Ultra Vires Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Ultra Vires, written in plain English, along with examples of how it is used.
What is Ultra Vires?
(adj) A legal entity is constituted with definite objective. Authority and powers were defined to achieve the objectives and limit the diversion of activities. Doctrine of Ultra virus protects the entity against mishaps occurred when persons in charge of the affairs acts beyond the stated powers of the establishment.
History and Meaning of Ultra Vires
The term Ultra Vires is Latin for "beyond the powers" and has been a central concept in corporate law for many years. It refers to actions taken by a corporation or other legal entity that exceed the powers granted to it under its articles of incorporation or legislation. In other words, an action is ultra vires if it is not authorized by the corporation's constitutional documents or the law, rendering it invalid.
The doctrine of Ultra Vires evolved in the 19th century as a way of protecting shareholders and creditors from losses that could result from unauthorized or excessive corporate activities. It allows them to challenge any activities undertaken by the company that are beyond its scope of authority.
Examples of Ultra Vires
A company's articles of incorporation limit its business to selling kitchen appliances. However, it decides to invest all its funds in real estate. This action would be ultra vires.
A Director of a company uses company funds to purchase expensive personal items, such as jewelry or a car. This would also be an ultra vires action as the director has exceeded their power and authority.
A city council seeks to impose a tax that is beyond its legal authority. This would be considered an ultra vires act, and it could be struck down in court.
Legal Terms Similar to Ultra Vires
- Intra Vires - An act that is within the powers of an entity.
- Ultra Vires loan – a loan is taken when the company does not have the authority to do so,, but the lender is not aware of it.
- Express powers - The specific power that is granted to a legal entity by the law or its constitution.
- Implied powers - The powers that are not expressly given, but necessary for carrying out the express powers.
- Ostensible Authority - The authority that a third party assumes an agent has based on the actions of the principal.