Beruflich Dokumente
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The memorandum and articles of association
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provided that Eley should be solicitor to the company,
it @as held that this @as not a right given to him as a
member and he could not rely on the Articles as a
contract for professional services.
In a
!"#$$% the articles of the company also did
not provide for an empo@ering provision to 'suspend' directors.
Ho@ever, it @as held that the company had the po@er of
suspension. The rationale according to the decision is that since a
company has po@er to 'remove' a director, it also has the lesser
po@er to 'suspend'.
M
In a "150 case, the po@er of suspension is capable of becoming a
legitimate @eapon to aggrandize de facto majority by one group of directors over
the other group. The aggrandizement of po@er in creating a majority @hich did not
previously exist is not something @hich the la@ condones. In a#$ %& case
itself, it is to be noted that the number of directors on the board @as evenly
divided bet@een the Tham family and the Zee family (3:3). With the po@er of
'suspension' and the suspension of one of the directors representing the Zee family
by the Tham family's directors, the Tham family created a de facto majority for
themselves and subsequently pushed through several resolutions after the
'suspension' @as effected. Of the several resolutions passed after the po@er of
suspension @as exercised, the Zee family's directors @as outvoted on at least one
crucial resolution as reported -- the approval and adoption of accounts and
directors' report all of @hich @ere prepared by the directors representing the Tham
family. The harsh realities of a commercial @orld are capable of producing an
infinite variety of situations @hich @ill go beyond the simple factual matrix found
in a#$ %& case -- the director there had deliberately failed to inform the
secretary of changes in his particulars pursuant to s 135(1)(c) of the Act and in
respect of @hich the director is personally liable.
*
Ôompanies cannot by their memorandum and articles of
association give themselves more or greater po@ers than that
provided for under the Act.
[
The Act in disciplining directors for the
purposes of upholding and enforcing the
statutory functions and duties of directors also
provides for offences by directors and for their
punishment, including the machinery for
enforcement.
D
3
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Alteration of the Memorandum
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X
9:
1
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Remedy: s 181
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|M
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The object clause of the Memorandum of the
company contains the object for @hich the company
is formed.
The expression ³ultra vires´ consists of t@o @ords: µultra¶ and µvires¶.
µUltra¶ means beyond and µVires¶ means po@ers. Thus the expression ultra
vires means an act beyond the po@ers. Here the expression ultra vires is
used to indicate an act of the company @hich is beyond the po@ers
conferred on the company by the objects clause of its memorandum. An
ultra vires act is void and cannot be ratified even if all the directors @ish to
ratify it. ºometimes the expression ultra vires is used to describe the
situation @hen the directors of a company have exceeded the po@ers
delegated to them.
|D
The ultra vires act or transaction is different from
an illegal act or transaction, although both are
void. An act of a company @hich is beyond its
objects clause is ultra vires and, therefore, void,
even if it is illegal.
|è
Doctrine of ultra vires has been developed to protect the
investors and creditors of the company. This doctrine prevents
a company to employ the money of the investors for a
purpose other than those stated in the objects clause of its
memorandum. Thus, the investors and the company may be
assured by this rule that their investment @ill not be
employed for the objects or activities @hich they did not have
in contemplation at the time of investing their money in the
company. It enables the investors to kno@ the objects in
@hich their money is to be employed.
i
There are, ho@ever, certain exceptions to this doctrine, @hich are as
follo@s:
1. An act, @hich is intra vires the company but outside the authority of
the directors may be ratified by the shareholders in proper form.
i|
5. There are certain acts under the company la@,
@hich though not expressly stated in the
memorandum, are deemed impliedly @ithin the
authority of the company and therefore they are not
deemed ultra vires. For example, a business
company can raise its capital by
borro@ing.
ii
In England the doctrine of ultra vires has been restricted by the
European Ôommunities Act, 1 9 7 2. According to ºection 9(1) of
the Act in favour of a person dealing @ith a company any
transaction decided by its directors shall be deemed to be @ithin
the capacity of the company to enter into validity and the other
party is not required to inquire about the capacity of the company
and thus such transaction may be enforced by the other party
acting in good faith against the company and the company cannot
plead that the transaction @as ultra vires, but it cannot be
enforced by the company against the other party for the other
party can still plead that the act @as ultra vires.
i
The actual authority of an agent is a relationship bet@een principal and agent;
the rest of the @orld is a stranger to this relationship. A third party dealing
@ith the agent of a company does not kno@ @hat the agent's actual authority
is, nor in most cases can he find out. ºometimes the authority of an agent to
do certain acts depends on compliance @ith certain formalities. For instance,
it may be provided by the company's articles that the affixing of the
company's seal can only be authorised by a resolution of the board.
ºometimes, there is some irregularity in the management @hich vitiates the
authority conferred upon an agent. For instance, a directors' meeting may
have been irregularly held. A party outside the company has no @ay of
determining @hether the company's internal regulations have been complied
@ith. Ho@ever, the la@ does not require an outside party to do so. If an agent
has apparent authority to do an act, a person dealing @ith the company is
entitled to assume that all matters of internal management and procedure
prescribed by the articles have been complied @ith. This is kno@n as the
'indoor management rule' or the rule in
'
( case ...
iM
The rule in
'
( case is a presumption of regularity. In other
@ords, a person @ho deals @ith a company is entitled to assume that
all procedural matters have been taken care of by the company.
There is a good practical reason for this: an outsider cannot
discover @hether the company's internal procedures have been
complied @ith. If a company could get out of a transaction by
pleading non-compliance @ith its internal procedures, commercial
certainty @ould be thro@n out of the @indo@.µ
The rule in
'
( case provides protection to persons dealing
@ith a company in good faith (see ' 0&
!X!' , @here it @as held by #- (as
he then @as) that the rule in
'
( case only applies to persons
dealing in good faith). An outsider dealing @ith a company does not
need to enquire into the regularity in the internal affairs and
proceedings of the company, and may assume that all is being done
regularly (see '&"
;! &6
&!
' $% ).
i*
There are exceptions to the
'
rule :-
i[
The follo@ing as situations @here a
third party cannot rely on the
presumption of regularity:
iD
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6. Explain the follo@ing :
(i) actual authority
(ii) ostensible authority
(iii) usual authority
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