Memorandum and Articles of Association; Doctrine of Ultra Vires
Memorandum and Articles of Association; Doctrine of Ultra Vires
This domain tests the contents and alteration of the MOA/AOA and the consequences of acts beyond the company’s objects.
Core rules
- MOA clauses: name, registered office (state), objects, liability, capital. AOA contains internal regulations, usually Table F for companies limited by shares.
- Alteration: name requires special resolution and Central Government approval; object clause requires special resolution and ROC filing; registered office change within state requires special resolution, outside state requires special resolution plus Regional Director approval; capital alteration requires ordinary resolution if AOA authorises.
- Ultra vires the company: an act beyond the objects clause is void, cannot be ratified even unanimously, and directors may be personally liable. Ultra vires the directors (breach of authority) can be ratified by shareholders.
Worked example
A textile company’s objects cover manufacture and sale of fabrics. Its board invests ₹50 lakh in cryptocurrency trading. Even if all shareholders later pass a resolution approving it, the act remains ultra vires the company and void; the directors must restore the funds.
Traps
Do not confuse ultra vires the company with ultra vires the directors. An AOA alteration cannot exceed the MOA. Name change is not effective on board resolution alone. Object clause alteration does not validate past ultra vires acts.