TRENDS IN THE CONCEPT OF ULTRA VIRES: THE NIGERIAN RETHINK

Abstract

The concept of ultra vires which literarily means beyond legal capacity envisages that a company which becomes a legal personality by virtue of its incorporation cannot carry on business beyond the object contained in its Memorandum of Association. Any business so carried out by the company which is not within its object becomes ultra vires and thereby, invalid. This seeming concept as found statutory flavour under section 39 of the Company and Allies Matters Act, Cap C.20, Laws of the Federation of Nigeria,2004 with modifications to reduce the hardship it hitherto melted against third parties. It is in this wise to argue that Companies haven become an accepted part of the economic landscape, thereby enabling legislation governing corporate practice began to authorize the general purpose clause, in any case giving companies virtually unlimited powers. This has made the ultra vires doctrine to have limited relevance in the realm of corporate governance. At about the turn of the last century, courts began to recognize the unfairness of the strict application of the ultra vires doctrine particularly in two major respects. Case laws, statutes, reported and unreported cases were arrived at in reaching some basic conclusions namely that, where one of the parties had already substantially performed, the defence of ultra vires only became available where the contract was still executory. Secondly, the purposes and powers clauses were interpreted more flexibly to authorize transaction reasonably incidental to the business. Does the continued retention of the ultra vires under the Nigerian law still make any corporate sense at the turn of the third millennium?

Keywords: Jurisdiction, Ultra vires, company law, legal capacity, object clause


Article Review Status: Published

Pages: 121-128 (Download PDF)

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