Does the doctrine of Ultra Vires still exist?

Abstract

Abstract provided by author

A company traditionally owing its incorporation to statutory authority could not effectively do anything beyond the powers expressly or impliedly conferred upon it by its statute or memorandum of association. Any purported activities in excess will be void even if agreed to by all the members. This was purportedly to protect investors and secondly to protect creditors

The ultra vires doctrine was bolstered with the doctrine of constructive notice which decreed that everyone that deal with the company is presumed to know the contents of the public documents and thereby became a trap for unwary third parties and the company itself. As a result of the undesirable consequence of an ultra vires act, companies started including into their objects clause every conceivable trade or activity trying to minimize the risk of an ultra vires act

On the recommendation of the Van Wyk de Vries Commission the Companies Act of 1973 made radical changes regarding the capacities of companies and the consequences of an ultra vires act. Section 36 in a nutshell retains the principle that a company's capacity is limited by the objects stated in the memorandum, but decrees that an ultra vires act is no longer void

However, new company law legislations have suggested the idea that a company has the same capacity and powers of a natural person as far as a juristic person is capable of having these powers. Upon closer analysis is becomes evident that a company is therefore considered to have the same capacity as a close corporation and thereby totally eliminating the ultra vires doctrine as it is not applicable to a close corporation

Based on this it becomes evident that the ultra vires doctrine is no longer applicable and outlived its usefulness. Although a company and close corporation might know have powers that are exactly the same as a natural person the extent of their powers and capacities are still regulated although not through the companies or close corporation act.