-This case is authorized for the proposition that a registered company's capacity is restricted to the transactions set forth in the objects clause of the memorandum other transactions are ultra vires and therefore null and void.
- In this case the transaction in question i.e. purchase of concession and construction of railways was not authorized by the objects and was therefore declared ultra vires.
- This case interpreted the doctrine of ultra vires very restrictively thereby limiting corporate capacity.
- However, in Attorney General V. Great Eastern Railway Co. it was held that a transaction reasonably incidental to the attainment or pursuit of the objects of the company was Ultra Viresthe company. In the words of Lord Selbourne 'whatever may be regarded as fairly incidental to or consequential upon'
-The second aspect of ruling relates to ratification of an ultra vires transaction. In Ashburys case although members in general meeting purported to ratify the transaction it was held that the ratification had no legal effect since the transaction was void. This ruling is correct in that a void transaction is incapable of ratification. This principle was upheld in Rolled Steel Products (Holdings) Ltd V. British Steel Corporation and Others(1986) where Slade L. J. was emphatic that an ultra vires transaction cannot be rendered intra vires by ratification, delay acquiescence estoppel or lapse of time.
(b)
- As a general rule a pre incorporation contract against the company did not exist and cannot ratify the transaction when incorporated, nor can directors of the company adopt or conform the contract (see Kelner V. Baxter) (Price V. Kelsal) (North SydneyInvestments and General Tramways V. Higgins & Another) (Natal Land Company V.Pauline Colliery Syndicate)
-However a person can escape liability on per incorporation contracts by:
- The company entering into a new contract to the same effect as the previous one (Mawagolas case). -Entering into a contract which expressly provides that the promoters liability shall cease when the company is formed.
- Entering into an agreement which expressly provides that it becomes legally binding upon the company when incorporated.
(c)
- This provision is to the effect that when the Articles are registered there comes into being a contract between the company on one hand and shareholders on the other to observe the provisions of the articles.
- Either party is free to sue the other for non compliance with the provisions of the articles. Welton V. Sattery.
- Hickman V. Kent or Romney Mash Sheep Breeders Association
marto answered the question on February 7, 2019 at 06:16
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(a) The principle of corporate legal personality is an important and fundamental aspect of company law.
Discuss this statement citing relevant decided cases....(Solved)
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Discuss this statement citing relevant decided cases.
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