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An act of a company is said to be ultra vires the company (and wholly void) when it is beyond the…

A company acts ultra vires in the strict sense when it acts beyond its own capacity, as defined by the Companies Act, 2013 and its memorandum. Section 4(1)(c) requires the…

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An act of a company is said to be ultra vires the company (and wholly void) when it is beyond the powers of:

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Answer and explanation

Correct answer C

A company acts ultra vires in the strict sense when it acts beyond its own capacity, as defined by the Companies Act, 2013 and its memorandum. Section 4(1)(c) requires the memorandum to state the company’s objects. In A. Lakshmanaswami Mudaliar v. Life Insurance Corporation of India, AIR 1963 SC 1185, the Supreme Court explained that shareholders cannot ratify an act outside the company’s objects. An internal authority defect may be curable where the company could lawfully authorise the act.

Option feedback

Option A

An act can exceed the directors’ authority while remaining within the company’s capacity. Ratification may be possible if the act can lawfully be authorised.

Option B

A member’s personal powers do not determine the company’s capacity.

Option C

The company acts ultra vires in the strict sense when it acts outside its own capacity. Even unanimous shareholder consent cannot ratify the act.

Option D

The articles govern internal management. An act outside their terms can still be within the capacity set by the memorandum and the Act.

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