Rolled Steel Products
Ltd v British Steel corp- Browne Wilkinson suggested to limit the use of the
term "ultra vires" to its strict sense
Small
v Smith - the UV doctrine was never harshly applied. Because the court accept
that whatever might be regarded as incidental to the objects specified, should
be held to be inside the power of the company.
Re
Balgan Hall Colliery - however all company soon to draft very wide object
clause
London
Financial Asso v Kelk - but these words will be held only to cover operations
of a similar nature
Cotman
v Brougham - starting with a para "company to acquire rubber", then
subsequent para "to underwrite stocks". The underwriting power would
be viewed as ancillary to the acquisition of rubber
Bell
House v City Hall Properties - whatever objects director think fit. Held:
within power
Introductions
v National Provincial Bank - oversea visitors of Festival of Britain > Pig
breeding
power
vs objects. power to borrow had to be used for the legitimate purpose.Since the
purpose (for big breeding) is UV, the borrowing itself was UV.
Re
Horsley & Weight Ltd - object: business of shopfitters. authorise to
"grant pensions to employees and directors". CA: granting of pensions
was capable of being a "object" instead of "power".
Roller
Steel Products Ltd v British Steel Corp -guarantee and debentures are powers,
not objects. So not binding. If an act performed to an ancillart power,
incidental to the substantive objects, it will not be rendered UV merely
becuase in particular instance it is done for other purpose
The
UV rule is to protect shareholders and creditors from risky and wasteful
spending by the directors. At the same time, other rules were developed to protect them are
strengthened (e.g. funds which could be used to pay dividends, or make other distributions
to shareholders). Insolvency legislation also prevent unwarranted disposals of
corporate funds . Accounting and reporting obligations become more onerous.
Fiduciary duties and specific personal liabilities also served as deterrents
against abuse of directors.
Corporate gifts:
Charterbridge v Llyods Bank –
S39 CA 2006 – it is to prevent that lack of capacity could be raised as
a defence to contractual claim against the company. It is a two-way effect,
operate to protect both the company and outsiders
Whether an act is done by the company is determined by reference to
agency principles, as modified by the Turquand rule and by s 40 CA 2006.
Just and equitable wind-up
Shareholder who object to a company undertaking new type of business may
petition under s.122g IA 1986, that the substratum of the company, the main
object for which it was incorporated, cease to exist. But now a company is not
required to have an object at all, it may be difficult to conclude that a
company’s substratum no longer exists.
Authority to bind the company
Art 3 of Model articles – general power to manage will be conferred upon
the board of directors.
Art 5- the board can delegate the managing power to one or more managing
directors
Grant v UK Switchback Railway – any want of authority can be cured by
ratification by a resolution of the shareholders in general meeting by ordinary
resolution.
Apparent authority – a person who has no actual authority to act on the
company’s behalf may be able to bind the company if he has been held out by
someone with appropriate authority as a duly authorized agent of the company.
S 40 – the power of directors to bind the company….is deemed to be free
of any limitation under the company’s constitution.
Interpretation Act – directors include singular form (director)
CL principles of law of agency –
This extension from plural to singular form has rendered the CL
principles of law of agency redundant.
Model art Art 7 – any decision taken by the directors must be a
collective decision.
The question is whether Art 7 is a limitation on the powers of the
directors to bind the company which is overcome by s 40, thus allowing
individual directors to bind the company without proper authorization or a
decision taken at a board meeting/
Cases:
¢¢ Ashbury Carriage Company v Riche [1875] LR 7 HL 653
¢¢ Re Jon Beauforte (London) Ltd [1953] Ch 131
¢¢ Re Introductions Ltd v National Provincial Bank [1970]
Ch 199
¢¢ Royal British Bank v Turquand [1856] 6 E & B
327
Chp 12 of Lowry
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