Doctrine of ultra vires
If the company operates beyond its powers and article of association as well as the memorandum of association and the scope of its object the action will be considered as ultra vires and thus void.
Consequences of ultra vires doctrines
Lability of directors: If the directors divert the capital of the company at some other place, then which is not mentioned in the memorandum of the association then he will be liable personally for the loss.
Ultra vires borrowing: If the money that is being borrowed is ultra vires to the object clause and the memorandum of association then the act will be void and the person who has given money will not be able to recover the loss.
Void ab initio: ultra vires acts are the void from the beginning.
Injunction: Any member can seek the remedy of the injunction if he thinks that any act is ultra vires to the company’s memorandum and article of association or its object clause against such act. So that the company can stop such acts.
Ultra vires lending of the money: If someone lends money which is ultra vires, then the act will be considered as ultra vires and void from the beginning and in this case no money can be recovered.
It is the duty of the person who is giving money to get well acquainted with the article of association, memorandum of association and the object clause of the company.
