No more ultra vires rule?

Stimorol

As far as I know the rule is going to die after the enactment of the new companies bill 2011. Ok, it surely simplifies the rules about the pre-incorporation contracts but what about the Turquands's rules and exceptions? How does the bill affect it?

I am going to do the FE-1s in October and can anyone clarify for me whether the board of directors can borrow as much as they please or the memorandum of articles can still restrict it, previously making it ultra vires to borrow more than a certain amount

Thank you very much!

Tom Young

Can you please provide a link to this proposed amendment? ...

Robbo

Tom Young wrote: »

Can you please provide a link to this proposed amendment? ...

From Tom Courtney's forward...

It will have the same contractual capacity as a natural person – private
companies will not have an objects clauses and so will not be subject to the
doctrine of ultra vires, making it easier to transact with confidence with
private companies;

I haven't gone into the details yet. It's a beast of a bill at 1400 pages.

Stimorol

Can anybody suggest some repercussions out of the rejection of the ultra vires rule?

Robbo

Stimorol wrote: »

Can anybody suggest some repercussions out of the rejection of the ultra vires rule?

An entity contracting with the company wouldn't need to go checking the objects to be 100% sure that the contract was within the scope of the company. Also, it may put an end to exhaustive shopping lists in the objects.

On the other hand, the CRO may lose a few quid on searches...

Stimorol

Robbo wrote: »

An entity contracting with the company wouldn't need to go checking the objects to be 100% sure that the contract was within the scope of the company. Also, it may put an end to exhaustive shopping lists in the objects.

On the other hand, the CRO may lose a few quid on searches...

Appreciated Robbo!

Although, I am not worried about the Third Party's interests but more about the company itself on whose behalf the apparent agent is acting.

Say the hypothetical entity transacts with an agent of the company, but in the past, that agent's act may have undermined the solvency of the company (ok, that obviously may not happen too often), at least there were some restrictions on the Director. Now the Bill allows for more flexibility and freedom for the Directors, obvously more personal responsibility on them too, but it will hardly matter afterwards if the agent's decisons led to insolvency of the agent's company..So, will the rejection of the rule benefit the Director more rather than the company now that the board of Directors have more powers?

beeftotheheels

Stimorol wrote: »

Appreciated Robbo!

Although, I am not worried about the Third Party's interests but more about the company itself on whose behalf the apparent agent is acting.

Say the hypothetical entity transacts with an agent of the company, but in the past, that agent's act may have undermined the solvency of the company (ok, that obviously may not happen too often), at least there were some restrictions on the Director. Now the Bill allows for more flexibility and freedom for the Directors, obvously more personal responsibility on them too, but it will hardly matter afterwards if the agent's decisons led to insolvency of the agent's company..So, will the rejection of the rule benefit the Director more rather than the company now that the board of Directors have more powers?

Remember that it is not just the ultra vires rule which protects the company, equity can still step in and construct a trust, I know in Aveling Barford v Perion Hoffman J as he then was felt that the transaction was ultra vires and thus constructed the trust, but he could have constructed the same trust for very many other reasons (in fact it is clear from the judgement that creditor protection and not the doctrine of ultra vires was what was on his mind in a rare intellectually dishonest judgement from him).

Abolishing ultra vires does not abolish the fiduciary duty owed to the company by the directors, does it?

Stimorol

beeftotheheels wrote: »

Remember that it is not just the ultra vires rule which protects the company, equity can still step in and construct a trust, I know in Aveling Barford v Perion Hoffman J as he then was felt that the transaction was ultra vires and thus constructed the trust, but he could have constructed the same trust for very many other reasons (in fact it is clear from the judgement that creditor protection and not the doctrine of ultra vires was what was on his mind in a rare intellectually dishonest judgement from him).

Abolishing ultra vires does not abolish the fiduciary duty owed to the company by the directors, does it?

True, in fact the existing statutory fiduciary duties are going to be enhanced with the leading case law rulings in that area becoming a statutory law. Dang, forgot about that, thanks!

Hoffmans

is this not somewhat to do with mortgage contracts too?