DOCTRINE OF ULTRA VIRES-EFFECTS AND EXCEPTIONS CONCEPT The object clause

of the Meo!a"#u of the co$a"% co"ta&"s the object fo! 'h&ch the co$a"% &s fo!e#( A"
act of the co$a"% ust "ot be be%o"# the objects clause) othe!'&se &t '&ll be ult!a *&!es a"#)
the!efo!e) *o&# a"# ca""ot be !at&f&e# e*e" &f all the ebe!s '&sh to !at&f% &t( Th&s &s calle# the
#oct!&"e of ult!a *&!es) 'h&ch has bee" f&!l% establ&she# &" the case of Asht!a% Ra&l'a% Ca!!&a+e
a"# I!o" Co$a"% Lt# *( R&che( Thus the e,$!ess&o" ult!a *&!es ea"s a" act be%o"# the $o'e!s(
-e!e the e,$!ess&o" ult!a *&!es &s use# to &"#&cate a" act of the co$a"% 'h&ch &s be%o"# the
$o'e!s co"fe!!e# o" the co$a"% b% the objects clause of &ts eo!a"#u( A" ult!a *&!es act &s
*o&# a"# ca""ot be !at&f&e# e*e" &f all the #&!ecto!s '&sh to !at&f% &t( Soet&es the e,$!ess&o"
ult!a *&!es &s use# to #esc!&be the s&tuat&o" 'he" the #&!ecto!s of a co$a"% ha*e e,cee#e# the
$o'e!s #ele+ate# to the( .he!e a co$a"% e,cee#s &ts $o'e! as co"fe!!e# o" &t b% the objects
clause of &ts eo!a"#u) &t &s "ot bou"# b% &t because &t lac/s le+al ca$ac&t% to &"cu!
!es$o"s&b&l&t% fo! the act&o") but 'he" the #&!ecto!s of a co$a"% ha*e e,cee#e# the $o'e!s
#ele+ate# to the( Th&s use ust be a*o&#e# fo! &t &s a$t to cause co"fus&o" bet'ee" t'o e"t&!el%
#&st&"ct le+al $!&"c&$les( Co"se0ue"tl%) he!e 'e !est!&ct the ea"&"+ of ult!a *&!es objects clause
of the co$a"%1s eo!a"#u( 2as&c $!&"c&$les &"clu#e# the follo'&"+3 A" ult!a *&!es
t!a"sact&o" ca""ot be !at&f&e# b% all the sha!ehol#e!s) e*e" &f the% '&sh &t to be !at&f&e#( The
#oct!&"e of esto$$el usuall% $!eclu#e# !el&a"ce o" the #efe"se of ult!a *&!es 'he!e the t!a"sact&o"
'as full% $e!fo!e# b% o"e $a!t% A fo!t&o!&) a t!a"sact&o" 'h&ch 'as full% $e!fo!e# b% both
$a!t&es coul# "ot be attac/e#( If the co"t!act 'as full% e,ecuto!%) the #efe"se of ult!a *&!es &+ht
be !a&se# b% e&the! $a!t%( If the co"t!act 'as $a!t&all% $e!fo!e#) a"# the $e!fo!a"ce 'as hel#
to be &"suff&c&e"t to b!&"+ the #oct!&"e of esto$$el &"to $la%) a su&t fo! 0uas& co"t!act fo! !eco*e!%
of be"ef&ts co"fe!!e# 'as a*a&lable( If a" a+e"t of the co!$o!at&o" co&tte# a to!t '&th&" the
sco$e of h&s o! he! e$lo%e"t) the co!$o!at&o" coul# "ot #efe"# o" the +!ou"# the act 'as ult!a
*&!es( ORI4IN AND DEVELOPMENT Doct!&"e of ult!a *&!es has bee" #e*elo$e# to $!otect the
&"*esto!s a"# c!e#&to!s of the co$a"%( The #oct!&"e of ult!a *&!es coul# "ot be establ&she#
f&!l% u"t&l 5678 'he" the D&!ecto!s) 9C() of the Ashbu!% Ra&l'a% Ca!!&a+e a"# I!o" Co$a"%
:L&&te#; * -ecto! R&che) :567<-78; L(R( 7 -(L( =8> 'as #ec&#e# b% the -ouse of Lo!#s( A
co$a"% calle# ?The Ashbu!% Ra&l'a% Ca!!&a+e a"# I!o" Co$a"%)@ 'as &"co!$o!ate# u"#e! the
Co$a"&es Act) 56=A( Its objects) as state# &" the Meo!a"#u of Assoc&at&o") 'e!e ?to a/e)
a"# sell) o! le"# o" h&!e) !a&l'a% ca!!&a+es a"# 'a++o"s) a"# all /&"#s of !a&l'a% $la"t) f&tt&"+s)
ach&"e!%) a"# !oll&"+-stoc/B to ca!!% o" the bus&"ess of echa"&cal e"+&"ee!s a"# +e"e!al
co"t!acto!s B to $u!chase) lease) 'o!/) a"# sell &"es) &"e!als) la"#) a"# bu&l#&"+sB to $u!chase
a"# sell) as e!cha"ts) t&be!) coal) etals) o! othe! ate!&als) a"# to bu% a"# sell a"% such
ate!&als o" co&ss&o" o! as a+e"ts(@ The #&!ecto!s a+!ee# to $u!chase a co"cess&o" fo! a/&"+
a !a&l'a% &" a fo!e&+" cou"t!%) a"# afte!'a!#s :o" accou"t of #&ff&cult&es e,&st&"+ b% the la' of
that cou"t!%;) a+!ee# to ass&+" the co"cess&o" to a Soc&CtC A"o"%e fo!e# &" that cou"t!%)
'h&ch soc&CtC 'as to su$$l% the ate!&als fo! the co"st!uct&o" of the !a&l'a%) a"# to !ece&*e
$e!&o#&cal $a%e"ts f!o the E"+l&sh co$a"%( The objects of th&s co$a"%) as state# &" the
Meo!a"#u of Assoc&at&o") 'e!e to su$$l% a"# sell the ate!&als !e0u&!e# to co"st!uct
!a&l'a%s) but "ot to u"#e!ta/e the&! co"st!uct&o"( The co"t!act he!e 'as to co"st!uct a !a&l'a%(
That 'as co"t!a!% to the eo!a"#u of assoc&at&o"B 'hat 'as #o"e b% the #&!ecto!s &" e"te!&"+
&"to that co"t!act 'as the!efo!e &" #&!ect co"t!a*e"t&o" of the $!o*&s&o"s of the Co$a"% Act)
56=A It 'as hel# that th&s co"t!act) be&"+ of a "atu!e "ot &"clu#e# &" the Meo!a"#u of
Assoc&at&o") 'as ult!a *&!es "ot o"l% of the #&!ecto!s but of the 'hole co$a"%) so that e*e" the
subse0ue"t asse"t of the 'hole bo#% of sha!ehol#e!s 'oul# ha*e "o $o'e! to !at&f% &t( The
sha!ehol#e!s &+ht ha*e $asse# a !esolut&o" sa"ct&o"&"+ the !elease) o! alte!&"+ the te!s &" the
a!t&cles of assoc&at&o" u$o" 'h&ch !eleases &+ht be +!a"te#( If the% ha# sa"ct&o"e# 'hat ha#
bee" #o"e '&thout the fo!al&t% of a !esolut&o") that 'oul# ha*e bee" $e!fectl% suff&c&e"t( Thus)
the co"t!act e"te!e# &"to b% the co$a"% 'as "ot a *o&#able co"t!act e!el%) but be&"+ &"
*&olat&o" of the $!oh&b&t&o" co"ta&"e# &" the Co$a"&es Act ) 'as absolutel% *o&#( It &s e,actl% &"
the sae co"#&t&o" as &f "o co"t!act at all ha# bee" a#e) a"# the!efo!e a !at&f&cat&o" of &t &s "ot
$oss&ble( If the!e ha# bee" a" actual !at&f&cat&o") &t coul# "ot ha*e +&*e" l&fe to a co"t!act 'h&ch
ha# "o e,&ste"ce &" &tselfB but at the utost &t 'oul# ha*e aou"te# to a sa"ct&o" b% the
sha!ehol#e!s to the act of the #&!ecto!s) 'h&ch) &f +&*e" befo!e the co"t!act 'as e"te!e# &"to)
'oul# "ot ha*e a#e &t *al&#) as &t #oes "ot !elate to a" object '&th&" the sco$e of the
eo!a"#u of assoc&at&o"( Late! o") &" the case of Atto!"e% 4e"e!al *( 4!eat Easte!" Ra&l'a%
Co(<) th&s #oct!&"e 'as a#e clea!e!( I" th&s case the -ouse of Lo!#s aff&!e# the $!&"c&$le la&#
#o'" &" Ashbu!% Ra&l'a% Ca!!&a+e a"# I!o" Co$a"% Lt# *( R&che8 but hel# that the #oct!&"e of
ult!a *&!es ?ou+ht to be !easo"able) a"# "ot u"!easo"able u"#e!stoo# a"# a$$l&e# a"# 'hate*e!
a% fa&!l% be !e+a!#e# as &"c&#e"tal to) o! co"se0ue"t&al u$o") those th&"+s 'h&ch the le+&slatu!e
has autho!&De#) ou+ht "ot to be hel#) b% ju#&c&al co"st!uct&o") to be ult!a *&!es(@ The #oct!&"e of
ult!a *&!es 'as !eco+"&se# &" I"#&a" the case of Eaha"+&! R( Mo# & *( Shaj& La#ha a"# has bee"
'ell establ&she# a"# e,$la&"e# b% the Su$!ee Cou!t &" the case of A( La/sha"as'a&
Mu#al&a! *( L&fe I"su!a"ce Co!$o!at&o" Of I"#&a6( E*e" &" I"#&a &t has bee" hel# that the
co$a"% has $o'e! to ca!!% out the objects as set out &" the objects clause of &ts eo!a"#u)
a"# also e*e!%th&"+) 'h&ch &s !easo"abl% "ecessa!% to ca!!% out those objects(F Fo! e,a$le) a
co$a"% 'h&ch has bee" autho!&De# b% &ts eo!a"#u to $u!chase la"# ha# &$l&e# autho!&t%
to let &t a"# &f "ecessa!%) to sell &t(-o'e*e! &t has bee" a#e clea! b% the Su$!ee Cou!t that the
co$a"% has) "o #oubt) the $o'e! to ca!!% out the objects state# &" the objects clause of &ts
eo!a"#u a"# also 'hat &s co"clus&*e to o! &"c&#e"tal to those objects) but &t has "o $o'e! to
t!a*el be%o"# the objects o! to #o a"% act 'h&ch has "ot a !easo"able $!o,&ate co""ect&o" '&th
the object o! object 'h&ch 'oul# o"l% b!&"+ a" &"#&!ect o! !eote be"ef&t to the co$a"%( To
asce!ta&" 'hethe! a $a!t&cula! act &s ult!a *&!es o! "ot) the a&" $u!$ose ust f&!st be asce!ta&"e#)
the" s$ec&al $o'e!s fo! effect&"+ that $u!$ose ust be loo/e# fo!) &f the act &s "e&the! '&th&" the
a&" $u!$ose "o! the s$ec&al $o'e!s e,$!essl% +&*e" b% the statute) the &"0u&!% shoul# be a#e
'hethe! the act &s &"c&#e"tal to o! co"se0ue"t&al u$o"( A" act &s "ot ult!a *&!es &f &t &s fou"#3 :a;
.&th&" the a&" $u!$ose) o! :b; .&th&" the s$ec&al $o'e!s e,$!essl% +&*e" b% the statute to
effectuate the a&" $u!$ose) o! :c; Ne&the! '&th&" the a&" $u!$ose "o! the s$ec&al $o'e!s
e,$!essl% +&*e" b% the statute but &"c&#e"tal to o! co"se0ue"t&al u$o" the a&" $u!$ose a"# a
th&"+ !easo"abl% #o"e fo! effectuat&"+ the a&" $u!$ose( The #oct!&"e of ult!a *&!es $la%e# a"
&$o!ta"t !ole &" the #e*elo$e"t of co!$o!ate $o'e!s( Thou+h la!+el% obsolete &" o#e!"
$!&*ate co!$o!at&o" la') the #oct!&"e !ea&"s &" full fo!ce fo! +o*e!"e"t e"t&t&es( A" ult!a *&!es
act &s o"e be%o"# the $u!$oses o! $o'e!s of a co!$o!at&o"( The ea!l&est le+al *&e' 'as that such
acts 'e!e *o&#( U"#e! th&s a$$!oach a co!$o!at&o" 'as fo!e# o"l% fo! l&&te# $u!$oses a"#
coul# #o o"l% 'hat &t 'as autho!&De# to #o &" &ts co!$o!ate cha!te!( Th&s ea!l% *&e' $!o*e#
u"'o!/able a"# u"fa&!( It $e!&tte# a co!$o!at&o" to acce$t the be"ef&ts of a co"t!act a"# the"
!efuse to $e!fo! &ts obl&+at&o"s o" the +!ou"# that the co"t!act 'as ult!a *&!es( The #oct!&"e also
&$a&!e# the secu!&t% of t&tle to $!o$e!t% &" full% e,ecute# t!a"sact&o"s &" 'h&ch a co!$o!at&o"
$a!t&c&$ate#( The!efo!e) the cou!ts a#o$te# the *&e' that such acts 'e!e *o&#able !athe! tha" *o&#
a"# that the facts shoul# #&ctate 'hethe! a co!$o!ate act shoul# ha*e effect( O*e! t&e a bo#% of
$!&"c&$les #e*elo$e# that $!e*e"te# the a$$l&cat&o" of the ult!a *&!es #oct!&"e( These $!&"c&$les
&"clu#e# the ab&l&t% of sha!ehol#e!s to !at&f% a" ult!a *&!es t!a"sact&o"B the a$$l&cat&o" of the
#oct!&"e of esto$$el) 'h&ch $!e*e"te# the #efe"se of ult!a *&!es 'he" the t!a"sact&o" 'as full%
$e!fo!e# b% o"e $a!t%B a"# the $!oh&b&t&o" a+a&"st asse!t&"+ ult!a *&!es 'he" both $a!t&es ha#
full% $e!fo!e# the co"t!act( The la' also hel# that &f a" a+e"t of a co!$o!at&o" co&tte# a to!t
'&th&" the sco$e of the a+e"tGs e$lo%e"t) the co!$o!at&o" coul# "ot #efe"# o" the +!ou"# that
the act 'as ult!a *&!es( Des$&te these $!&"c&$les the ult!a *&!es #oct!&"e 'as a$$l&e# &"co"s&ste"tl%
a"# e!!at&call%( Acco!#&"+l%) o#e!" co!$o!at&o" la' has sou+ht to !eo*e the $oss&b&l&t% that
ult!a *&!es acts a% occu!( Most &$o!ta"tl%) ult&$le $u!$oses clauses a"# +e"e!al clauses that
$e!&t co!$o!at&o"s to e"+a+e &" a"% la'ful bus&"ess a!e "o' &"clu#e# &" the a!t&cles of
&"co!$o!at&o"( I" a##&t&o") $u!$oses clauses ca" "o' be eas&l% ae"#e# &f the co!$o!at&o" see/s
to #o bus&"ess &" "e' a!eas( Fo! e,a$le) u"#e! t!a#&t&o"al ult!a *&!es #oct!&"e) a co!$o!at&o" that
ha# as &ts $u!$ose the a"ufactu!&"+ of shoes coul# "ot) u"#e! &ts cha!te!) a"ufactu!e
oto!c%cles( U"#e! o#e!" co!$o!ate la') the $u!$oses clause 'oul# e&the! be so +e"e!al as to
allo' the co!$o!at&o" to +o &"to the oto!c%cle bus&"ess) o! the co!$o!at&o" 'oul# ae"# &ts
$u!$oses clause to !eflect the "e' *e"tu!e( State la's &" alost e*e!% ju!&s#&ct&o" ha*e also
sha!$l% !e#uce# the &$o!ta"ce of the ult!a *&!es #oct!&"e( Fo! e,a$le) sect&o" >(H<:a; of the
Re*&se# Mo#el 2us&"ess Co!$o!at&o" Act) #!afte# &" 5F6<) states that Ithe *al&#&t% of co!$o!ate
act&o" a% "ot be challe"+e# o" the +!ou"# that the co!$o!at&o" lac/s o! lac/e# $o'e! to act(I
The!e a!e th!ee e,ce$t&o"s to th&s $!oh&b&t&o"3 &t a% be asse!te# b% the co!$o!at&o" o! &ts
sha!ehol#e!s a+a&"st the $!ese"t o! fo!e! off&ce!s o! #&!ecto!s of the co!$o!at&o" fo! e,cee#&"+
the&! autho!&t%) b% the atto!"e% +e"e!al of the state &" a $!ocee#&"+ to #&ssol*e the co!$o!at&o" o!
to e"jo&" &t f!o the t!a"sact&o" of u"autho!&De# bus&"ess) o! b% sha!ehol#e!s a+a&"st the
co!$o!at&o" to e"jo&" the co&ss&o" of a" ult!a *&!es act o! the ult!a *&!es t!a"sfe! of !eal o!
$e!so"al $!o$e!t%( 4o*e!"e"t e"t&t&es c!eate# b% a state a!e $ubl&c co!$o!at&o"s +o*e!"e# b%
u"&c&$al cha!te!s a"# othe! statuto!&l% &$ose# +!a"ts of $o'e!( These +!a"ts of autho!&t% a!e
a"alo+ous to a $!&*ate co!$o!at&o"Gs a!t&cles of &"co!$o!at&o"( -&sto!&call%) the ult!a *&!es co"ce$t
has bee" use# to co"st!ue the $o'e!s of a +o*e!"e"t e"t&t% "a!!o'l%( Fa&lu!e to obse!*e the
statuto!% l&&ts has bee" cha!acte!&De# as ult!a *&!es( I" the case of a $!&*ate bus&"ess e"t&t%) the
act of a" e$lo%ee 'ho &s "ot autho!&De# to act o" the e"t&t%Gs behalf a%) "e*e!theless) b&"# the
e"t&t% co"t!actuall% &f such a" e$lo%ee 'oul# "o!all% be e,$ecte# to ha*e that autho!&t%( .&th
a +o*e!"e"t e"t&t%) ho'e*e!) to $!e*e"t a co"t!act f!o be&"+ *o&#e# as ult!a *&!es) &t &s
"o!all% "ecessa!% to $!o*e that the e$lo%ee actuall% ha# autho!&t% to act( .he!e a +o*e!"e"t
e$lo%ee e,cee#s he! autho!&t%) the +o*e!"e"t e"t&t% a% see/ to !esc&"# the co"t!act base# o"
a" ult!a *&!es cla&( EFFECT OF ULTRA VIRES TRANSACTIONS A co"t!act be%o"# the
objects clause of the co$a"%1s eo!a"#u &s a" ult!a *&!es co"t!act a"# ca""ot be e"fo!ce#
b% o! a+a&"st the co$a"% as 'as #ec&#e# &" the cases of I" Re) Eo" 2eaufo!e :Lo"#o"; Lt# ()
:5F8>; Ch( 5>5) I" S( S&*asha"u+ha A"# Othe!s *( 2utte!fl% Ma!/et&"+ P!&*ateLt#() :AHH5;
5H8 Co$( Cas Ma# 7=>) A bo!!o'&"+ be%o"# the $o'e! of the co$a"% :&(e( be%o"# the objects
clause of the eo!a"#u of the co$a"%; &s calle# ult!a *&!es bo!!o'&"+( -o'e*e!) the cou!ts
ha*e #e*elo$e# ce!ta&" $!&"c&$les &" the &"te!est of just&ce to $!otect such le"#e!s( Thus) e*e" &" a
case of ult!a *&!es bo!!o'&"+) the le"#e! a% be allo'e# b% the cou!ts the follo'&"+ !el&efs3 :5;
I"ju"ct&o" --- &f the o"e% le"t to the co$a"% has "ot bee" s$e"t the le"#e! ca" +et the
&"ju"ct&o" to $!e*e"t the co$a"% f!o $a!t&"+ '&th &t( :A; T!ac&"+--- the le"#e! ca" !eco*e! h&s
o"e% so lo"+ as &t &s fou"# &" the ha"#s of the co$a"% &" &ts o!&+&"al fo!( :>; Sub!o+at&o"---
&f the bo!!o'e# o"e% &s a$$l&e# &" $a%&"+ off la'ful #ebts of the co$a"%) the le"#e! ca" cla&
a !&+ht of sub!o+at&o" a"# co"se0ue"tl%) he '&ll sta"# &" the shoes of the c!e#&to! 'ho has $a&#
off '&th h&s o"e% a"# ca" sue the co$a"% to the e,te"t the o"e% a#*a"ce# b% h& has bee"
so a$$l&e# but th&s sub!o+at&o" #oes "ot +&*e the le"#e! the sae $!&o!&t% that the o!&+&"al
c!e#&to! a% ha*e o! ha# o*e! the othe! c!e#&to!s of the co$a"%( EXCEPTIONS TO T-E
DOCTRINE OF ULTRA VIRES The!e a!e) ho'e*e!) ce!ta&" e,ce$t&o"s to th&s #oct!&"e) 'h&ch
a!e as follo's3 5( A" act) 'h&ch &s &"t!a *&!es the co$a"% but outs&#e the autho!&t% of the
#&!ecto!s a% be !at&f&e# b% the sha!ehol#e!s &" $!o$e! fo!(AH A( A" act 'h&ch &s &"t!a *&!es the
co$a"% but #o"e &" a" &!!e+ula! a""e!) a% be *al&#ate# b% the co"se"t of the sha!ehol#e!s(
The la') ho'e*e!) #oes "ot !e0u&!e that the co"se"t of all the sha!ehol#e!s shoul# be obta&"e# at
the sae $lace a"# &" the sae eet&"+( >( If the co$a"% has ac0u&!e# a"% $!o$e!t% th!ou+h a"
&"*este"t) 'h&ch &s ult!a *&!es) the co$a"%1s !&+ht o*e! such a $!o$e!t% shall st&ll be secu!e#(
<( .h&le a$$l%&"+ #oct!&"e of ult!a *&!es) the effects 'h&ch a!e &"c&#e"tal o! co"se0ue"t&al to the
act shall "ot be &"*al&# u"less the% a!e e,$!essl% $!oh&b&te# b% the Co$a"%1s Act( 8( The!e a!e
ce!ta&" acts u"#e! the co$a"% la') 'h&ch thou+h "ot e,$!essl% state# &" the eo!a"#u) a!e
#eee# &$l&e#l% '&th&" the autho!&t% of the co$a"% a"# the!efo!e the% a!e "ot #eee# ult!a
*&!es( Fo! e,a$le) a bus&"ess co$a"% ca" !a&se &ts ca$&tal b% bo!!o'&"+( =( If a" act of the
co$a"% &s ult!a *&!es the a!t&cles of assoc&at&o") the co$a"% ca" alte! &ts a!t&cles &" o!#e! to
*al&#ate the act( CASE NOTES3 Ele% * The Pos&t&*e 4o*e!"e"t Secu!&t% L&fe Assu!a"ce
Co$a"%) L&&te#) :5678-7=; L(R( 5 E,( D( 66 It 'as hel# that the a!t&cles of assoc&at&o" 'e!e a
atte! bet'ee" the sha!ehol#e!s &"te! se) o! the sha!ehol#e!s a"# the #&!ecto!s) a"# #&# "ot c!eate
a"% co"t!act bet'ee" the $la&"t&ff a"# the co$a"% a"# a!t&cle &s e&the! a st&$ulat&o" 'h&ch 'oul#
b&"# the ebe!s) o! else a a"#ate to the #&!ecto!s( I" e&the! case &t &s a atte! bet'ee" the
#&!ecto!s a"# sha!ehol#e!s) a"# "ot bet'ee" the a"# the $la&"t&ff( The D&!ecto!s) 9C() of the
Ashbu!% Ra&l'a% Ca!!&a+e a"# I!o" Co$a"% :L&&te#; * -ecto! R&che) :567<-78; L(R( 7 -(L(
=8>( The objects of th&s co$a"%) as state# &" the Meo!a"#u of Assoc&at&o") 'e!e to su$$l%
a"# sell the ate!&als !e0u&!e# to co"st!uct !a&l'a%s) but "ot to u"#e!ta/e the&! co"st!uct&o"( The
co"t!act he!e 'as to co"st!uct a !a&l'a%( That 'as co"t!a!% to the eo!a"#u of assoc&at&o"B
'hat 'as #o"e b% the #&!ecto!s &" e"te!&"+ &"to that co"t!act 'as the!efo!e &" #&!ect co"t!a*e"t&o"
of the $!o*&s&o"s of the Co$a"% Act) 56=A It 'as hel# that th&s co"t!act) be&"+ of a "atu!e "ot
&"clu#e# &" the Meo!a"#u of Assoc&at&o") 'as ult!a *&!es "ot o"l% of the #&!ecto!s but of the
'hole co$a"%) so that e*e" the subse0ue"t asse"t of the 'hole bo#% of sha!ehol#e!s 'oul#
ha*e "o $o'e! to !at&f% &t( The sha!ehol#e!s &+ht ha*e $asse# a !esolut&o" sa"ct&o"&"+ the
!elease) o! alte!&"+ the te!s &" the a!t&cles of assoc&at&o" u$o" 'h&ch !eleases &+ht be +!a"te#(
If the% ha# sa"ct&o"e# 'hat ha# bee" #o"e '&thout the fo!al&t% of a !esolut&o") that 'oul# ha*e
bee" $e!fectl% suff&c&e"t( Thus) the co"t!act e"te!e# &"to b% the co$a"% 'as "ot a *o&#able
co"t!act e!el%) but be&"+ &" *&olat&o" of the $!oh&b&t&o" co"ta&"e# &" the Co$a"&es Act ) 'as
absolutel% *o&#( It &s e,actl% &" the sae co"#&t&o" as &f "o co"t!act at all ha# bee" a#e) a"#
the!efo!e a !at&f&cat&o" of &t &s "ot $oss&ble( If the!e ha# bee" a" actual !at&f&cat&o") &t coul# "ot
ha*e +&*e" l&fe to a co"t!act 'h&ch ha# "o e,&ste"ce &" &tselfB but at the utost &t 'oul# ha*e
aou"te# to a sa"ct&o" b% the sha!ehol#e!s to the act of the #&!ecto!s) 'h&ch) &f +&*e" befo!e the
co"t!act 'as e"te!e# &"to) 'oul# "ot ha*e a#e &t *al&#) as &t #oes "ot !elate to a" object '&th&"
the sco$e of the eo!a"#u of assoc&at&o"( Shuttle'o!th * Co, 2!othe!s a"# Co$a"%
:Ma&#e"hea#;) L&&te#) a"# Othe!s) J5FA7K A L(2( F It 'as hel# that M the co"t!act) &f a"%)
bet'ee" the $la&"t&ff a"# the co$a"% co"ta&"e# &" the a!t&cles &" the&! o!&+&"al fo! 'as subject
to the statuto!% $o'e! of alte!at&o" a"# M &f the alte!at&o" 'as bo"a f&#e fo! the be"ef&t of the
co$a"% &t 'as *al&# a"# the!e 'as "o b!each of that co"t!actB M the!e 'as "o +!ou"# fo! sa%&"+
that the alte!at&o" coul# "ot !easo"abl% be co"s&#e!e# fo! the be"ef&t of the co$a"%B M the!e
be&"+ "o e*&#e"ce of ba# fa&th) the!e 'as "o +!ou"# fo! 0uest&o"&"+ the #ec&s&o" of the
sha!ehol#e!s that the alte!at&o" 'as fo! the be"ef&t of the co$a"%B a"#) M the $la&"t&ff 'as "ot
e"t&tle# to the !el&ef cla&e#( I" Re Ne' 2!&t&sh I!o" Co$a"%) J56F6K 5 Ch( >A< It 'as hel# that
the a!t&cle &s "ot &" &tself a co"t!act bet'ee" the co$a"% a"# the #&!ecto!sB &t &s o"l% $a!t of the
co"t!act co"st&tute# b% the a!t&cles of assoc&at&o" bet'ee" the ebe!s of the co$a"% &"te! se(
2ut 'he!e o" the foot&"+ of that a!t&cle the #&!ecto!s a!e e$lo%e# b% the co$a"% a"# acce$t
off&ce the te!s of a!t( =A a!e ebo#&e# &" a"# fo! $a!t of the co"t!act bet'ee" the co$a"%
a"# the #&!ecto!s( U"#e! the a!t&cle as thus ebo#&e# the #&!ecto!s obta&" a co"t!actual !&+ht to a"
a""ual su of 5HHHl as !eu"e!at&o"( It 'as hel# also that althou+h these $!o*&s&o"s &" the
a!t&cles 'e!e o"l% $a!t of the co"t!act bet'ee" the sha!ehol#e!s &"te! se) the $!o*&s&o"s 'e!e) o"
the #&!ecto!s be&"+ e$lo%e# a"# acce$t&"+ off&ce o" the foot&"+ of the) ebo#&e# &" the
co"t!act bet'ee" the co$a"% a"# the #&!ecto!sB that the !eu"e!at&o" 'as "ot #ue to the
#&!ecto!s &" the&! cha!acte! of ebe!s) but u"#e! the co"t!act so ebo#%&"+ the $!o*&s&o"sB a"#
that) &" the '&"#&"+-u$ of the co$a"%) the #&!ecto!s 'e!e e"t&tle# to !a"/ as o!#&"a!% c!e#&to!s &"
!es$ect of the !eu"e!at&o" #ue to the at the coe"cee"t of the '&"#&"+-u$( Ra%f&el# *
-a"#s a"# Othe!s) J5F87 R( No( =H>(K F&el#-Da*&s Lt#( 'as a $!&*ate co$a"% ca!!%&"+ o"
bus&"ess as bu&l#e!s a"# co"t!acto!s) &"co!$o!ate# &" 5F<5 u"#e! the Co$a"&es Act) 5FAF ) as a
co$a"% l&&te# b% sha!es) ha*&"+ a sha!e ca$&tal of N<)HHH) #&*&#e# &"to <)HHH o!#&"a!% sha!es
of N5 each) of 'h&ch A)FHH full%-$a&# sha!es ha# bee" &ssue#( The $la&"t&ff) F!a"/ Lesl&e
Ra%f&el#) 'as the !e+&ste!e# hol#e! of 7A8 of those sha!es) a"# the #efe"#a"ts) 4o!#o" .%"#ha
-a"#s) Alf!e# .&ll&a Scales a"# Do"al# Da*&es 'e!e at all ate!&al t&es the sole #&!ecto!s of
the co$a"%( The $la&"t&ff 'as a sha!ehol#e! &" a co$a"%( A!t&cle 55 of the a!t&cles of
assoc&at&o" of the co$a"% !e0u&!e# to &"fo! the #&!ecto!s of h&s &"te"t&o" to t!a"sfe! sha!es &"
the co$a"%) a"# 'h&ch $!o*&#e# that the #&!ecto!s ?'&ll ta/e the sa&# sha!es e0uall% bet'ee"
the at a fa&! *alue(@ I" acco!#a"ce '&th th&s the $la&"t&ff so "ot&f&e# the #&!ecto!s) 'ho
co"te"#e# that the% "ee# "ot ta/e a"# $a% fo! the $la&"t&ff1s sha!es) o" the +!ou"# that the
a!t&cles &$ose# "o such l&ab&l&t% u$o" the( The $la&"t&ff1s cla&e# fo! the #ete!&"at&o" of the
fa&! *alue of h&s sha!es) a"# fo! a" o!#e! that the #&!ecto!s shoul# $u!chase such sha!es at a fa&!
*alue( It 'as fou"# that the t!ue co"st!uct&o" of the a!t&cles !e0u&!e# the #&!ecto!s to $u!chase the
$la&"t&ff1s sha!es at a fa&! $!&ce( A!t&cle 55 &s co"ce!"e# '&th the !elat&o"sh&$ bet'ee" the $la&"t&ff
as a ebe! a"# the #efe"#a"ts) "ot as #&!ecto!s) but as ebe!s of the co$a"%( 4u&""ess *
La"# Co!$o!at&o" of I!ela"#) :566>; L(R( AA Ch( D( ><F The La"# Co!$o!at&o" of I!ela"#)
L&&te# ) 'as &"co!$o!ate# u"#e! the Co$a"&es Act o" the 5Ath of Eul%) 566A) as a co$a"%
l&&te# b% sha!es( 2% the eo!a"#u of assoc&at&o" of a co$a"% l&&te# b% sha!es &t 'as
state# that the objects of the co$a"% 'e!e) the cult&*at&o" of la"#s &" I!ela"# ) a"# othe! s&&la!
$u!$oses the!e s$ec&f&e#) a"# to #o all such othe! th&"+s as the co$a"% &+ht #ee &"c&#e"tal o!
co"#uc&*e to the atta&"e"t of a"% of those objects( The 6th clause of the a!t&cles of assoc&at&o")
$!o*&#e# that the ca$&tal $!o#uce# b% the &ssue of 2 sha!es shall) so fa! as &s "ecessa!%) be a$$l&e#
&" a/&"+ +oo# to the hol#e!s of A sha!es the $!efe!e"t&al #&*&#e"# of N8 $e! ce"t() 'h&ch the%
a!e to !ece&*e o" the aou"ts $a&# u$ o" the&! sha!es( Th&s act&o" 'as b!ou+ht b% o"e of the 2
sha!ehol#e!s o" behalf of h&self a"# the othe!s) to !est!a&" the #&!ecto!s f!o &ssu&"+ a"% A
sha!es o" the foot&"+ of the&! be&"+ e"t&tle# to the be"ef&t of that a!t&cle) a"# to !est!a&" the
#&!ecto!s f!o a$$l%&"+ &" acco!#a"ce '&th &t the ca$&tal a!&s&"+ f!o the 2 sha!es( It 'as hel#
that the a$$l&cat&o" of the 2 ca$&tal $!o*&#e# fo! b% the a!t&cles &s "ot a" a$$l&cat&o" of ca$&tal to
ca!!%&"+ o" the bus&"ess of the co$a"%) but &s $!o*&#&"+ a" &"#ucee"t to $eo$le to ta/e sha!es
a"# subsc!&be ca$&tal to ca!!% o" the bus&"ess a"# that a!t&cle 6 'as &"*al&#) as &t $u!$o!te# to
a/e the 2 ca$&tal a$$l&cable to $u!$oses "ot '&th&" the objects of the co$a"% as #ef&"e# b%
the eo!a"#u of assoc&at&o") a"# &" a 'a% "ot &"c&#e"tal o! co"#uc&*e to the atta&"e"t of
those objects) a"# that the #&!ecto!s ust be !est!a&"e# f!o act&"+ u$o" &t( The a!t&cles of
assoc&at&o" of a co$a"% ca""ot) e,ce$t &" the cases $!o*&#e# fo! b% sect( 5A of the Co$a"&es
Act) 56=A ) o#&f% the eo!a"#u of assoc&at&o" &" a"% of the $a!t&cula!s !e0u&!e# b% the Act
to be state# &" the eo!a"#u(
Rea# o!e at3 htt$3OO'''(caclub&"#&a(coOfo!uO"otes-#oct!&"e-of-ult!a-*&!es-effects-a"#-
e,ce$t&o"s-5AFF5A(as$P(Uot8Pft0FUA