Ultra Vires (Corporate)
What does "Ultra Vires (Corporate)" mean in law?
Ultra vires (Latin for 'beyond the powers') refers to acts taken by a corporation that exceed the scope of authority granted by its articles of incorporation or governing statute. Historically, corporations were formed for specific, limited purposes stated in their charters, and any action beyond those stated purposes was void and unenforceable. As recognized in Dartmouth College v. Woodward, the corporate charter defines the scope of corporate powers as a contractual matter. Modern corporate statutes have largely eliminated the ultra vires doctrine by allowing corporations to be formed for any lawful purpose and by providing that ultra vires cannot be used as a defense in most contract actions, though it may still be raised in a proceeding by shareholders to enjoin unauthorized acts, by the corporation against incumbent or former officers, or by the state attorney general in a dissolution action.
Definition
Ultra vires (Latin for 'beyond the powers') refers to acts taken by a corporation that exceed the scope of authority granted by its articles of incorporation or governing statute. Historically, corporations were formed for specific, limited purposes stated in their charters, and any action beyond those stated purposes was void and unenforceable. As recognized in Dartmouth College v. Woodward, the corporate charter defines the scope of corporate powers as a contractual matter. Modern corporate statutes have largely eliminated the ultra vires doctrine by allowing corporations to be formed for any lawful purpose and by providing that ultra vires cannot be used as a defense in most contract actions, though it may still be raised in a proceeding by shareholders to enjoin unauthorized acts, by the corporation against incumbent or former officers, or by the state attorney general in a dissolution action.
Example
When a corporation chartered solely for the purpose of operating retail stores attempted to invest in oil exploration, a shareholder sought an injunction on ultra vires grounds, arguing that the investment fell outside the scope of the corporation's stated purposes in its articles of incorporation.