What is Ultra Vires?

Courthouse“Ultra Vires” is a legal doctrine that roughly translates as “beyond the power.”  Basically, it describes acts undertaken by corporate officers that fall outside the scope of their legal authority.   Not acts that are illegal per se, but those that fall outside the scope of Articles, Bylaws, or (in the case of an LLC), its Operating Agreement.   As an example, a corporation’s president may perform an ultra vires act by selling a significant portion of the company’s assets without shareholder approval, if the corporate bylaws require that such approval be obtained beforehand.

Traditionally, an ultra vires act was essentially void, and could not be ratified by shareholders after the fact.  However, the ultra vires doctrine is now mostly obsolete, as most states have enacted laws that enable corporate officers to transact any lawful business on behalf of the corporation.

However, the ultra vires doctrine still arises in some circumstances, and is most often applied to corporate officers who undertake  acts that are specifically forbidden by the corporation’s bylaws, such as using corporate funds to make political contributions, or making loans to officers, directors, or outsiders.

 



Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.

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