- June 13, 2013
- Posted by: Seth Heyman
- Category: Business Law
“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.