Do companies have complete freedom to act
Do companies have complete freedom to act? Analyse the doctrine of ultra vires and the proposed reforms in the Companies Bill designed to grant companies full capacity.
The doctrine of ultra vires has been fervently debated for many years since its conception in the 19th century, and has caused widespread confusion within the sphere of company law. It will be necessary, in order to construct a thourough and fluidous argument, to outline the history and development of the ultra vires doctrine and why, some would argue, it has become the bane of company law. It will also be necessary to dicuss the relevance of ultra vires to modern company law and the efforts to curtail its widespread influence. The DTI’s White Paper Modernising Company Law, presented to Parliament in 2002 seeks to afford companies the ability to act with unlimited capacity and therefore remove the problems associated with the ultra vires doctrine which will be discussed shortly.
This essay will adopt the normative approach that companies, in order to fulfil their potential should have the ability to expand by any means possible to achieve the most economically efficient response. The doctrine of ultra vires is widely regarded as a way in which the company law can be responsive to different bodies and constituencies. The doctrine of ultra vires has been subjected to many reforms and has been highly criticised since it was first introduced, this is largely due to the fact that it has been regarded as a hindrance upon the economic efficiency of companies and an inhibitor of a companies ability to expand and respond to the economic climate. Stephen Griffin describes the ultra vires doctrine (pre-reform) as a
"regulatory device which sought to prevent a registered company from entering into any type of transaction which exceeded the scope of the company's...