Page 155 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes Held, the contention of the liquidator was correct as all the three contracts were clearly ultra
vires.
4. In case a company is about to undertake an ultra vires act, the members of a company (even
a single member) can get an order of injunction from the court restraining the company
from going ahead with the ultra vires act.
5. If the directors have exceeded their authority and done something then such matter can be

ratified by the general body of the shareholders, provided the company has the capacity to
do so by its memorandum of association.
Example: Company has the power to borrow money, but the Articles of the company
provide that in case the directors borrow more than ` 50,000, they should get prior approval by
the company in general meeting. However, the directors can issue debentures to the extent of `
75,000 without getting the approval from the shareholders.

The company in general meeting may ratify the act of directors as it is intra vires the company,
though ultra vires the powers of the directors of the company.
6. Any property acquired by a company under an ultra vires transaction may be protected by
the company against damage by third persons.

7. Directors and other officers can be held liable to compensate the company for any loss
occasioned to it by an ultra vires act.

8. Directors and other officers shall be personally accountable to the third parties
9. Money or property gained through an ultra-vires transaction available in specie or capable

of being identified shall be restituted (restored) to the other party.
10. In case, an ultra-vires loan, taken by a company is used for payment of its intra-vires debts,
the lender of the ultra vires loan is substituted in place of the creditor who has been paid
off and as such can recover the money.

8.3.4 Alteration of Memorandum

Section 16 provides that the company cannot alter the conditions contained in memorandum
except in the cases and in the mode and to the extent express provision has been made in the Act.
These provisions are explained herein below.
Change of name. Section 21 provides that the name of a company may be changed at any time by
passing a special resolution at a general meeting of the company and with the written approval
of the Central Government. However, no approval of the Central Government is necessary if the
change of the name involves only the addition or deletion of the word ‘private’ (i.e., when public
company is converted into a private company or vice versa).
If through inadvertence or otherwise, a company has been registered with a name which is
identical with or too closely resembles with the name of an existing company, the company may
change its name by passing an ordinary resolution and by obtaining the approval of the Central
Government in writing (s.22).
The change of name must be communicated to the Registrar of Companies within 30 days of the
change. The Registrar shall then enter the new name on the register in the place of the old name

and shall issue a fresh certificate of incorporation with necessary alterations [s.23(1)]. The change

of name becomes effective on the issue of fresh certificate of incorporation. The Registrar will also
make the necessary alteration in the memorandum of association of the company [s.23(2)].

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