Gist of lord buckleys statement, Business Law and Ethics

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Gist of Lord Buckleys statement:

The gist of Lord Buckley's statement, above, may be summarised as follows: The judges will not regard a transaction undertaken by a company as ultra vires merely because it is not written in the company's memorandum of association as one of the company's objects. They would in fact regard the transaction as intra vires by implication if -

i.   it was reasonably incidental to any of the objects which have been written in the company's memorandum of association, and.

ii. It was undertaken for the sole purpose of effectuating, or achieving, the written objects, or any of them.

Regarding the criteria to be used when deciding on whether a proposed transaction is "reasonably incidental" to the objects written in the memorandum, it was stated in Henderson v Bank of Australia (1888) that what other companies with similar objects do may be a good guide for a company regarding its implied powers. But it appears that, provided a transaction is decided on by the company (at a board or general meeting) in the bona fide belief that its pursuit would enable the company to get more customers or do more business, the court would not regard the transaction as ultra vires even though it may doubt its "reasonableness".


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