Implied powers, Business Law and Ethics

Implied Powers:

                                    The statement of Lord Cairns in 1875 in Ashbury Rail Co Ltd v Riche (22) to the effect that a contract beyond the objects of the company "in the memorandum of association" is "beyond the powers" of the company gives the impression that a company has no legal power to do anything which is not written in the memorandum of association. That would be a startling proposition because, in practice, companies have to do so many things in the course of their business that if all those things were to be written down in the memorandum of association, the memorandum would be such a gigantic document that nobody would print or read. It was therefore a welcome clarification of the legal position when, in 1880, Lord Selborne, L C, stated in Attorney-General v Great Eastern Railway Co that the doctrine of ultra vires, as explained in the Ashbury case, "ought to be reasonably, and not unreasonably, understood and applied". His Lordship then explained that it is not necessary for a company to write down in its memorandum everything that it would or could do in the course of its business because whatever may fairly be regarded as incidental to, or consequential upon, those things which have been stated in the memorandum ought not, and would not, be held by the courts to be ultra vires. The courts would regard such things as impliedly within the company's powers unless they are "expressly prohibited" by the memorandum.

Posted Date: 1/12/2013 2:31:31 AM | Location : United States







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