Professional Documents
Culture Documents
FACT: Activities have been carried out, member wish to discipline directors who
responsible in entering ultra vires contract.
S 20(2)(c): ultra vires valid if any petition by Minister to wind up company.
FACT: Entering an ultra vires contract provide a ground to minister when attempting to
wind up the company.
Pamaron Holdings Sdn. Bhd. v Ganda Holdings Bhd [1988]
GH entered into contract to purchase share of Pamaron.
GH defaulted the payment and co sued him for the sum owed.
GH claim that the transaction was ultra vires.
Court held that a purchaser of shares does not fail under section 20(2).
An outsider cannot enforce the ultra vires act.
S 20(3) stop company from carrying out the act
Condition: No activity took place yet.
The court has power:
-To stop the performance by granting an injuction.
-To order compensation for loss sustained by either party.
Problems of ultra vires
to company itself: Lose opportunity on profitable transaction as it is ultra vires, Time
consumed to amend the clause.
Problems to shareholders: Might receive lesser dividends.
Common Law:
Widen object clause
- Any other business that connected to its main object.
- Generate lucrative profit to the co.
Bell House Ltd v City Wall Properties Ltd
- Held honest opinion and carried business advantageously with independent
objects.
Reasonably implied or incidental power
- Borrowing, investing or any acts in connection with object clause.
- Provided that the directors can prove they are acting in connection to the cos objects.
Re Introduction Ltd
- An exhibition promote company borrows to carry on pig breeding business is
not valid.
Company Law
Clause 1 in Third Schedule
-Any other business that co capable of being conveniently carried in connection with
object clause and directly or indirectly to enhance the value of companys properties &
rights.
S 19(1): other than expressed and implied power attached with object clause, company
- Has power to donate for charity or patriotic purpose.
- Has power to transact any lawful business to aid Malaysia government in the event of
war or hostility.
Similarities in terms of exception
These allow company to draft the widest objects clause that lists down many specific
activities and are supplemented by dependent objects which could be construed so as
to include virtually any lawful activity.
Conclusion:
Part of the doctrine of ultra vires has been modified by Statute Act in S 20(1) & S 20(3).
Further address circumstances and specify people that can rely on ultra vires in S20(2).
There are similarity in term of wide object clause and incidental powers to S19.
Primary purpose for both common law and companies act is to strike down effect of
ultra vires & to protect innocent third parties.