What is the doctrine of ultra vires visavis section 39 of the CAMA of nigeria?

Answer 1

Ultra vires literarily means beyond legal capacity. In legal parlance, the concept is a common law doctine which means that a company which becomes a legal personality by virtue of its incorporation cannot carry on business beyond the object contains in its Memorandum of Association. Thus, any business carried on by the company which is not within its objects is said to ultra vires the company and to that effect, invalid.

The doctrine has found a statutory expression under Section 39 of the Companies and Allied Matters Act, Cap C20, LFN, 2004 with modifications to reduce the hardship it hitherto worked against third parties. Section 1 thereof entrenches the doctrine. Section 2, in an attempt to reduce the severity provides that a breach of the doctrine may be asserted by minority shareholders against oppressive or illegal acts of the majority shareholders as provided in Sections 300-313 and by an injunction secured by any member of the company or by any creditor to prohibit a breach of the doctrine as provided under Section 39(4).

Under Sub-section 3 thereof, the Act provides that notwithstanding the provision of Sub-section 1, no act of company and no conveyance or transfer of a property to or by a company shall be invalid by reason that such act, conveyance or transfer was not made in furtherance of any of the authorized business or object of the company. Thus, a third party may yet be protected even if the company does an act which is beyond the power of the company since the breach does not render the act invalid.