# Objects Clause and the Doctrine of Ultra Vires

## 1. What the Objects Clause Must Contain

The MOA shall state:

The objects for which the company is proposed to be incorporated, AND
Any matter necessary in furtherance thereof.

### IFSC Companies (Special Rule)

Objects must relate to financial services activities under the SEZ Act, 2005 and SEZ Rules, 2006, aligned with licences granted by RBI, SEBI, IRDAI.

## 2. Doctrine of Ultra Vires

'Ultra vires' = 'beyond the powers'.

Any act not stated in (or incidental to) the objects clause is ultra vires the company and is void.
No party, even an outsider, can sue for enforcement or specific performance.

## 3. Principle of Ratification

Type of Act	Can it be ratified?	By whom?
Ultra vires the company	No — incapable of ratification	–
Intra vires the company but ultra vires the directors	Yes	Company in proper form
Ultra vires the directors' powers	Yes	Shareholders
Ultra vires the AOA	Yes	By altering the AOA

## 4. Protection to Stakeholders

The doctrine protects shareholders and creditors by ensuring the company acts only within its defined objects.

## 5. Leading Case – Ashbury Railway Carriage & Iron Co. v. Riche

Facts:

The company's memorandum permitted it to engage in 'making, selling, lending or hiring railway plants' and acting as general contractors for related businesses.
The company entered into a contract with M/s Riche to finance railway construction in Belgium, claiming this fell under general contractors.

Held by the House of Lords:

The contract was ultra vires, null and void as it went beyond the objects.
Even unanimous shareholder consent could not ratify it.

## 6. Modern Context

The doctrine has been weakened, as the objects clause can now be easily altered by passing a special resolution.

Worked example

### Example 1

Q. ABC Ltd.'s objects clause permits 'manufacture and sale of textile machinery'. The board enters into a contract to acquire a coal mine. A unanimous shareholders' meeting later ratifies the contract. Is it valid?

A. No. The acquisition is ultra vires the company. Per Ashbury v. Riche, such an act is void ab initio and cannot be ratified even by unanimous shareholder approval. To validly enter this activity, the company must first alter its objects clause by SR under Sec. 13.

### Example 2

Q. Directors enter into a contract within the company's objects but without observing a procedural requirement in the AOA. Can it be ratified?

A. Yes. The contract is intra vires the company but ultra vires the directors' authority/AOA. The company can ratify it by appropriate shareholder resolution or by altering the AOA.

⚠️ Common exam mistakes

Believing all ultra vires acts can be ratified — those ultra vires the company cannot be ratified.
Confusing 'ultra vires the company' with 'ultra vires the directors' — only the latter is ratifiable.
Stating that the doctrine has been abolished — it has been weakened, not abolished.
Misapplying Ashbury — the case turned on the contract going beyond the objects clause.

Bare-Act text Section 4(1)(c) · Companies Act, 2013 · click to expand

Sec. 4(1)(c): The memorandum of a company shall state the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof.

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Objects Clause and Doctrine of Ultra Vires

Worked example

⚠️ Common exam mistakes