THE ULTRA VIRES DOCTRINE OF COMPANY LAW IN ZAMBIA INTRODUCTION This assignment examines the debate on the legal issues surrounding the abolition of the requirement to submit a Memorandum of Association when applying to incorporate a company under the Zambian Companies Act 1994 cap 388 of the Laws of Zambia. This debate has been on the â€œObjects Clauseâ€ which used to be a requirement under the old Companies Act 1921 and was to remain as part of the Memorandum of Association thereafter until the company ceased to exist. ORIGINS OF THE OBJECTS CLAUSE A company on incorporation under the Companies Act cap 388 gives it a corporate personality which means that it gains the status of a separate legal entity from its shareholders or members. However, as an artificial person, the company cannot make decisions and as such has to rely on humans to make decisions on its behalf.
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Therefore, the decisions and actions by the company officers, employees or indeed its agents will be taken to be those of the company which shall bear the liability. As such, as the company is to be regarded as an artificial person, the courts developed the view that its legal capacity had to be limited to its objects and on incorporation to include the objects clause in its memorandum of association which formed part of the companyâ€™s constitution. This was with a view of safeguarding the interests of both the shareholders and the creditors by way of the doctrine of ultra vires. In summing up, it can be said that an objects clause is that provision in a company’s constitution which provides for the purposes and the power to undertake only the activities for which the company was formed as was the case before the coming into force of the Companies Act cap 388. THE DOCTRINE OF ULTRA VIRES The doctrine of ultra vires refers to those acts or decisions that a company may undertake which are beyond the scope of powers granted by the companyâ€™s objects clause in its memorandum of association. Ashbury Carriage Company v Riche (1875) The ACC was an incorporated company under the Companies Act of 1862. Clause 3 of the memorandum that: The objects for which the company is established are to make and sell, or lend on hire, railway carriages and wagons, and all kinds of railway plant, fittings, machinery, and rolling-stock; to carry on the business of mechanical engineers and general contractors; to purchase and sell, as merchants, timber, coal, metals, or other materials; and to buy and sell any such materials on commission, or as agents. The company agreed to provide Richie and his brother with finance for the construction of a railway in Belgium but later repudiated the agreement.
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