# Understanding Ultra Vires Acts: Definition, Examples, Legal Implications

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## What Are Ultra Vires Acts?

 Ultra vires acts are actions a [corporation](https://www.investopedia.com/terms/c/corporation.asp) performs beyond its authority. These acts exceed the powers listed in a [corporate charter](https://www.investopedia.com/terms/c/corporatecharter.asp) or law and include actions specifically prohibited by the charter.

The term comes from a Latin phrase meaning beyond the power, the opposite of intra vires, which is used in legal contexts.

Ultra vires acts can render a corporation vulnerable to lawsuits and are not defensible in court. These acts breach corporate charters or laws and can occur in corporations or government bodies. Examples are unauthorized board appointments or misuse of company assets. It is crucial for corporations, government bodies, and their stakeholders to understand the risks involved with ultra vires acts.  

### Key Takeaways

*   Ultra vires acts refer to actions taken beyond the legal authority granted to a corporation, as specified in its corporate charter or relevant laws, potentially leading to legal vulnerabilities.
*   Such acts are not defensible in court, exposing corporations to lawsuits from employees or other stakeholders, emphasizing the importance of operating within defined legal boundaries.
*   Documents like a memorandum of association and articles of incorporation serve as the governing framework, detailing permissible corporate actions and interactions with shareholders.
*   Instances such as unauthorized appointment of board members or misappropriation of company resources are classic examples of ultra vires acts.
*   The term also applies to government bodies when they act beyond their legal authority, as defined by constitutions or laws, which can lead to legal consequences.

## Identifying Excessive Corporate Power Use

Ultra vires acts can also be defined as any excessive use of corporate power that has been granted. These acts cannot be legally defended in court. They will, in fact, leave the corporation vulnerable to lawsuits by employees or other parties.

Companies use legal documents like a "memorandum of association" to outline permissible actions for organizations, their employees, and directors. This document is more common in Europe than in the United States.  

Together, the [memorandum](https://www.investopedia.com/terms/o/offeringmemorandum.asp) and [articles of association](https://www.investopedia.com/terms/a/articles-of-association.asp) serve as a company constitution, outlining how the organization may operate and engage with [shareholders](https://www.investopedia.com/terms/s/shareholder.asp). The memorandum guides external engagements, while [articles of incorporation](https://www.investopedia.com/terms/a/articlesofincorporation.asp) describe the company's nature, purpose, and type.

Government bodies, like corporations, performing actions beyond their legal powers, can also be described as engaging in ultra vires acts.  

## Examples of Ultra Vires Actions

Actions that breach the above directives can be classified as ultra vires. For example, a company’s constitution might outline the procedure for appointing directors to its board. If board members are added or removed without following those procedures, then those actions would be described as ultra vires.

If individuals within a company make use of resources that go beyond the scope of their legal purview, this can be called ultra vires. Such actions may include appropriating company revenue or shares of the company that the individuals do not have legal ownership of. If a manager were to access the bank accounts of the company and use those assets for personal needs, this would be classified as an ultra vires act. If an accountant or another financial officer within a company transferred ownership of company shares that they have the right to control, this also falls under ultra vires acts.

When government bodies or agencies take action, the scope of their powers is determined by laws that can include a constitution. If branches of government go beyond those outlined powers, their actions can be deemed ultra vires and may face legal repercussions.