Abstract
In this final chapter, the different ways to ratify an ultra vires act or transaction are taught. Likewise, the legitimated person to make it. To the extent that in ancient times there were no legislative provisions related to this issue, judges and courts have delivered many opinions some of them contradictory.
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Notes
- 1.
Morawetz (1886), vol. 2, §581. In accordance with the predominant opinion, there can be no ratification of an illegal transaction that will render it enforceable. In re Cartwright v. Albuquerque Hotel Co., 36 N.M. 189, 11 P.(2d) 261 (1932); Runcie v. Corn Exchange Bank Trust Co., 6 N.Y.S.(2d) 616 (1938); Baird v. McDaniel Printing Co., 25 Tenn. App. 144, 148, 153 S.W.(2d) 135, 138 (1941), in which the court pointed out: “Corporate transactions which are illegal because prohibited by statute are void, and cannot support an action nor become enforceable by performance, ratification, or estoppel.” 35. La. Act 250 of 1928, §12, I [Dart’s Stats. (1939) §1092, I]. In Runcie, it was held that shareholders could not ratify ultra vires acts. In turn, in Ashbury it was submitted that: “Where there could be no mandate, there cannot be any ratification”.
- 2.
O’Kelley et al. (2010), p. 688. In re Inter. Corp. v. Moody, 411 S.W.2d 578 (Tex. Civ. App. 1966).
- 3.
Garner (2009), p. 1376. Civil Law scholars stand for ratification as the unilateral act through which one individual or moral person, takes charge of both rights and obligations of a business done on behalf of it by someone to whom he had not conferred power or beyond the powers granted. See, Capitant (1966), p. 459.
- 4.
Elliott (1911), §221. There is must be noted that in Ashbury the contract for the purchase of a concession for building a railway was declared ultra vires, and consequently void. In this case, not even the subsequent assent of the whole body of shareholders could ratify it. In Tippecanoe Co. v. Lafayette, et al. 50 Ind. 85 (1875) it was ruled that: “A contract ultra vires the charter is void, and cannot be made valid by any subsequent act of the corporation, because there is no residuary power to confirm it. What they could not make, they cannot confirm. A void act can never become valid, merely because it remains unquestioned”.
- 5.
Central Transportation Co. v. Pullman Palace Car Co., 139 U.S. 24 (1890). In California Bank v. Kennedy, 167 U.S. 362, a certificate for shares of the stock of corporation M was issued in the name of corporation X, and dividends thereon were paid into the treasury of X. M became insolvent, and a creditor sought to enforce against X the liability attaching to shareholders in M. The court allowed X to defend, on the ground that the purchase of the shares by X was ultra vires. “It would be a contradiction in terms to assert that there was a total want of power by any act to assume the liability, and yet to say that by a particular act the liability resulted. The transaction being absolutely void, could not be confirmed or ratified” (italics added). Some criticism about this reasoning in Warren (1910), pp. 497, 504.
- 6.
Spackman v. Evans, 3 HL 171 (1868).
- 7.
The Companies Act 1862 expressly prohibited an alteration of the objects clause in the memorandum of association, even with the unanimous consent of all the shareholders.
- 8.
Ballantine (1930), pp. 282–283. The consent of the shareholders need not be expressed by any formal vote of authorization or ratification. Where the funds of the corporation are openly employed in a venture outside the contemplated scope of corporate action, so that the fact could upon inquiry be ascertained, if the shareholder does not restrain the further prosecution of the venture within a reasonable time, it is proper for the law to impose upon him ratification of such employment. If shareholders are to be protected, to the detriment of outsiders, against the unauthorized acts of the directors and officers, it is not improper to impose a duty upon shareholders to inquire as to the conduct of the directors and officers, and to restrain such conduct, if improper. Cf. Warren (1910), p. 537, footnote 4.
- 9.
De La Cámara (1977), p. 332.
- 10.
The antithesis holds that the general meeting has no legitimation to ratify an act not described in the objects clause because it is also bound by the company’s purpose. Cf. La Villa (1996), p. 339.
- 11.
- 12.
Manóvil (1978), p. 1068.
- 13.
- 14.
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Jiménez Sánchez, M.A. (2022). Ratification of Ultra Vires Acts and Transactions. In: The Ultra Vires Doctrine in Corporate Law. SpringerBriefs in Law. Springer, Cham. https://doi.org/10.1007/978-3-030-88838-1_8
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