What is the usual legal consequence when a company enters into a transaction beyond the objects stated in its constitution?
Correct answer: B. The transaction may be considered ultra vires the company
- A. The transaction is automatically a criminal offence
- B. The transaction may be considered ultra vires the company
- C. The shareholders become ordinary employees
- D. The company immediately becomes a partnership
Explanation
An act beyond the company’s stated objects may be described as ultra vires the company. The exact consequences depend on the applicable company law and the nature of the transaction.
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About Company Law Basics
Company law covers incorporation, separate legal personality, limited liability, shares, the memorandum and articles of association, and the powers and duties of directors. It also includes shareholder meetings, resolutions, company records, audit, winding up and the differences between a registered company, partnership and sole proprietorship.
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