Ultra Vires Acts

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Definition of 'Ultra Vires Acts'

Ultra vires is a Latin phrase that means "beyond the powers." In the context of business law, it refers to an act that a corporation takes that is outside of its legal authority. This can include anything from entering into a contract that is not in the best interests of the company to issuing stock without shareholder approval.

When a corporation engages in an ultra vires act, it can be held liable for damages. The shareholders may also be able to sue the directors and officers of the company for breaching their fiduciary duty.

There are a few different ways to prevent ultra vires acts from happening. One is to have clear and concise corporate bylaws that set out the powers of the board of directors and the officers of the company. Another is to have an annual shareholders meeting where the shareholders can vote on important decisions. Finally, it is important for the board of directors and the officers of the company to be aware of their legal obligations and to seek legal advice when they are unsure about whether or not a particular act is ultra vires.

Here are some examples of ultra vires acts:

* A corporation enters into a contract to buy a new building when it does not have the financial resources to do so.
* A corporation issues stock without shareholder approval.
* A corporation donates money to a political campaign.
* A corporation makes a loan to a shareholder without interest.

These are just a few examples of the many ways that a corporation can engage in an ultra vires act. It is important for corporations to be aware of the potential risks of ultra vires acts and to take steps to prevent them from happening.

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