Ultra vires stocks are all actions that are beyond the control of a company. Ultra vires shares do not fall within the powers expressly enumerated in a charter or corporate law. This may also refer to any act expressly prohibited by the Company Charter. In Hammersmith and Fulham London Borough Council v Hazell, the House of Lords found that interest rate swaps entered into by local authorities (a popular method of circumventing legal restrictions on local authorities borrowing money at the time) were all ultra vires and void, triggering a number of satellite disputes. This first view proved unworkable and unfair. It allowed a company to accept the benefits of a contract and then refuse to fulfil its obligations on the ground that the contract was ultra vires. The doctrine also compromised the security of ownership of assets in fully executed transactions involving a corporation. Accordingly, the courts have held that such acts are questionable rather than void and that the facts must determine whether an act of enterprise should be effective. When government bodies or agencies take action, the extent of their powers is determined by laws, which may include a constitution. When branches of government go beyond these defined powers, their actions can be considered ultra vires and have legal consequences. When people within a company use resources beyond their legal jurisdiction, this can be called ultra vires. Such measures may include the appropriation of the proceeds of the company or shares of the company in which natural persons have no legal ownership. If a manager were to access the company`s bank accounts and use those assets for his personal needs, this would be qualified as ultra vires acts.
If an auditor or other tax officer within a company has transferred ownership of the company`s shares, he has rights of control, this is also subject to ultra vires laws. Under constitutional law, particularly in Canada and the United States, constitutions confer various powers on federal, provincial or state governments. To go beyond these powers would be ultra vires; For example, although the Court did not use this term to amend a federal statute in United States v. Lopez on the grounds that it exceeded the constitutional authority of Congress, the Supreme Court still declared the law ultra vires.  Although other types of bodies, such as public authorities, also take measures that go beyond their legal competence, their actions can also be characterized as ultra vires acts. Government agencies created by a state are public bodies governed by municipal by-laws and other powers prescribed by law. These powers correspond to the articles of association of a private company. In the past, the ultra vires concept was used to narrow the powers of a government entity. Failure to comply with legal limits has been described as ultra vires. Despite these principles, the ultra vires doctrine has been applied inconsistently and unpredictably.
As a result, modern company law has sought to exclude the possibility of ultra vires acts. Most importantly, multi-purpose clauses and general clauses that allow companies to conduct lawful activities are now included in the articles of association. In addition, purpose clauses can now be easily changed if the company wants to do business in new areas. For example, under the traditional doctrine of ultra vires, a company that aimed to manufacture shoes could not manufacture motorcycles under its charter. Under modern company law, the purpose clause would either be so general that the company could enter the motorcycle business, or the company would amend its purpose clause to reflect the new company. In the landmark case of Anisminic v. Foreign Compensation Commission, Lord Reid is accredited to formulate the ultra vires doctrine. However, ultra vires, as well as impropriety, were mentioned much earlier by Lord Russell in the famous Kruse v Johnson case, which involved challenging laws and other rules. Anisminic is best known for not depriving the courts of their jurisdiction to overturn a decision, even though a law expressly prohibits the decision from being subject to judicial review. Other cases such as Bromley LBC v. Greater London Council and Council of Civil Service Unions v.
Minister of the Civil Service have tried to refine the doctrine. Legal issues related to ultra vires can arise in different contexts: several modern developments related to business start-ups have limited the likelihood of ultra vires actions. Except in the case of not-for-profit corporations (including municipal corporations), this legal doctrine is obsolete; In recent years, almost all businesses have been created to enable them to conduct legitimate activities. The U.S. Model Business Corporation Act states: „The validity of corporate actions shall not be challenged on the basis that the corporation is unable or incapable of acting.“ The doctrine still has some life among non-profit organizations or state-created corporations established for a specific public purpose, such as universities or charities. The situation was changed by the 1985 Act, which largely abolished the doctrine of commercial companies. The situation is now regulated by sections 31 and 39 of the Companies Act 2006, which also severely limit the applicability of ultra vires in company law, although it can still apply to charities and a shareholder can only apply for an injunction in advance to prevent an act known as ultra vires.