This article, the fourth in our series on the Companies Act 2006, will focus on where a company is bound by the acts of its directors and ways to avoid personal liability through the use of contracts
Section 39 firmly dismisses the old ‘ultra vires doctrine’ (see 3.2.1) by stating that:
‘The validity of an act done by a company shall not be called into question on the ground of lack of capacity by reason of anything in the companyʼs constitution.’
Well before the move towards unrestricted objects, modern thinking on company law has been that protection for outsiders dealing with a company takes precedence over safeguarding shareholders against unauthorised acts by directors – a safeguard that is rarely necessary with owner-managed companies, at least not from a legal point of view. The old-fashioned robust view that people wishing to deal with a company should look in advance at its memorandum and articles is, and perhaps always was, impractical and unreasonable.
