DOCTRINE OF ULTRAVIRES: ♦ In the case of a company objects or powers which is not stated
in the memorandum is prohibited by the doctrine of ultra vires. ♦ As a result, an act which is ultra
vires is void and it shall not bind the company. ♦ Neither the company nor the party to the
contract can sue on it. ♦ Also, the company cannot make it valid, even if every member give
assent to it. ♦ The act which is ultra vires the company will never be ratified that is the general
rule. ♦ If the act is ultra vires the directors only, then the shareholders are eligible to ratify it. In
other words ‘Ultra’ means beyond ‘Vires’ means Powers. So ultra vires means acts beyond
the legal powers or objects of the company.
If it is ultra vires the articles of association, the company can alter its articles in the proper way
and after that such acts can be ratified.
The Memorandum of Association and Articles of Association of any company are public
documents which can be inspected by the general public on MCA portal by paying the required
fees. Doctrine of constructive notice assumes that any person who deals with a company, must
have inspected its documents and establish conformity with the provisions. Though, if a person
fails to read them, then the law assumes that he is aware of the all the contents of the
documents. Such an assumption or presumption notice is called Constructive Notice. In simpler
words, if a person enters into a contract which is beyond the powers of a company, then he has
no right to sue the company for its redemption. The Memorandum of Association is the charter
documents that states the powers of its directors and its members. If a person enters into a
contract which is beyond the powers of the company or outside the limits of its authority, he
cannot acquire any rights against the property of the company
Following are some of the ultra vires acts:  Issue of unauthorized capital.  Pay dividend out
of capital.  Pay unreasonable sums for services rendered.  Make payments for benefit of
selected shareholders.  Subscribes to external objects of the company.  Acts which do not
fall in main, ancillary or other objects of company.
DOCTRINE OF INDOOR MANAGEMENT: The doctrine of indoor management is contrary to the
doctrine of constructive notice. Doctrine of indoor management assumes that outsiders are
unaware internal affairs of the company. Hence, if an act performed is authorized by the
Memorandum or Articles of Association of the company, then the outsider can assume that the
company complies with all the detailed formalities. This assumption is known as Doctrine of
Indoor Management. This principle is based on the landmark case between The Royal British
Bank and Turquand. Therefore, this rule of indoor management is important to people who deals
with a company through its directors or other persons. They can assume that the members of the
company are performing within the scope of their authority as mentioned in the charter
documents i.e. Memorandum / Articles of association. – The Doctrine of Indoor Managements
states that outsider person has no responsibility to have the knowledge about the internal affairs
of the company. The outsider person cannot be bound by the duty to review the internal
functioning or the internal managerial proceedings of the company. So, the outsider person shall
not be made liable for the irregularities in the internal proceedings of the company. The company
cannot transfer its liability on the outsider person of its own irregular internal actions. This
principle is called the Doctrine of the Indoor Management. Outsiders are not deemed to have
the constructive notice as regards the manner in which the power is exercised. They are not
bound to make further enquiries. They are entitled to assume that management of internal
affairs of the company has been regular & is being carried on in accordance with the
memorandum & articles. This assumption is known as doctrine of indoor mgmt.