The following sections set out the primary powers of companies, company directors and/or secretaries under the Companies Acts, under secondary legislation and related case law. Further information on the roles of companies, company directors and/or secretaries can be found in the ODCE Information Books which are available for download at the end of this page.
Companies' Powers
The objects clause contained in the company's memorandum of association sets out its objects and express powers. The company also has implied powers to do things ancillary to its objects. Where a company enters into a transaction which is not in furtherance of its objects, such a transaction is known as being ‘‘ultra vires’’, i.e. beyond the company's capacity.
An ultra vires transaction is generally void and unenforceable. However, where a party deals with a company and is not actually aware of the fact that the company's act was not within its powers, the act is effective in favour of the person relying on it. The director or officer of the company responsible for the ultra vires act is liable to the company for any loss or damage which the company suffers as a consequence. Moreover, where a person deals with a limited liability company in good faith, any transaction entered into by the company is deemed to be within the company's capacity.
Company Directors' Powers
A company's directors act on behalf of the company. They only have powers to do what the company itself is legally entitled to do. The powers that directors have are those which have been conferred upon them by the company, usually via the company's articles of association.
Normally, directors' powers are conferred collectively. These powers are formally exercised by a resolution at a board meeting, usually decided by a majority of votes. A company is obliged to keep minutes of such meetings. Where decisions are made informally, a company's articles of association usually accept their validity, provided that a resolution is signed by all of the directors.
Typically, the articles of association of a company provide that the directors may exercise all of the powers of the company which are not required by the Companies Acts or by the articles of association to be exercised by the company in a general meeting (i.e. in a meeting of the members). In such circumstances, the delegation to the directors is unrestricted, and they are entitled to do whatever the company is empowered to do.
As is the case with a company, a director is precluded from doing anything which is illegal or ultra vires (i.e. outside the powers of the company). The company cannot in a general meeting validly set aside an action taken by the directors which is within the powers conferred on them by the articles. Similarly, the company cannot in a general meeting take any step which is delegated to the directors by virtue of its articles of association.
In addition to the actual powers delegated to a director by the board, a director may also have ‘‘ostensible authority’’. That is to say, where a company holds a director out as having authority to do something or another party is led to believe that a director has the authority to commit the company in a certain way and no attempt is made to correct the impression given, the company may be precluded from subsequently denying this authority.
Company Secretaries' Powers
A company secretary has authority to make contracts within his or her own sphere of competence i.e. the day to day administration of the company. Additionally, a company secretary may, under the doctrine of ‘‘ostensible authority’’, bind a company, where the action is one within the secretary's usual authority even if the secretary in fact had no authority to act. Outside the usual areas of authority for a company secretary, a company secretary has no authority to make contracts unless specifically authorised to do so by the directors.
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