UniversePG l www.universepg.com 119 Company’s Corporate Legal Capacity: Problems of the Ultra Vires Rule, Modern Shift and Position of Bangladesh Md. Omar Faruque Munshi* Supreme Court of Bangladesh, Dhaka-1000, Bangladesh. *Correspondence: omarfaruque.munshi@gmail.com (Md. Omar Faruque Munshi, Advocate, Supreme Court of Bangladesh, Ex Research Fellow, Institute of Bangladesh Studies (IBS), University of Rajshahi, Bangladesh). ABSTRACT The traditional ultra vires rule has been applied restricting the corporate capacity of an incorporated entity. It being a ‘legal person’ can function only within the defined objects of its constitution. Long experience of applying this rule shows that, the doctrine served no positive purpose (e.g. limiting the company’s transactions to some precise line of the stated objectives in its constitution), rather it produced many unsatisfactory state of affairs and difficulties like operating as fetter on company’s new business opportunities, risk of company’s transaction being treated as void in court’s proceedings interpreting it “ outside the company’s constitution” and is unenforceable. Thus, the parties in a corporate transaction are always at risk to suffer irremediable loss if at any stage either of the parties renounces the contractual obligation. For the said and many other unsatisfactory results of the traditional ultra vires rule, many developed countries have either completely abolished it from their company law or greatly limited its applications to some statutorily defined cases only. But Bangladesh still retained the century’s old outmoded tradition, even though recently the Companies (Amendment) Act 2020 passed. In the array of a vast literature on this particular issue, and a great number of legislative reform proposals in many other countries and instances of their legislative reforms, it is not understandable in the legislative policy of Bangladesh for retaining it. This article analyses the historical factors behind applying this rule, the irrationality of those considerations and its present time irrelevance. Keywords: Corporate capacity, Ultra vires rule, Corporate entity, and Company law reform. 1. INTRODUCTION: The term ultra vires comes from Latin - ultra means beyond and vires means powers. The phrase ultra vires act of a company is used to describe an act which is beyond the company’s corporate legal capacity and thus is illegal and void. The limitation upon corporate capacity of a company classically interpreted deriving from those objects as are stated in the object clause in its constituting documents (made up with two docu- ments-memorandums of association and articles of association). Under the traditional legal requirement, the objects in incorporating a company must be men- tioned in its constitution documents. In law an incur- porated company treated as a “ legal being”, in other words termed as “ corporate legal person”, a body cor- porate, created and existed only in contemplation of law. As such its functional capacity is limited in res- pect to those of defined objectives only as are men- tioned in its constituting documents. Any act outside those stated objectives is thus according to classical legal theoretical discourse interpreted as beyond the corporate capacity, i.e. ultra vires, and hence void. In modern world the application of the rule has now been greatly modified, especially upon finding that its Asian Journal of Social Sciences and Legal Studies, 3(4), 119-127, 2021 Publisher homepage: www.universepg.com, ISSN: 2707-4668 (Online) & 2707-465X (Print) https://doi.org/10.34104/ajssls.021.01190127 Asian Journal of Social Sciences and Legal Studies Journal homepage: www.universepg.com/journal/ajssls