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Corporate Capacity and Authority - Coggle Diagram

- - - - Ashbury Railway (UK)
        
        A co was formed to create parts for railway lines and not to build lines. Contract to build lines was rescinded and this illustrates the harshness of UV.
    - - Cotman v Brougham (UK)
        
        Due to Ashbury, lengthy and broad objects clauses were drafted and cts had to determine if these were valid and it found that they were. Ct found it was bound by the certificate of incorporation which was conclusive evidence that it had complied with law and was therefore bound to apply its constitution as it stood.
      - Re Jon Beafort (UK)
        
        Also affirmed Ashbury. Facts were vaguely similar to Ashbury, although here it was a dressmaker who sought to invest in fuel. Interestingly here because the dressmaking description was on the headed notepaper of the co, the counterparty was deemed to be on constructive notice.
    - - Re German Date Coffee (UK)
        
        Cts began to develop MOR as a response to the Ashbury shopping list of objects. The main object was expressly noted as such and everything which came after that was ancillary to it.
      - Anglo Overseas (UK)
        
        MOR continued to limit the extent of lengthy objects by deeming all ancillary objects to be valid, only to the extent that they were in line with the main objects.
    - - Cotman (above)
        
        This came about in response to MOR. This made each sub-clause of the constitution to be read independently of the other clauses. Here the purported act was held to be intra vires (investing in a rubber plantation) because a clause to invest in shares and stocks was held to be an independent object.
      - Bell Houses (UK)
        
        Involved objects containing a sub-clause which was affirmed allowing the directors to do whatever they considered to be advantageous for the company i.e. the ‘Bell Houses’ clause or the ‘Plenipotentiary’ clause. Irish cts were wary of this development and sought for it not to be abused in Northern Bank (IRL), stating that the decision of the directors in this regard should be ‘reasonable’.
    - - Rolled Steel Products (UK)
        
        As the cts were faced with longer shopping lists of objects, they began to rule that not all clauses are substantive objects, but some are ancillary powers (either express or implied) incapable of being utilised other than in pursuit of the co’s primary objectives e.g. the co can borrow money (not the primary object but incidental to carrying on the business). Parkes and Sons (IRL) accepted this case in Irl and in that case (as well as in in Hutton v West Cork Railways (IRL)) there was an implied power (implied by cts where the power is regarded as incidental or consequential to a co’s express objects) to make a gratuitous disposition (these are suspicious because the co is not benefitting quid pro quo there needs to be some sort of corporate benefit). In Hutton, the co was about to go into liquidation and 2 gratuitous dispositions were made, one of which was to the employees to compensate their loss of employment. Ct stated: “[t]he law does not state that there are to be no cakes and ale, but there are to be no cakes and ale except as such are required for the benefit of the company”. On the facts it was found that these payments were not reasonably incidental to the business and were therefore UV. In Re Frederick Inns, (IRL) these payments were attempted whilst the co was insolvent and was also regarded as UV.
- - - - • Condition 1: Armagas v Mundagas: the most common form of representation is one made by conduct, Kett: ostensible authority does not derive from a consensual agreement like actual authority but exists where the principal makes a representation which is intended to convey to the third party that they have apparent authority.
      - • Condition 2: Ulster Factors v Entonglen: the representor must have actual authority: this cannot come from a purported agent. Under the Act, this would be the board.
      - • Condition 3: for there to be estoppel, there must be reliance.
      - • Condition 4: the contract is only binding if the constitution allows it to enter into the contract. Notwithstanding the power to contract, if a registered person (Section 40) concludes a UV contract, it can still be enforced.
      - • Rule in Turquands Case (UK): this rule, now supplemented by Section 40(11) is a further common law protection and was endorsed in AIB v Ardmore Studios (IRL) and ACC Bank plc v McCann (IRL). The rule says that an outsider can assume that the internal co requirements (internal management) necessary to perfect the co’s actual authority are complied with.
        
        There are 4 limitations to the rule:
        
        o there must be actual reliance on the constitution (Rama Corporation (IRL));
        
        o if an irregularity is on public record you cannot rely on the rule (Irvine v Union Bank of Australia (AUS));
        
        o awareness of the irregularity will frustrate the rule (Cox v Dublin Distiller (IRL)); and
        
        o if a contract is of an exceptional nature, the outsider may be deemed on notice and should themselves of the agent’s authority (Underwood v Bank of Liverpool (UK).