COMPARATIVE STUDY OF ULTRA VIRES ACTS OF COMPANIES IN IRANIAN AND COMMON LAW LEGAL SYSTEM

The concept of “Ultra Vires” has been studied in two specific areas: in company law and in discussions on the issues of capacity and acts of representatives.
Historically, in English law, ultra vires acts were considered as void, and neither representatives nor shareholders could approve them at a later time. Subsequently, Judges in common law system changed their approach from a restricted capacity of companies to a general capacity, and ultra vires acts were considered as valid acts towards a bona-fide third party.
Under Iranian legal system, we witness two approaches to the concept, i.e., that of the Commercial Code (1932) and that of the Decree amending some parts of the Commercial Code (1968).
According to the Commercial Code, providing for general rule in Iranian company law, ultra vires act is considered as voidable. Regarding the company's director liability, reference is made to trust liability which is rooted in agency contract. Under the provisions of the Decree governing joint stock and governmental companies, ultra vires acts regarding third parties become valid, subject to certain conditions: if composed of three terms: being within the limits of capacity, not to be in company's general meetings duties and considering specific status of bankrupt companies.