security to the investors and creditors of the company

The doctrine of ultra vires has been established to provide security to the investors and creditors of the company for it provides that ultra vires activities
shall not be financed out of their money. Their money shall be utilized in specified areas only and curiously: it reveals the' risk their
investment faces. In the words ofL.C.B. Gower, the purpose of the doctrine is to ensure ,.that the investor in gold mining company does not find himself
holding shares in a fried fish shop and to give to those who allow credit to a limited company some assurance that its assets would not be dissipated in
unauthorized enterprises".Effects of Ultra Vires Transactions. The effects of a transaction which is ultra vires the company arc as follows:
1. Injunction. Any member of the company can apply to the Court. praying for issue of an injunction order restraining the company from proceeding with
an ultra vires act. Thus, he can indirectly force the company to adhere to the objects stated in the memorandum only.
2. Personal Liability of the Directors. Directors can be held personally liable to the company for an ultra vires transaction. It is the duty oftlle directors to see that the company's funds are utilized for the legitimate objectives of the company. If company's money is used for other purpose which is not connected with company's objects, directors shall be personally liable to make up the loss to the company. However, if the persons receiving the payment knows that

the act is ultra-vires, the directors can recover the money from them.
3. Breach of Warranty of Authority. It is the duty of an agent to act within the scope of his authority. For if he goes beyond it, he will be personally liable to the third party for breach of warranty of authority. The directors of a company are its agents. As such it is their duty to keep within the limits of the
company's powers. If they induce, however innocently, an outsider to enter into a contract which is ultra vires the company, they will be personally liable to the third party fo his loss for breach of warranty of authority. '.
4. Ultra Vires Contracts. A contract ultra-vires the company is wholly void and unenforceable in a court of law. It does not bind the company nor can the company take advantage of any such contract (Asbury contract,

has no contracting capacity. Such acts cannot subsequently be ratified.
5. Ultra Vires Acquired Property. If a company's money has been spent ultra vires in purchasing some property, the company's right over that property must be held secured. For, that asset, slough wrongly acquired, represents tlle corporate capital. The position of the company in such a case. is similar to that of a minor. If a property has been legally acquired by the company, it ,..ill be duly vested in such corporation, even though the corporation is not empowered to acquire that property.
6. Ultra Vires Torts. A company will be liable for any tort of its employees if (a) the tort is committed in pursuance of its stated objects; and (b) it is committed by employees within the course of their employment.