A company incorporated under law derives its legal existence, and its capacity to act, from the objects stated in its own founding charter. The doctrine of ultra vires -- literally, "beyond the powers" -- holds that any act done by a company that falls outside the objects specified in its charter is void from the very outset, incapable of being made valid or binding even if every shareholder and director of the company unanimously agrees to it after the fact.

The doctrine rests on the idea that a company's capacity to act is not general, unlike that of an individual person, but is instead confined to the specific objects for which it was created and to whatever is reasonably incidental to achieving those objects. An act genuinely necessary or reasonably incidental to carrying out a company's stated objects is treated as within the company's powers, even if not separately and expressly listed as an object in its own right. An act entirely unconnected to, and not reasonably incidental to, any stated object, however, remains ultra vires regardless of how commercially sensible or profitable that act might otherwise be.

An ultra vires act cannot be validated or ratified by the company itself, whether by its shareholders, its directors, or both acting together, precisely because the company never had the legal capacity to perform the act in the first place; there is no valid act in existence for anyone to subsequently ratify. This distinguishes an ultra vires act from an act that is merely irregular -- one that was within the company's capacity to perform but was carried out without following the correct internal procedure, which can generally be cured by subsequent ratification.

Because an ultra vires act is void from the outset, a third party generally cannot enforce an ultra vires contract against the company, regardless of how genuinely and reasonably that third party believed the transaction was within the company's proper powers, since capacity, unlike an internal procedural irregularity, is not a defect that either party's good faith or subsequent conduct can cure.