Ultra Vires Principle

Ultra Vires Principle | What is Ultra Vires | What does Ultra Vires mean | Attorney Mustafa Yolcu

What are Ultra Vires?

The Latin word “ultra vires” means 'beyond the power/authority'. The concept of ultra vires is used to describe an action that requires legal authority or power but is subsequently performed outside of or without the necessary authority.

What is the Ultra Vires Prohibition under Commercial Law?

The old Turkish Commercial Code No. 6762 stipulated that "commercial companies have legal personality and can acquire all rights and assume all obligations, provided they remain within the scope of the business subject matter stated in their articles of association." This article stipulated that the company could not acquire rights or incur obligations outside of the matters listed in its articles of association. In other words, according to the old Turkish Commercial Code, joint-stock companies could not conduct commercial transactions outside of the business subjects listed in their articles of association; this rule was called "ultra vires." For example, under ultra vires, if a joint-stock company did not include hotel management in its business subject matter, it could not purchase a hotel offered for sale under suitable conditions. To purchase the hotel, it had to hold a general assembly meeting and add hotel management to the business subject matter in its articles of association. If the hotel was purchased by someone else during this period, the company would be unable to benefit from this opportunity due to this rule.

Law No. 6102 Turkish Commercial Code‘With the entry into force of the new Turkish Commercial Code No. 6102, the "Ultra Vires" ban has been lifted, and the limits of the legal capacity of legal entities have been expanded. It is stated that the subject of the business is no longer a determining factor in legal capacity. The new Turkish Commercial Code No. 6102 abolished this rule, referred to as "ultra vires," and as of July 1, 2012, a joint-stock company can acquire a hotel offered for sale even if its articles of association do not include, for example, hotel management as one of its business activities.

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