(1)The validity of an act done by a company shall not be called into question on the ground of lack of capacity by reason of anything in the company's constitution.
(2)This section has effect subject to section 42 (companies that are charities).
Definitions used in section 39
- company
“company” means a company formed and registered under this Act, that is—
Defined in s.1(1) · see it in the full Act(a)a company so formed and registered after the commencement of this Part, or
(b)a company that immediately before the commencement of this Part—
(i)was formed and registered under the Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), or
(ii)was an existing company for the purposes of that Act or that Order,
(which is to be treated on commencement as if formed and registered under this Act).
(4) In this section and that Schedule “company” includes any body corporate.
Defined in s.1159(4) · see it in the full Act
Cases considering section 39 (11)
SR Projects Ltd v Rampersad, the Liquidator of the Hindu Credit Union Co-Operative Society on behalf of the Hindu Credit Union Co-Operative Society Ltd (Trinidad and Tobago)
The Board used section 39 to confirm that the ultra vires rule has effectively been abolished for companies registered under company legislation, while remaining relevant to bodies incorporated under other statutes. (see paras [47]-[48])
Ceredigion Recycling & Furniture Team v Pope
Abolition of the ultra vires doctrine as between a company and third parties does not relieve directors from liability to the company for breach of duty or wrongdoing merely because, as members, they unanimously agreed to the conduct (see para [47]). The validity of a company act cannot be challenged for constitutional lack of capacity, but this protection does not answer the company’s internal claim against directors for breach of duty (see paras [8]; [47]).
GGF Fund Limited v Anglian Windows Limited & Anor
The court held that section 39 prevented the validity of the Fund Rules from being challenged for lack of company capacity. The rules were therefore valid and were not ultra vires.
- Jusan Technologies Limited v Uconinvest LLC
- Tonstate Group Limited & Ors v Rosling King LLP
- TCPC Management Limited v Windrush Alliance UK Community Interest Company
- Abdelmamoud v The Egyptian Association In Great Britain Ltd
- Credit Suisse International v Stichting Vestia Groep
- Chalcot Training Ltd v Ralph & Anor
- The David Roberts Art Foundation Ltd v Riedweg
- Friends of Burbage School Ltd. v Woodhams
What each judgment says about section 39 is in the case-law panel in the full Act.
Explanatory note
Amendments and notes
1 notes from legislation.gov.uk
Modifications
- C75S. 39 applied (with modifications) (1.10.2009) by The Unregistered Companies Regulations 2009 (S.I. 2009/2436), regs. 3-5, Sch. 1 para. 3(a) (with transitional provisions and savings in regs. 7, 9, Sch. 2)
122.This section provides that the validity of a company’s acts is not to be questioned on the ground of lack of capacity because of anything in a company’s constitution. It replaces the present section 35(1) and (4) of the 1985 Act, which made similar provision for restrictions of capacity contained in the memorandum.
123.The section does not contain provision corresponding to section 35(2) and (3) of the 1985 Act. It is considered that the combination of the fact that under the Act a company may have unrestricted objects (and where it has restricted objects the directors’ powers are correspondingly restricted), and the fact that a specific duty on directors to abide by the company’s constitution is provided for in section 171, makes these provisions unnecessary.
124.Subsection (2) indicates that the section, like section 35 of the 1985 Act, is modified in its application to charities.