The Disappearance of the Ultra Vires Doctrine in Greater China: Harmonized Legislative Action or (Simply) an Accident of History

Wolff, Lutz-Christian | January 1, 2003

In the context of company law, the term “ultra vires” is normally used to describe acts that are beyond the scope of the powers of a corporation. Rules concerning ultra vires acts of companies have changed in recent years in mainland China, Taiwan and the Hong Kong Special Administrative Region (“Hong Kong”). It appears that in all of these parts of Greater China, the legal frameworks are now rather similar to each other and seem to resemble the rules that are applied in the Macau Special Administrative Region (“Macau”). This, of course, provokes questions: what are the reasons for these seemingly synchronized legislative developments, given the different political, economic and legal systems of these areas in Greater China? In particular, can any conclusion be drawn in regard to attempts to harmonize lawmaking in the region, or do the reasons for the aforementioned changes follow a global trend? The ultra vires doctrine was originally developed in the common law world but has ceased to be popular in many of these jurisdictions. Consequently, it is further interesting to inquire if (1) the reasons for abandoning the doctrine are the same in the West and in the Far East, and (2) if this means anything for the significance of the ultra vires doctrine. This article is divided as follows. Part II will briefly introduce the historical development and function of the ultra vires doctrine in the Western world. Part III is devoted to the discussion of the development and current status of the legal framework governing ultra vires acts of corporations in the different parts of Greater China. Part IV will carry out an analytical comparison of the legislative approaches taken towards ultra vires acts of companies in Greater China and the West. Part V will address final remarks.