When it comes to legal jargon, even experienced business professionals may get a bit lost as to what certain terms mean. One such term is “ultra vires,” a Latin phrase that literally translates to “beyond the powers.” In simpler terms, ultra vires describes actions that are taken beyond the scope of a particular organization’s authority.
For the everyday business professional, it’s crucial to understand that these are the kinds of behaviors and activities that are not within the power or authority of a certain business organization. To give a modern example, a retail chain might be legally prohibited from selling certain items — like firearms — due to the terms of their business license or other restrictions. If members of that retail chain went ahead and sold firearms or conducted any other activities beyond their legal authority, this would be considered ultra vires.
Recognizing and Consequences of Ultra Vires
When it comes to representing a company, it’s important to remember that the company can only act within the limits of its legal authority. If individuals are found to be exceeding their authority, then they are engaging in ultra vires activities. Unfortunately, when something like this is discovered, the consequences can be quite serious — including potential criminal charges, losses of profits, and more.
When evaluating activities or transactions of your own company, simply ask yourself “Is this activity within our legal rights?” and clarify with a lawyer if there are any questions that remain. By familiarizing yourself with the potential consequences of ultra vires activities, you can help protect your organization by avoiding these actions altogether.