Ultra vires is a Latin phrase, meaning "beyond the powers." Ultra vires plainly means an action by a company or its agent that exceeds the legal scope of its authority. In this instance, the scope of authority is granted by the company’s own bylaws, constitution, or state statutes under which the company is subject to. For example, a company has set procedures in its bylaws for removing or firing a member of the board. If the company removes a board member without following their bylaws, then the removal is ultra vires.
Governments can engage in ultra vires activities as well. When referring to the acts of government bodies (e.g., legislatures), a constitution is most often the measuring stick of the proper scope of power.
A real-world example of a company committing ultra vires acts is in the 2015 case, FTC v Volkswagen Group of America. In this case, Volkswagen was caught reporting manipulated emissions tests for its diesel vehicles. These fraudulent reports were ultra vires acts because they violated environmental requirements and the company’s own requirement of ethical behavior and compliance. As a result of Volkswagen’s ultra vires actions, the company paid billions in settlements.
[Last updated in June of 2024 by the Wex Definitions Team]
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