UK Law
The EC Directive 68/151/EEC of 9 March 1968 First Directive, specifically Article 9(1) and 9(2) prompts European Communities Act 1972 s 9(1) and Companies Act 1985 ss 35 and 35A, which deals with those transactions which are ultra vires of a company or those which go beyond the authority of those purporting to represent it. It is the managers and directors who do so in general board meetings and shareholder meetings under English law. Section 9(1) states that ultra vires transactions bind the company but not against certain third parties. Section 9(2) restricts the occasions in which a company may avoid a transaction on the grounds of the circumstance being ultra vires. National authorities have to interpret their national law so that the intended result of the directive is achieved. Two problems arise in English Law which does not define ‘organ’ which is a key word in 9(1) and 9(2) of the First Directive. Secondly, the German theory of corporate representation seems alien to English Law. National law determines which organs set the relations in relation to Third parties. Yet, in English Law it is the board of directors who decide this and shareholders in a general meeting. The mandate theory is followed in the UK where which is the basis of corporate representation. Here, the governors are agents delegated by those who have to carry out the instructions received from their elector. UK legislation, Companies Act 1985 ss 35 and 35A does not fully implement the First Directive in that representation is limited to “the power of the board of directors to bind the company, or authorize others to do so” as per ss35. Also, Article 9(2) requires that “limits on the powers of the organs of the company, arising under the statutes or from a decision of competent organs”. Under UK Law much confusion is caused, firstly due to the wording of the section and also because s35A of the CA which implements that directive, implies that the “limitations” of the company cannot be extended to the board resolutions which are crucial for the representation of the company. Thus, what follows is that the rules governing the enforceability as against third parties by directors (who have a additional duty to act in good faith under UK law, (subjective meaning)) may contravene with the meaning of the First Directive.
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