Plain language law

New Zealand law explained for everyone

Companies Act 1993

Capacity, powers, and validity of actions - Validity of actions

17: Validity of actions

You could also call this:

“Company actions remain valid even if they exceed company powers”

You should know that a company’s actions or property transfers are always valid, even if the company didn’t have the right or power to do them. This means that if a company does something it’s not supposed to, it still counts.

However, there are some exceptions to this rule. People can still try to stop a company from doing things that go against its rules. Directors and shareholders can take action if they think the company is doing something wrong. Shareholders can also ask directors to follow the company’s rules or the law.

It’s important to understand that even if something isn’t the best thing for the company to do, the company can still do it. This means that a company has the ability to make decisions that might not always be the smartest or most helpful for itself.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320119.

Topics:
Business > Industry rules
Business > Fair trading
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16: Capacity and powers, or

“Companies have broad powers but must follow legal and constitutional limits”

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18: Dealings between company and other persons, or

“How companies deal with outside people and what you can trust”

Part 3 Capacity, powers, and validity of actions
Validity of actions

17Validity of actions

  1. No act of a company and no transfer of property to or by a company is invalid merely because the company did not have the capacity, the right, or the power to do the act or to transfer or take a transfer of the property.

  2. Subsection (1) does not limit—

  3. section 164 (which relates to injunctions to restrain conduct by a company that would contravene its constitution); or
    1. section 165 (which relates to derivative actions by directors and shareholders); or
      1. section 169 (which relates to actions by shareholders of a company against the directors); or
        1. section 170 (which relates to actions by shareholders to require the directors of a company to take action under the constitution or this Act).

          1. The fact that an act is not, or would not be, in the best interests of a company does not affect the capacity of the company to do the act.

          Compare
          • 1955 No 63 s 18A
          • 1983 No 53 s 8