In corporations which have a head (as colleges), although the head cannot veto the resolution of the majority, he is still considered an integral part of the society, and his death suspends its existence, so that a head cannot devise or bequeath to the corporation, nor can a grant be made to a corporation during vacancy of the headship.
A corporation has power to make such regulations (by-laws) as are necessary for carrying out its purposes, and these are binding on its members and on persons within its local jurisdiction if it has any.
The power to acquire and hold land was incident to a corporation at common law, but its restriction by the statutes of mortmain dates from a very early period. The English law against mortmain was dictated by the jealousy of the feudal lords, who lost the services they would otherwise have been entitled to, when their land passed into the hands of a perpetual corporation. The vast increase in the estates of ecclesiastical corporations constituted by itself a danger which might well justify the operation of the restricting statutes.
The Mortmain Acts applied only to cases of alienation inter vivos. There was no power to devise lands by will until 32 Henry VIII. c. 1 (1540), and when the power was granted corporations were expressly excluded from its benefits. No devise to a corporation, whether for its own use or in trust, was allowed to be good; land so devised went to the heir, either absolutely or charged with the trusts imposed upon it in the abortive devise. A modification, however, was gradually wrought by the judicial interpretations of the Charitable Trusts Act 1601, and it was held that a devise to a corporation for a charitable purpose might be a good devise, and would stand unless voided by the Mortmain Acts; so that no corporation could take land, without a licence, for any purpose or in any way; and no localised corporation could take lands by devise, save for charitable purposes. Then came the act of 1736, commonly but improperly called the Mortmain Act. Its effect was generally to make it impossible for land to be left by will for charitable uses, whether through a corporation or a natural person[1]. The Wills Act 1837 did not renew the old provision against devises to corporations, which therefore fell under the general law of mortmain. The law was consolidated by the Mortmain and Charitable Uses Act 1888, and the result is simply that corporations cannot take land for any purpose without a licence, and no licence in mortmain is granted by the crown, except in certain statutory cases in the interests of religion, charity or other definite public object.
The power of corporations at common law to alienate their property is usually restricted, as is their power to lease it for more than a certain number of years, except by sanction of a public authority. The more important classes of corporations, however, are now governed by special statutes which exclude or modify the operation of the common law principles. The most considerable class of societies still unaffected by such special legislation are the Livery Companies (q.v.). Under [Company] will be found an account of the important enactments regulating joint-stock companies.
The question to what extent the common law incidents of a corporation have been interfered with by special legislation has become one of much importance, especially under the acts relating to joint-stock companies. The most important case on this subject is that of Riche v. The Ashbury Railway Carriage Company, 1875 (L.R. 9 Ex. 224; L.R. 7 H.L. 653), in which, the judges of the exchequer chamber being equally divided, the decision of the court below was affirmed. The view taken by the affirming judges, viz. that the common law incidents of a corporation adhere unless expressly removed by the legislature, may be illustrated by a short extract from the judgment of Mr Justice Blackburn:—
“If I thought it was at common law an incident to a corporation that its capacity should be limited by the instrument creating it, I should agree that the capacity of a company incorporated under the act of 1862 was limited to the object in the memorandum of association. But if I am right in the opinion which I have already expressed, that the general power of contracting is an incident to a corporation which it requires an indication of intention in the legislature to take away, I see no such indication here. If the question was whether the legislature had conferred on a corporation, created under this act, capacity to enter into contracts beyond the provisions of the deed, there could be only one answer. The legislature did not confer such capacity. But if the question be, as I apprehend it is, whether the legislature have indicated an intention to take away the power of contracting which at common law would be incident to a body corporate, and not merely to limit the authority of the managing body and the majority of the share-holders to bind the minority, but also to prohibit and make illegal contracts made by the body corporate, in such a manner that they would be binding on the body if incorporated at common law, I think the answer should be the other way.”
On the other hand, the House of Lords, agreeing with the three dissentient judges in the exchequer chamber, pronounced the effect of the Companies Act to be the opposite of that indicated by Mr Justice Blackburn, “It was the intention of the legislature, not implied, but actually expressed, that the corporations, should not enter, having regard to this memorandum of association, into a contract of this description. The contract in my judgment could not have been ratified by the unanimous assent of the whole corporation.” In such companies, therefore, objects beyond the scope of the memorandum of association are ultra vires of the corporation. The doctrine of ultra vires, as it is called, is almost wholly of modern and judicial creation. The first emphatic recognition of it appears to have been in the case of companies created for special purposes with extraordinary powers, by act of parliament, and, more particularly, railway companies. The funds of such companies, it was held, must be applied to the purposes for which they were created, and to no other. Whether this doctrine is applicable to the older or, as they are sometimes called, ordinary corporations, appears to be doubtful. S. Brice (Ultra Vires) writes:—
“Take, as a strong instance, a university or a London guild. Either can undoubtedly manage, invest, transform and expend the corporate property in almost any way it pleases, but if they proposed to exhaust the same on the private pleasures of existing members, or to abandon the promotion, the one of education, the other of their art and mystery, it is very probable, if not absolutely certain, that the court of chancery would restrain the same, as being ultra vires.”