The Doctrine of Indoor Management (Turquand's Rule) protects which of the following parties dealing with a company?
Answer and explanation
Correct answer: A. Third-party outsiders dealing with the company in good faith
- Step 1: Understand the Doctrine of Indoor Management, originally articulated in Royal British Bank v. Turquand (1856).
- Step 2: The rule serves as an essential qualification and exception to the doctrine of constructive notice. Under constructive notice, outsiders are presumed to have read public corporate documents (Memorandum and Articles of Association).
- Step 3: However, under the doctrine of indoor management, third-party outsiders acting in good faith are entitled to assume that the internal procedures, approvals, and internal management regulations required by the articles have been properly complied with by the company's officers.
Answer
Third-party outsiders dealing with the company in good faith.
Practise more Sale of Goods Act 1930 & Companies Act 2013 Overview.
Free questions with an explanation for every one, and full timed CA Foundation mock tests.
More Sale of Goods Act 1930 & Companies Act 2013 Overview questions
- Under the Sale of Goods Act, 1930, what is the key difference between a Condition and a Warranty?
- What does the commercial legal maxim Caveat Emptor mean?
- Under the Companies Act, 2013, what is the maximum number of members in a Private Limited Company (excluding employee-members)?
- The principle of Separate Legal Entity of a company from its shareholders was famously established in which landmark case?
- Under the Sale of Goods Act, an unpaid seller's right of stoppage in transit can be exercised only when: