The Memorandum and articles when registered become public documents and then they can be inspected by anyone on payment of a nominal fee.
Constructive Notice Of Articles And Memorandum:
The Memorandum and articles when
registered become public documents and then they can be inspected by anyone on
payment of a nominal fee. Every person dealing with the company is presumed to
have read these documents and understood them in their true perspective. This
is known as ‘Doctrine of Constructive Notice’.
Doctrine Of Indoor
Management:
The doctrine of indoor management
allows all those who deal with the company to assume that the provisions of the
articles have been observed by the officers of the company. In other words,
they are not bound to enquire into the regularity of internal proceedings. An
outsider is not expected to see that the company carries out its internal
regulations.
Exceptions : The
doctrine of indoor management is subject to the following exceptions:
1. Knowledge of irregularity.2. No knowledge of Articles: The rule cannot be invoked
in favour of a person who did not consult the Memorandum and articles and, thus
did not rely on them.3. Void or illegal transaction. The rule does not apply
to transactions which are void or illegal ab initio, eg., forgery.4. Negligence: If an officer of a company does something
which would not ordinarily be within his powers, the person dealing with him
must make proper enquiries and satisfy himself as to the officer’s authority.
If he fails to make inquiry he cannot rely on the rule.5. Doctrine does not apply where question is in regard to
very existence of agency.
Tags : Business Environment and Law-Memorandum And Articles Of Association
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