Constructive Notice

doctrine
 TAPIWA M MABHANDE R212795H
 TADIWANASHE MAFUNDU R212328H
 NYASHA NCUBE
 SHAMISO MACHAYA
 Constructive notice doctrine is the legal that signifies that a person or entity
should have known, as a reasonable person would have, of a legal action
taken or to be taken, even if they have no actual knowledge of it.
 Section 610 is the specific regulation that requires the registrar to inspect all
of the incorporation documents. Because all documents registered with the
registrar are public documents, any person considering entering into a
contract with the company should be aware of the individual powers and
conditions of the company.
 The doctrine is generally construed with regards to legal notices published,
either by posting them at a designated place in a courthouse, or publishing
them in a newspaper designated for legal notices. Because both methods of
publication are available to the general public , the person to whom the
notice is being issued (even if issued in a generic form, such as "To All Heirs of
John Smith, a Resident of Orange County") is considered to have received
notice even if they were not actually aware of it.
 In companies law the doctrine of constructive notice is a doctrine where all
persons dealing with a company are deemed (or "construed") to have
knowledge of the company's articles of association and memorandum of
association. The doctrine of indoor management is an exception to this rule.
 The harshness of the doctrine of constructive notice is somewhat reduced by
the "Rule of Indoor management" or "Turquand's Rule". The rule derives its
name from the case of Royal British Bank v Turquand, where the defendant
was the liquidator of the insolvent Cameron's Coalbrook Steam, Coal and
Swansea and Loughor Railway Company.
The articles of the company stated that the directors could only borrow if
authorised by a resolution of the company's general meeting, and could not
borrow more than the amount specified in the resolution.

The articles were registered with Companies House so there was constructive
notice. But the bank could not have known about the resolution, as they were
not registrable and thus were not a public document. The bond was held valid
and there was no requirement to know the company's internal workings.
the Turquand rule

 The doctrine of indoor management, also known as the Turquand rule is a

150-year old concept, which protects outsiders against the actions done by
the company.
 Any person who enters into a contract with the company shall ensure that the
transaction is authorised by the articles and memorandum of the company.
There is no requirement to look into the internal irregularities, and even if
there are any irregularities, the company shall be held liable since the person
has acted on the grounds of good faith.
 Section 399 of the Companies Act, 2013 states that any person may, after
payment of the prescribed fees inspect by electronic means any documents
kept with the Registrar of Companies. Any person can also obtain a copy of
any document including the certificate of incorporation from the Registrar.
 In line with this provision, the Memorandum of Association and the Articles of
Association are public documents once they are filed with the Registrar. Any
person may inspect the same after payment of the fees prescribed. The
special resolutions are also required to be registered with the Registrar under
the Companies Act, 2013.
 The doctrine presumes that every person has knowledge of the contents of
the Memorandum of Association, Articles of Association and every other
document such as special resolutions as it is filed with the Registrar and
available for public view.
 This principle has been upheld in the landmark case of Oakbank Oil Co. V.
Crum (1882) 8 A.C.65. Thus, if any person enters into a contract, which is
inconsistent with the company’s Memorandum and Article, he shall not
acquire any rights against the company and shall bear the consequences
himself.
 Section 399 of the Companies Act, 2013 states that any person may, after
payment of the prescribed fees inspect by electronic means any documents
kept with the Registrar of Companies. Any person can also obtain a copy of
any document including the certificate of incorporation from the Registrar.
 In line with this provision, the Memorandum of Association and the Articles of
Association are public documents once they are filed with the Registrar. Any
person may inspect the same after payment of the fees prescribed. The
special resolutions are also required to be registered with the Registrar under
the Companies Act, 2013.
 The doctrine presumes that every person has knowledge of the contents of
the Memorandum of Association, Articles of Association and every other
document such as special resolutions as it is filed with the Registrar and
available for public view.
 Origin of Doctrine of Indoor ManagementThe doctrine originated from the
landmark case Royal British Bank V Turquand (1856) 6 E&B 327. The facts of
the case are as follows. The Articles of the company provide for the
borrowing of money on bonds, which requires a resolution to be passed in the
General Meeting. The directors did acquire the loan but failed to pass the
resolution. The repayment on loan defaulted, and the company was held
liable. The shareholders refused to accept the claim in the absence of the
resolution. Held, the company shall be liable since the person dealing with
the company is entitled to assume that there has been necessary compliance
with regards to the internal management.
Exceptions to the Doctrine of Indoor Management

 Listed below are the exceptions to the doctrine that have been judicially
established, which provide circumstances under which the benefit of indoor
management cannot be claimed by a person dealing with the company.
Suspicion of Irregularity

 In case any person dealing with the company is suspicious about the
circumstances revolving around a contract, then he shall enquire into it. If he
fails to enquire, he cannot rely on this rule.In the case of Anand Bihari Lal V
Dinshaw & Co, (1946) 48 BOMLR 293, the plaintiff accepted a transfer of
property from the accountant. The Court held that the plaintiff should have
acquired a copy of the Power of Attorney to confirm the authority of the
accountant. Thus, the transfer was considered void.
Knowledge of Irregularity

 This rule does not apply to circumstances where the person affected has
actual or constructive notice of the irregularity. In Howard V Patent Ivory
Manufacturing Company (1888) 38 Ch D 156, the Articles of the company
empowered the directors to borrow up to 1,000 pounds. The limit could be
raised provided consent was given in the General Meeting. Without the
resolution being passed, the directors took 3,500 pounds from one of the
directors who took debentures. Held, the company was liable only to the
extent of 1,000 pounds. Since the directors knew the resolution was not
passed, they could not claim protection under Turquand’s rule.
Forgery

 Transactions involving forgery are void ab initio (null and void) since it is not
the case of absence of free consent; it is a situation of no consent at all. This
has been established in the Ruben V Great Fingall Consolidated case [1906] 1
AC 439. A person was issued a share certificate with a common seal of the
company. The signature of two directors and the secretary was required for a
valid certificate. The secretary signed the certificate in his name and also
forged the signatures of the two directors. The holder contented that he was
not aware of the forgery, and he is not required to look into it. The Court
held that the company is not liable for forgery done by its officers.