Question

Why is Articles of Association also called as Doctrine of Indoor Management?

Answer 1

The doctrine of indoor management was evolved 150 years ago. It is also known as Turquand’s rule. The role of doctrine of indoor management is opposed to the role of doctrine of constructive notice. The doctrine of constructive notice protects company against outsiders whereas the doctrine of indoor management protects outsiders against the actions of company. This doctrine also is a possible safeguard against the possibility of abusing the doctrine of constructive notice.

The person entering into a transaction with the company only needed to satisfy that his proposed transaction is not inconsistent with the articles and memorandum of the company. He is not bound to see the internal irregularities of the company and if there are any internal irregularities than company will be liable as the person has acted in the good faith and he did not know about the internal arrangement of the company. Article of association upto some extent is same as doctrine of indoor management as they both work in interest of company.