Rule in turquands case, Business Law and Ethics

Rule in Turquands case:

This statement can be reduced to two propositions which constitute what is compositely known as "the rule in Turquand's case", namely:;

i. A person dealing with a company is bound to read the relevant restrictive provisions of the Companies Act, like the memorandum of association of the such company and the company's articles of association. Whether he doesn't do like same he will be deemed to have read them and, as a consequence, to have been aware of their provisions.

ii. In so far as the articles provide that a transaction may be effected by some internal procedure, the person dealing with the company (called "outsider") may assume that the procedure has been duly complied with.

The effect of these propositions is that the company will be bound by the transaction even if the prescribed procedure was in fact not followed or complied with. Hence an "internal procedure" for this purpose would usually be a decision of the company which is made by an ordinary resolution passed by the company in general meeting, or a resolution of the directors passed at a board meeting. Such a resolution is not registerable at the Companies Registry pursuant to s.143 or any other section of the Companies Act and the outsider who goes to the Registry would not be in a position to ascertain whether it had in fact been passed. Rather than compel him to go to the relevant office of the company to make enquiry after then the courts decided to, as it were, "give him the advantage of the doubt" through holding that the resolution will be deemed to have been passed even if it had not actually been passed.

Posted Date: 1/12/2013 5:13:30 AM | Location : United States

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