Royal British Bank v. Turquand
Citation: (1856)
6 E & B 327
This case is a
landmark judgment in UK company law and lays down the important Doctrine of Indoor Management which
protects outsiders and third parties who have no way of knowing if the internal
rules of the company are being complied with. The doctrine is now followed in
most common law jurisdictions.
The directors of
the defendant company issued a bond to the plaintiff.
The articles of
association of the defendant company provided that the directors of the company
could borrow only on the basis of a general resolution passed.
When the
plaintiff sued on the bond the defendant company pleaded that the required resolution
had not been passed.
It was held that
a person dealing with a company could assume that all the internal processes of
the company are in order and have been complied with.
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