2.10 Doctrine of Indoor Management and Its Exceptions

The Turquand rule (name only) — the outsider's counter-shield: persons dealing with the company in good faith may assume the internal regularity of the company's proceedings — that the meetings were held, the resolutions passed, the internal conditions observed. The balance: constructive notice binds the outsider to the constitution's external limits; indoor management protects him from the internal machinery's defects. The exceptions (where the outsider cannot assume regularity): (1) constructive or actual notice of the irregularity; (2) forgery (the forged resolution protects no one); (3) the outsider's own negligence or failure to inquire where suspicion beckons; (4) suspicious circumstances putting inquiry; (5) the outsider's knowledge of the transaction's invalidity; (6) acts of no apparent authority at all (the officer's act outside any ordinary business face).