Professional Documents
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Prospectus, Redd Herring, Shelf
Prospectus, Redd Herring, Shelf
• According to this doctrine, persons dealing with the company cannot be assumed to have
knowledge of internal problems of the company. He can simply assume that all the required things
were get done properly in the company.
• Stakeholders need not enquire whether the necessary meeting was convened and held properly or
whether necessary resolution was passed properly. They are entitled to take it for granted that the
company had gone through all these proceedings in a regular manner.
• The doctrine helps protect external members from the company and states that the people are
entitled to presume that internal proceedings are as per documents submitted with the Registrar of
Companies.
• The doctrine of indoor management evolved around 150 years ago in the context of the doctrine of
constructive notice. The role of doctrine of indoor management is opposed to the role of doctrine of
constructive notice. Whereas the doctrine of constructive notice protects a company against
outsiders, the doctrine of indoor management protects outsiders against the actions of a company.
This doctrine also is a possible safeguard against the possibility of abusing the doctrine of
constructive notice.
• Doctrine of Ultra Vires
• In the case of a company, whatever is not stated in the memorandum
as the objects or powers is prohibited by the doctrine of ultra vires.
As a result, an act which is ultra vires is void, and does not bind the
company. Neither the company nor the contracting party can sue on
it. The company cannot make it valid, even if every member assents
to it.
• The general rule is that an act which is ultra vires the company is
incapable of ratification. An act which is intra vires the company but
outside the authority of the directors may be ratified by the company
in proper.
• If the act is ultra vires (beyond the powers of) the directors only, the
shareholders can ratify it. If it is ultra vires the articles of association,
the company can alter its articles in the proper way.