Understanding Company Law: Doctrine of Indoor Management
The question asks to identify the correct statement concerning company law principles, specifically the doctrine of indoor management and related concepts.
Analyzing the Correct Statement
Option 2 states: "If the contract is consistent with the public documents, the person contracting will not be prejudiced by irregularities that may be set the indoor working of the company."
- This statement accurately reflects the principle of the **Doctrine of Indoor Management** (also known as the rule in Turquand's Case).
- This doctrine protects outsiders who deal with a company in good faith.
- It presumes that the company's internal procedures, as suggested by its public documents (like the Memorandum and Articles of Association filed with the registrar), have been duly followed.
- Outsiders are generally not affected by internal procedural irregularities they are unaware of, provided the transaction appears authorized on the face of the public records.
Analyzing Incorrect Statements
- Option 1: Incorrect. If a contract is *inconsistent* with public documents, it raises concerns, and the contracting party might indeed be prejudiced. The protection applies when dealings align with apparent authority derived from public records.
- Option 3: Incorrect. The doctrine of indoor management is designed to protect the **outsider** dealing with the company, not the company itself, from the consequences of internal mismanagement or procedural errors.
- Option 4: Incorrect. The **Doctrine of Ultra Vires** concerns acts that are beyond the company's legal powers as defined by its constitution. While it relates to the company's capacity, it primarily protects the company and its shareholders from unauthorized acts, not specifically outsiders from internal procedural irregularities. The doctrine of indoor management addresses the latter.
Therefore, Option 2 is the only statement that correctly articulates the protective scope of the doctrine of indoor management for contracting parties.
Important Questions from Company law
Arrange the following as per sections of the Companies Act, 2013 in descending order :
A. Execution of Bills of Exchange, etc.
B. Punishment in case of repeated default
C. Annual reports on Government Companies
D. Petition for winding up
E. Functions of Company Secretary
Choose the correct answer from the options given below:
Match List I with List - II.
List - I
List - II
(A)
Producer companies
(I)
Do not necessarily require Memorandum of Association
(B)
Statutory companies
(II)
Association not for profit
(C)
Section 8 company
(III)
Formed to convert cooperative into a company
(D)
Small company
(IV)
Paid up share capital is between 50 lakh-5 crore and turnover is between 2 crore - 20 crore
Choose the correct answer from the options given below:
Red herring prospectus is a prospectus issued:
- The problem of double taxation in international transactions can be reduced by:
i. Market agreement
ii. Multilateral agreement
iii. Bilateral agreement.
iv. Trade agreement - Given below are two statements: one is labelled as Assertion A and the other is labelled as Reason R
Assertion A: Every company having net worth of rupees five hundred crores or more or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee (CSRC).
Reason R: The CSR Committee monitors CSR policy of the company.
In the light of the above statements, choose the most appropriate answer from the options given below
