# Doctrine of Indoor Management (Turquand's Rule)
## Core Concept
While outsiders are presumed to know the public documents of the company (MOA & AOA), they are entitled to assume that all internal procedures required by those documents have been duly complied with by the officers of the company.
It is NO PART of an outsider's duty to investigate how the company conducts its internal affairs.
## Whom It Protects
- Protects outsiders AGAINST the company.
- It is the converse of [[doctrine-of-constructive-notice]].
## Comparative Snapshot
| Doctrine | Protects | Direction |
|---|
| Constructive Notice | Company | Against outsiders |
| Indoor Management | Outsiders | Against the company |
## Exceptions (When the doctrine does NOT apply)
1. Actual or constructive knowledge of irregularity — If the outsider knows (or by virtue of public documents ought to know) of the irregularity, no protection.
2. Suspicion of irregularity — If the transaction is unusual or not in the ordinary course of business, the outsider has a duty to inquire.
3. Forgery — The doctrine does not validate forged documents. Forgery is a nullity and confers no rights even on innocent third parties.
### Example 1
Case Law — Royal British Bank v. Turquand (1856):
Facts: Cameron's Coalbrook Steam, Coal & Swansea and Loughor Railway Co. (incorporated under the Joint Stock Companies Act, 1844) gave a bond of £2,000 to the Royal British Bank to secure drawings on its current account. The bond bore the company's seal and was signed by two directors and the secretary. The company's deed of settlement (AOA) authorised directors to borrow only up to an amount specified by a company resolution. A resolution had been passed, but it did NOT specify a sum.
Held: The bond was valid and enforceable. The bank was deemed to know (constructive notice) that the directors could borrow only up to the amount authorised by resolution. But the bank could not be expected to know whether an ordinary resolution had in fact been passed specifying the amount — ordinary resolutions are not registrable. Internal affairs are the company's problem; the bank could rely on the bond's regularity.
Principle: This is the Indoor Management Rule — outsiders need not investigate internal procedural compliance.
### Example 2
Exception illustration — Forgery: If the company secretary forges the signatures of two directors on a share certificate and issues it to X, X cannot claim protection under Turquand's rule. Forgery is void ab initio and the certificate confers no title.