Skip to content

Doctrine of Constructive Notice

The Doctrine of Constructive Notice is a fundamental principle in corporate law, particularly outlined in Section 399 of the Companies Act, 2013. This doctrine plays a crucial role in the interaction between companies and external parties, ensuring transparency and accountability in corporate operations.

  • Section 399 of the Companies Act, 2013, provides the legal basis for the doctrine, granting individuals the right to inspect and review the records of a company that are available with the registrar.
  • It underscores the public's right to access a company's documents, including the Memorandum of Association (MOA) and Articles of Association (AOA).

Implications of the Doctrine

  • The essence of the doctrine is that external parties are presumed to have knowledge of the contents of a company's MOA and AOA since these documents are available for public inspection.
  • In disputes, an outsider cannot claim ignorance of the company's rules and regulations as outlined in these documents. This presumption safeguards companies by ensuring that third parties cannot evade compliance with known regulations.

Doctrine's Function

  • As a public entity, the company's foundational documents are open to public inspection. Thus, anyone engaging in business with the company is assumed to have reviewed these documents.
  • The duty falls on the external party to acquaint themselves with the company's rules and regulations, which are deemed to be in the public record. This is the crux of the Doctrine of Constructive Notice.

Relationship with the Doctrine of Indoor Management

  • While the Doctrine of Constructive Notice protects companies against claims by third parties unaware of the company's regulations, the Doctrine of Indoor Management, or the Turquand Rule, offers protection to third parties against the internal irregularities of the company.
  • This complementary doctrine suggests that outsiders, acting in good faith, can assume that the company has adhered to all internal procedures and that no internal irregularities exist.

In summary, the Doctrine of Constructive Notice serves as a protective measure for companies, ensuring that external parties engaging with them cannot claim ignorance of their publicly available rules and regulations. This doctrine, alongside the Doctrine of Indoor Management, balances protections between companies and third parties, fostering a transparent and accountable corporate environment.

Ask Hive Chat Chat Icon
Hive Chat
Hi, I'm Hive Chat, an AI assistant created by CollegeHive.
How can I help you today?
🎶
Hide