25A. No constructive notice Flashcards
25A. No constructive notice
- person shall not be affected by or deemed to have notice or knowledge of the contents of the constitution or any other document merely because the constitution or document is registered by the registrar or available for inspection at the registered office
General overview
[25A.01] This statutory provision purports to eradicate the problems arising from the common law doctrine of constructive knowledge or notice of a company’s registered constitutional documents or other documents by a person dealing with the company. Thus, any limitation in the company’s directors, employees or agents’ authority (that is contained in these documents) will not invalidate a contract or transaction made by the third party with the company. However, doubts remain as to whether the doctrine extends to additional information or particulars such as the “negative pledge” clause registered with the Registry. At common law, the effect of this doctrine was cut down by the “indoor management rule”: see s 25B.
[25A.02] A person shall not be affected by or deemed to have notice or knowledge of the contents of the constitution or any other document relating to the company merely because the constitution or document is registered by the registrar or available for inspection at the registered office of the company: s 25A originated from s 19 of the Companies Act 1993 (New Zealand). See the Report of the Steering Committee for Review of the Companies Act, Chapter 1, April 2011.
Common law rule of constructive notice
- person dealing with a company should be deemed to have notice of that company’s registered constitutional documents. Cos in early days there’s no limited liability so this rule serve to protect co against unauthorised act of its agents
[25A.03] A person dealing with a company should be deemed to have notice of that company’s registered constitutional documents: Ernest v Nicholls (1857) 6 HL Cas 401 . A hire purchase agreement purportedly signed by a director who had resigned from the company does not bind the company because the third party is deemed to have constructive notice of the register of particulars of directors (Form 49), which is a public document registered with the Registrar of Companies: KL Engineering Sdn Bhd & Anor v Arab Malaysian Finance Bhd [1994] 2 MLJ 201, SC. The rule was established when companies, in those days, did not have limited liability. Thus, it is a device by companies to protect themselves against being bound to contracts or transactions with third parties that open them to unlimited liabilities when they have instituted limits on the authority of its directors, employees and agents. Generally, commercial law regards the concept of constructive notice with disfavour, not to mention that business decisions have to be made speedily and often without the third party checking the company’s constitution or other documents lodged with the Registry. It has been held that the constructive notice doctrine does not extend to the additional information registered with the Registry, such as a “negative pledge” clause, but only to those matters which the Act prescribed
