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Apr 18

How does the indoor management rule apply to company officials?

In accordance with company law of Uganda

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Apr 18

The indoor management rule, also known as the "rule of regularity," presumes that the internal decisions and actions of a company's officers, directors, and other officials are valid and binding on the company, and that third parties dealing with the company are entitled to rely on the apparent authority of these officials, even if the officials exceed their actual authority or act in breach of their duties to the company. In other words, the indoor management rule protects innocent third parties who transact with a company in good faith, without knowledge of any irregularities in the company's internal affairs.

However, the indoor management rule is not absolute and has exceptions. For instance, it may not apply if the third party has actual knowledge or notice of the irregularities or if the company's officers are acting in bad faith or committing fraud. Additionally, the indoor management rule does not shield company officials from liability for their actions that are in violation of the company's constitution, company law, or other applicable laws and regulations.

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