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Corporations - Indoor Management Rule. AOD Corporation v. Miramare Investment Incorporated
In AOD Corporation v. Miramare Investment Incorporated (Ont CA, 2022) the Court of Appeal describes the 'indoor managment rule' for corporations:[20] Section 18(1) incorporates the indoor management rule at common law. That rule provides that parties dealing with a corporation, acting in good faith and without knowledge of any irregularity, are entitled to assume that a corporation's internal policies and proceedings have been followed and complied with: The Midas Investment Corporation v. Bank of Montreal, 2016 ONSC 3003, at para. 4. For the purposes of this appeal, the relevant provisions of s. 18(1) are as follows:18 (1) No corporation and no guarantor of an obligation of a corporation may assert against a person dealing with the corporation or against a person who acquired rights from the corporation that
(a) the articles, by-laws and any unanimous shareholder agreement have not been complied with;
…
(d) a person held out by a corporation as a director, officer, agent or mandatary of the corporation has not been duly appointed or has no authority to exercise the powers and perform the duties that are customary in the business of the corporation or usual for a director, officer, agent or mandatary;
(e) a document issued by any director, officer, agent or mandatary of a corporation with actual or usual authority to issue the document is not valid or genuine; or
(f) a sale, lease or exchange of property referred to in subsection 189(3) was not authorized.
[Emphasis added.]
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