Indoor management and unanimous member assent can validate share allotments despite missing formal general-meeting approval.

Share allotments entered in the register of members could not be invalidated merely because the directors acted without express prior approval in general meeting; persons dealing with a company are entitled to assume regularity in internal corporate procedure, and improper entries must be challenged through rectification rather than unilateral cancellation. In a closely held company where all members were also directors and effectively assented to the allotment, the distinction between board and general meeting was treated as technical, and unanimous substance over form supported validity of the allotment and restoration of the applicants' names in the register.

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Issues: (i) Whether the allotment of shares made by the directors without express prior approval of the company in general meeting could be treated as invalid so as to justify removal of the applicants' names from the register of members. (ii) Whether, on the facts of a closely held company where all members were directors, the allotment could be upheld as binding on the company and the register rectified by restoring the applicants' names.

Issue (i): Whether the allotment of shares made by the directors without express prior approval of the company in general meeting could be treated as invalid so as to justify removal of the applicants' names from the register of members.

Analysis: The applications for shares were accepted by allotment and the applicants' names were entered in the register of members. The company sought to avoid the allotment on the footing that the directors lacked prior sanction of the general meeting under the articles. The governing principle was that outsiders dealing with a company are entitled to assume regularity in internal proceedings and need not enquire into compliance with the company's indoor management. The company could not unilaterally cancel the entries in the register; if the entry was improper, the proper course was rectification by the Court.

Conclusion: The allotment could not be avoided on this ground, and the applicants were to be treated as persons who had agreed to become members.

Issue (ii): Whether, on the facts of a closely held company where all members were directors, the allotment could be upheld as binding on the company and the register rectified by restoring the applicants' names.

Analysis: The company consisted of only six members, all of whom were directors, and five were present when the allotments were made. In such circumstances, the distinction between a board meeting and a general meeting was treated as overly technical, because the same persons constituted both organs of the company. The unanimous assent of the members, acting in substance together, was sufficient to validate the transaction.

Conclusion: The allotments were valid and binding on the company, and the applicants were entitled to rectification of the register by restoration of their names.

Final Conclusion: The challenge to the cancellation of the share allotments failed, and the applicants obtained restoration of their membership status with costs.

Ratio Decidendi: Persons dealing with a company may assume regularity in internal corporate procedure, and where all members of a closely held company have in substance assented, a transaction will not be defeated by a merely technical want of formal general-meeting approval.

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