Lloyd's Maritime and Commercial Law Quarterly
NO MAGIC TO THE INDOOR MANAGEMENT RULE
Hans Tjio* & Daniel Ang†
East Asia v PT Satria
1. Introduction
In East Asia Company Ltd v PT Satria Tirtatama Energindo,
1 the Judicial Committee of the Privy Council clarified the relationship between ostensible authority and the indoor management rule. This will bring welcome relief to generations of law students.
In East Asia, PT Satria Tirtatama Energindo (“PT Satria”) (the appellant, an Indonesia-incorporated company) sought to rectify the members’ register of Bali Energy Ltd (“BEL”, a Bermuda-incorporated company) under s.67 of the Bermuda Companies Act 1981 (“Bermuda Companies Act”). It sought to insert PT Satria’s name in place of East Asia Co Ltd (“EACL”, an exempt Bermuda-incorporated company), which was the sole holder of all of BEL’s shares.
PT Satria argued that it had purchased the BEL Shares from EACL, itself a wholly-owned subsidiary of Affluent Ocean Ltd (“AOL”, a Seychelles-incorporated company), which acquired EACL’s shares from a Mr Matsumoto in 2013. PT Satria’s alleged purchase followed a due diligence exercise where it examined EACL’s documents and thus became aware of EACL’s byelaws that conferred general powers of management on the board of directors. In particular, EACL’s byelaw 46 empowered the board to appoint one or more directors to the office of managing director or chief executive officer, and to delegate the board’s powers to any person and on such terms as it thought fit.2
In its arguments, PT Satria relied upon: (1) a share sale agreement called “Heads of Agreement on the Sale and Purchase of Bali Energy Ltd” (the “HOA”); and (2) a share transfer form for the transfer of the BEL shares from EACL to PT Satria. Both documents were signed and entered into by Mr Joenoes purportedly on behalf of EACL. Notably, Joenoes was a director and “Chief of General Affairs” of BEL, and a director of EACL although he was never appointed as EACL’s chief executive officer or managing director.3
Before the share transfer was made, AOL had been seeking to remove Mr Joenoes and Mr Hata (the two longest-serving directors) as directors of EACL and notified them of the same.4 AOL also objected to Joenoes and Hata approving the share transfer,5 and warned that they would be in breach of their statutory and common law fiduciary duties under Bermudan law.6 The share transfer was allegedly approved on the day of the transfer by the boards of EACL and BEL.7 The next day, AOL again objected to those board meetings and formally notified PT Satria that the purported transfer was ineffective and invalid.8
* Professor of Law, National University of Singapore, Faculty of Law.
† LLB (Hons) Candidate, National University of Singapore, Faculty of Law.
1. [2019] UKPC 30 (hereinafter “East Asia”).
2. Ibid, [39].
3. Ibid, [39].
4. Ibid, [29].
5. Ibid, [29].
6. Ibid, [30].
7. Ibid, [32–33].
8. Ibid, [35].
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