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Borrowing Powers

company and borrow

BORROWING POWERS. When a com pany wishes to borrow, a banker should. by careful reference to the memorandum and articles of association of the company, ascertain what powers to borrow, if any, are given therein, and what are the limitations of those powers. If a company has power to borrow, there may be a limit beyond which the directors cannot go, and a banker must make certain that any proposed ad vance will not, with any loans already ob tained by the company. exceed the specified limit. It may be that the directors are unable to borrow except by resolution of the company. or they may be able to borrow but not have any power to mortgage the company's property. Directors must not act :Ora cirets—that is. beyond their powers. In dealing with a company it is of the first importance to see, as Lord Halsbury said (in County of Gloucester Book v. Rudry

Merthyr Steam and House Coal Colliery Co., 1895, I Ch. 629), " that the acts which the company is purporting to do are acts within the general authority of the company, and if those public documents, which every one has a right to refer to, disclose an infirmity in their action, they take the consequences of dealing with a joint stock company which has apparently exceeded its authority." \\'here nothing is said in the memorandum and articles as to borrowing, a right to borrow is presumed in the case of a trading company for the purposes of its ordinary business. The above remarks apply whether the company desires to borrow by way of overdraft (either unsecured or secured by a mortgage of its property), or by debentures, or by discounting bills. (See COMPANIES, COMPANY LIMITED BY SHARES.)