|Company, borrowing powers of|
These are set out in the memorandum of associaton of each company. If they are exceedcd the loan is ultra vires and any securities given are void. The lenders' remedies are: (1) to have the money returned if the company has not spent it; (2) to sue the directors for breach of warranty of authority; (3) to claim subrogation where the money has been used to pay off debts enforceable against the company.
All trading companies have implied power to borrow and to pledge the property of the company.
|Reference: The Penguin Business Dictionary, 3rd edt.|