Description
- Borrowing powers of a company – Every company has implied power to borrow for purpose of the company’s business. The implied power to borrow is too indefinite to be relied upon. Thus, it is wise to include an express power to borrow in the objects clause of the memorandum.
- Allegations that a loan advanced to a company is fictitious – board resolutions sanctioning the loan exist – loan offer was accepted and signed by two directors of the company – evidence shows that the loan was used for the benefit of the company –the loan is not fictitious.
- How the company exercises its powers to borrow is an internal affair of the company itself. It is not the business of a third partydealing with the company to investigate and satisfy itself that the affairs of the company are strictly conducted in the manner prescribed in its Articles of Association.
- Definition of connivance – The term connivance implies a secret or indirect condonation of another’s unlawful act.
- Misunderstandings between directors of a company and non-compliance with some internal procedures of the company do not amount to connivance or do no fault a loan granted to the company.
- The bank has no duty to inquire into the internal arrangement of the plaintiff’s company as to the limitations of the directors’ power to borrow and commit the company to the terms and conditions thereof – section 37 of the Companies Act.
- A third party will not be affected by any constitutional limitations on the authority of the board of directors or a director provided it deals with a company in good faith.
