| Commentary

5 Company’s capacity to borrow

| Commentary

B: POWER TO BORROW

5 Company’s capacity to borrow

Under the Companies Act 1985 it was necessary for a company to state its objects in its memorandum of association and it was the usual practice to provide for an express capacity to borrow. In the case of a trading company or a commercial company, the courts were prepared to imply a power to borrow up to a reasonable amount for the purposes of its business, provided that such borrowing was not expressly prohibited by the memorandum of association1.There was, however, no such implication where the company was not

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