| Commentary

7.1 Historic position

| Commentary

7 Position of the lender and the abolition of the ultra vires rule

7.1 Historic position

Historically, the ability of a company to borrow has been treated as a subject of some importance in company law. This treatment was justified in the days when the ultra vires rule was strictly construed, with the result that it was necessary to look carefully at the borrowing capacity and powers of the company and its directors and to consider the effect of inadvertently exceeding any borrowing limits set out in the memorandum of association. A loan agreement that was not within the capacity or

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