Dealing with companies in a finance transaction—investigating capacity and authority
Dealing with companies in a finance transaction—investigating capacity and authority

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Dealing with companies in a finance transaction—investigating capacity and authority
  • Why is it important to understand the acts a company will perform in a finance transaction?
  • Acts of a company in a finance transaction
  • What is meant by 'capacity and authority'?
  • Investigating a company's capacity
  • Investigating a company's authority
  • Board of directors
  • Committee of the board of directors
  • Sole director
  • Shareholder approval

This Practice Note considers the acts typically carried out by companies in the context of finance transactions and covers the steps which can be taken to investigate the capacity and authority of a company incorporated under English law.

There are a number of different types of company incorporated in England and Wales which may participate in a finance transaction. For more information on different types of company, see: Types of borrowers—Companies. This Practice Note assumes that the company in question is a private company limited by shares, as most finance transactions in England and Wales will involve at least one such company as borrower or security provider.

Why is it important to understand the acts a company will perform in a finance transaction?

Lender's perspective

A lender will want to understand the acts a company will be performing in a finance transaction so that it can investigate whether or not the company has the capacity and authority to perform those acts. If the company did not have the requisite capacity or authority this can have serious consequences for its contractual counterpart (see below).

Borrower's perspective

A borrower will want to be clear about the acts it will be performing in a finance transaction because it will not want to contravene its constitutional documents, any of the applicable provisions of the Companies