Dealing with local authorities in a finance transaction—investigating capacity and authority when lending to a local authority
Dealing with local authorities in a finance transaction—investigating capacity and authority when lending to a local authority

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

  • Dealing with local authorities in a finance transaction—investigating capacity and authority when lending to a local authority
  • What are finance transactions?
  • What are local authorities?
  • Why it is important to understand the acts a local authority will perform in a finance transaction?
  • Acts of a local authority in a finance transaction
  • What is meant by 'capacity and authority'?
  • Investigating the capacity of a local authority
  • Investigating the authority of a local authority
  • Issues that need to be given particular consideration when dealing with a local authority in a finance transaction

This Practice Note covers information on the types of acts a local authority may perform in a typical finance transaction. It also considers the steps which can be taken to investigate the capacity and authority of a local authority under English law.

What are finance transactions?

For the purposes of this Practice Note, finance transactions can be characterised as those involving to some extent the giving or taking of credit. At their simplest they involve the lending and borrowing of money but also encompass more complicated arrangements involving deferred payment (eg finance leases) or asset acquisitions combined with the provision of associated services (eg PFI schemes).

Other funding and grants available to local authorities are not considered in this Practice Note. For more information, see Lexis®PSL Local Government subtopic: Finance—overview.

What are local authorities?

Local authorities in England and Wales are corporate bodies created by statute of the UK Parliament as single legal entities. A local authority may only do what Parliament states it can do in the statute under which it was established or under statutes and secondary legislation adding to its purpose.

Local authorities are defined differently for statutory purposes. For the purposes of the Localism Act 2011 (LA 2011), 'local authority' means:

  1. in relation to England:

    1. a county council

    2. a district council

    3. a London borough council

    4. the Common