ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Kestrel Plc wishes to borrow money by issuing debentures to the public. Which of the following statements about a company's power to borrow and issue debentures is correct?
A trading company has an implied power to borrow for business purposes and can secure the loan by granting a charge over its assets. The constitution does not have to list borrowing expressly, and security is a normal feature of lending to companies.
- AA company may borrow only if its constitution expressly lists borrowing as an object
- BA trading company has an implied power to borrow for the purposes of its business, and may secure the borrowing by a charge over its assetsCorrect
- CA company may never grant security over its own assets to a lender
- DOnly a company limited by guarantee may issue debentures
Explanation
A trading company has an implied power to borrow for business purposes and to give security such as a charge over its assets. Express authorisation is not a precondition, and security is a common feature of debenture issues. Guarantee companies are not the only issuers.
Did you get it right without looking?
One question tells you little. A timed set on Loan capital shows your real accuracy, how long you take and where you lose marks.
More Loan capital questions
- Marlow Ltd has granted a floating charge to Lender X. Which of the following events would cause the floating charge to crystallise and becom…
- Kestrel Co is in a poor year and has made no distributable profits. It has issued both preference shares and debentures. Which statement is …
- Tamsin Ltd wants to buy back some of its own shares from a member. It also wants to repay a debenture holder early, using the redemption ter…
- Delmar Ltd is wound up with insufficient assets. It has a debenture holder secured by a fixed charge over its building, and ordinary shareho…
- Mirabel Ltd defaults on its debenture. The debenture holder, secured by a floating charge, wishes to enforce. Which right is the debenture h…
- Zentra Ltd issues a debenture that is repayable on a fixed date and carries a set rate of interest. The document is a written acknowledgemen…