ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
The board of Nuvo Ltd, which is properly authorised to borrow under its articles, resolves to borrow $150,000 and to give the lender a floating charge over its inventory. Which statement is correct?
A company's power to borrow generally includes the power to give security, such as a floating charge over inventory. Unanimous member consent is not needed and the lender need not be a bank.
- AThe power to borrow generally includes the power to grant security for the borrowingCorrect
- BThe company may grant security only if all members agree in writing
- CThe company cannot grant security unless the loan is made by a bank
Explanation
A power to borrow ordinarily carries with it an incidental power to give security, including fixed or floating charges. No unanimous member agreement is required and the lender need not be a bank.
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