What is a Company Resolution To Borrow?
A company resolution to borrow is a written record of a formal decision by the board of directors authorising the company to enter a loan or credit facility. Under the Companies Act 2006, directors must act within the powers granted by the company's articles of association. The resolution confirms that authority, sets out the terms approved, and provides lenders with evidence that the company is properly bound.
About the Company Resolution To Borrow
When your company needs to secure financing, you must follow proper corporate procedures to authorize borrowing under United States law. A Company Resolution To Borrow is the formal document that demonstrates your board of directors has approved the loan transaction and designated authorized signatories to execute financing agreements on behalf of your corporation.
When do you need this document?
You need a Company Resolution To Borrow whenever your business seeks financing from banks, credit unions, or other institutional lenders. This includes securing working capital loans, equipment financing, commercial mortgages, or lines of credit. Most lenders require this resolution before approving business loans to verify that the borrowing has been properly authorized by your company's governing body. You also need this document when refinancing existing debt, increasing credit limits, or when your company's authorized signatories change and lenders need updated authorization documentation.
Key legal considerations
Your resolution must clearly specify the maximum borrowing amount, intended use of funds, and acceptable loan terms to prevent unauthorized debt obligations. The document should name specific individuals authorized to sign loan agreements and provide their titles and authority limits. Consider including provisions for collateral authorization if your company may need to pledge assets as security. Ensure the resolution complies with your corporate bylaws regarding board approval requirements and quorum rules. For publicly traded companies, additional Securities Exchange Act requirements may apply, and Sarbanes-Oxley compliance considerations become critical for financial reporting accuracy.
Legal requirements in United States
Under state corporation acts, your company must have proper board authorization before incurring debt obligations. The resolution must be formally adopted at a board meeting with proper notice and quorum present, or through written consent if permitted by your bylaws. Your corporate secretary must certify the resolution's validity and maintain it in corporate records. If your company is an LLC, state LLC acts govern the authorization process, which may require member approval depending on your operating agreement. Federal Truth in Lending Act disclosures may apply to certain business loans, and the Bank Secrecy Act requires lenders to verify authorized signatories. Ensure compliance with any restrictive covenants in existing loan agreements that may limit additional borrowing authority.
Governing law
Applicable law
This Company Resolution To Borrow is drafted to comply with England and Wales law. Key legislation includes:
- Companies Act 2006: Governs the authority of company directors to bind the company, including resolutions authorising borrowing and restrictions under the articles of association.
- Model Articles of Association (Companies Act 2006, Schedule 1): Default constitutional rules setting out directors' powers to borrow and their duty to act within limits set by members.
- Insolvency Act 1986: Imposes personal liability on directors who authorise borrowing while the company is insolvent or slides into insolvency, making proper authorisation records essential.
- Financial Services and Markets Act 2000: Regulates certain borrowing arrangements and credit agreements, particularly where lenders are FCA-authorised institutions.
- Limitation Act 1980: Sets the six-year limitation period within which lenders may enforce debts arising from authorised borrowing, underscoring the importance of dated resolution records.
