Company Resolution To Borrow Template for England and Wales
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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.
Frequently Asked Questions
What is a company resolution to borrow?
It's a formal decision recorded in writing by a company's directors or members authorising the company to take on debt. Under the Companies Act 2006, directors must act within the powers granted by the articles, so a resolution confirms that authority exists and documents the decision properly.
When does a company need a board resolution before borrowing?
Most articles of association require a board resolution before the company enters any significant loan or credit facility. Lenders and banks routinely demand a certified copy before advancing funds, so the resolution acts as both an internal approval record and external evidence of authority.
Can directors pass a borrowing resolution without a shareholders' meeting?
Yes, for most routine borrowing decisions directors can pass a board resolution without shareholder involvement. However, if the articles impose a borrowing limit that requires shareholder approval to override, or if the amount exceeds that cap, a general meeting or written shareholder resolution is needed first.
Does a borrowing resolution need to be filed at Companies House?
The resolution itself is not automatically filed, but if it amends the articles or grants special authority the relevant special or ordinary resolution must be filed within 15 days under the Companies Act 2006. The company should keep a certified copy in its statutory books.
What information should a borrowing resolution include?
It should state the date, the names of directors present, the proposed lender, the maximum borrowing amount, the term, any security being granted, and a clear statement that the directors are satisfied the borrowing is in the company's best interests and within constitutional limits.
Can a sole director pass a borrowing resolution?
Yes, a sole director may pass resolutions without a quorum issue if the articles permit single-director decisions. The resolution should still be recorded in writing, signed by the director, and retained in the minute book as contemporaneous evidence of the authority granted.
What happens if borrowing is taken on without a proper resolution?
The borrowing may still bind the company under the doctrine of apparent authority, but the directors who authorised it could face personal liability for breach of duty under the Companies Act 2006. Lenders that fail to check authority risk the transaction being challenged.
How long should a company keep its borrowing resolutions?
Companies Act 2006 requires companies to retain minutes of board meetings for at least ten years. Given that lenders may enforce debts for six years under the Limitation Act 1980, retaining borrowing resolutions for at least ten years from the date of repayment is prudent.
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:
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