Do I need board approval before applying for a

2 min read

ArticlesCheck them first

ResolutionOften needed

Directors' dutyTo act properly

EvidenceLender may ask

Where the requirement comes from

A company borrows through its directors, but their power to do so is framed by the articles of association and any shareholders' agreement. Many require a board resolution for borrowing, and some set a threshold above which shareholder approval is needed. Directors also have a legal duty to act within their powers and in the company's interests.

Passing a resolution

Where board approval is needed, the directors pass a resolution authorising the borrowing and record it in the minutes. This is straightforward for a small company but should not be skipped — it evidences that the company, not just one director, decided to borrow. Keeping a clean board finance pack makes this simple.

What lenders want to see

On larger or secured deals, a lender may ask for evidence of authority — a copy of the resolution or confirmation that the constitution permits the borrowing. This is a common condition precedent. Sorting it before you apply avoids a last-minute scramble; the application checklist flags it.

Frequently asked questions

Does a sole director need board approval?

A sole director still records the decision to borrow, but there is no board to convene — a written resolution of the single director suffices. Check the articles, since even a sole director must act within their powers.

What if I borrow without proper authority?

It can breach your duties and, in some cases, the loan agreement, and may expose you personally. Where the constitution requires approval, get it and record it — it protects you as much as the company.