in their own name and do all acts that an individual may do. A public
limited company has to have a minimum of seven members. There is
no maximum. On the other hand a private limited company has to have
atleast two members. It cannot have more than fifty members. This
excludes those in the employment of the company during the period of
• Banks must examine the company’s memorandum and articles of
association to determine what it may or may not do.
• The certificate of incorporation and certificate of commencement of
business must be examined as these provide conclusive proof that the
company is incorporated and is permitted to do business. A private
limited company is not required to obtain a certificate of
commencement of business.
• The memorandum of association is the document that details the
constitution of the company. It contains the name of the company, its
authorized share capital, its objects, the amount it may borrow and the
liability of the members. The objects clause is important as any
contract entered into contrary to the objects is unenforceable.
• The articles of association detail the rules and regulations relating to
its internal (day to day) management such as the powers of directors.
• Along with an application to open a bank account, the company must
furnish a board resolution that approves the opening of the bank
account and how the account should be operated and by whom.
• The amount a company can borrow is stated in its memorandum of
association. If the company wishes to borrow more, the excess must be
approved by the members in a general meeting. The maximum that
may be borrowed is stipulated by Section 293 (1) d of the Companies
• If directors borrow money without authorization and the money is
used by the company, the company is bound to repay the money.
• Banks must ensure that borrowings are only for purposes mentioned
in the memorandum of association.
• The bank must obtain a certified copy of the resolution to borrow.
• The b