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Consequences of taking a loan out of rights

If the operator takes a loan outside the jurisdiction, it can have the following consequences

(1) Loans outside the memorandum of law Unauthorized and void Loans taken outside the limits of the memorandum of the company are called unauthorized loans and such contracts are void. As a result, the person giving such loan has no statutory and judicial rights against the company.

(2) No suit against the company – Can not sue the creditor for debts outside the rights of the company.

(3) The security given by the company is ineffective – If the directors of the company have taken a loan outside the memorandum and articles of the company and have kept any property as security for that loan, then the lender cannot get the right of surety on that property. .

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