Debt outside the rights means a loan taken outside the limits of the rights of the company. The limit of the company’s debt receipt has been prescribed in the Companies Act, which can be increased by passing a resolution in the general meeting of the company. By making provision in the memorandum and Articles of Association of the company, the extent of the rights of the company can also be determined. A loan taken outside these limits is said to be out of rights.
Sometimes the company has the right to get the loan but that right is not given to the directors. In such a situation, if the directors take loans outside the limits of their rights, then it is called debt outside the rights of the operators.