Question

Mr. Davi a credit manager of UPA Bank, lends GH¢100,000.00 to Asesewaa Company Limited, to be repaid over a five-year period. However, according to the Constitution of UPA Bank, a Credit Manager requires authorisation from the Board of Directors before he or she is able to grant a loan in excess of GH¢50,000.00. A month after the disbursement of the loan to Asesewaa Company Limited, the Head of Legal and Corporate Affairs of UPA Bank writes to Asesewaa Company Limited to recall the loan, indicating that the Credit Manager did not have the authority to grant the loan. Asesewaa Company Limited has come to see you, a crack company law student, for advice.
Discuss the company law issue(s) and advise Asesewaa and Company Limited

Answer 1

Ans. Asesewaa Company Limited has been granted loan of  GH¢100,000.00 from credit manager of UPA Bank. The issue that arose is that credit manager did not take permission from board of directors, as he sanctioning power was up to GH¢50,000.00.  The Head of Legal and Corporate Affairs of UPA Bank is telling to Asesewaa Company Limited to recall the loan. The issue here is whether it is the fault of Asesewaa Company Limited due to which the loan should be recalled. Loan should not be recalled as it was not the duty of Asesewaa Company Limited to know the limit of credit manager's sanctioning power. It is the bank's staff fault. Instead of recalling the loan, the bank should ratify the act by granting permission of board of directors. Sanctioning power is the internal issue of bank. Customer has no responsibility if for knowing sanctioning power of staff of bank. So, Head of Legal and Corporate Affairs of UPA Bank is wrong in his approach.