Loan Borrowing

[RobertM]

Reading your comments in Lg Debits & Credits for April & had a query around your loan advice to negotiate with 2 lenders. council needs to resolve to borrow as stated. but how can you affix the seal unless by council resolution? Wouldn't the resolution have to name the lender & resolve to affix seal to documentation? Refer to Reg 400 (4) of LG Regs

[ken]

Hi RobertM,

Thanks for the query!!

LG Reg 400(4) dealing with the Council Seal states that:

(4) The seal of a council must not be affixed to a document unless the document relates to the business of the council and the council has resolved (by resolution specifically referring to the document) that the seal be so affixed.

We recommended in the newsletter regarding Loans that Councils either:

1. Adopt to go with the best interest rate & lender as per the quotes, OR
2. Adopt to go take out the loan to the value quoted but delegate the GM to negotiate with the best two lenders (in terms of rates) to lock in the best deal.

The reason we went with (2) as a suggested option is that by the time the Council Report goes up, the interest rates could & usually have changed and maybe another lender at drawdown rate is cheaper...hence choosing the best 2 rates/lenders & letting the GM finalise the best rate at drawdown & therefore determine the lender.

Reading Reg 404(4) - I donlt think our suggested Option 2 negates Council using the Seal on Loan Contract as the Loan Report to Council as adopted by Council would still resolve that Council to take a Loan for the dollar value in the Report & would still resolve for Council to apply the Seal to the final Loan Contract which falls in line with Reg 404(4).

I don't think that the Council delegating the choice of actual lender to the GM (such thht the best rate is achieved) goes against Reg 404(4) nor preclude the Seal being affixed to the Loan Document.

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NB. Of course it's always good to remember I'm a humble chartered accountant and so the above all starts delving into legal stuff...so as long as everyone knows I'm no legal expert but I'm always willing to provide a view!!