Q: We have a longstanding bank account and an excellent relationship with our account manager. Can a new MD change this account without other shareholders agreement?
Jun 08 2010
Answered by: Clive Lewis Ask a question
Any proposal for a major change to a company’s financing arrangements should be discussed at a meeting of the company’s board, particularly if the change was to leave a ‘longstanding bank account and an excellent relationship’. If the board did decide to change banks, the new bank will require a minute of board meeting recording their appointment as the new bank. Shareholders usually are represented on the board by at least one nominee director and they should have a regular dialogue on matters arising at board meetings.
A new MD would normally have a clear steer from the board, and possibly the company’s shareholders, of the changes they were seeking before his appointment. The MD’s reasons for switching finance providers would need to be discussed and a decision made supported by the board. The new MD may have had a good experience with another finance provider in their previous role. The MD would need to articulate what a new bank might offer the company. For example, some banks are very UK focussed while others offer a wider international service. So if the new MD wants to take the company in the direction of increased international activities this might be a good reason to seek a bank with greater international coverage.
An increasing number of businesses are switching banks, usually because of dis-satisfaction with bank charges, interest rates or the conditions imposed by the bank on financing facilities. Although increasing, the numbers are still relatively small. The board of directors would normally regularly discuss matters such as the company’s financing and banking arrangements. This often takes place before the annual or quarterly review of the company’s financing facilities by the bank.
Comments