MORTGAGE BY COMPANIES

Section 166 of the Companies and Allied Matters Act provides that:

“a company may borrow money for the purpose of its business or objects and may mortgage or charge its undertaking, property and uncalled capital or any part thereof and issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the company or of any third party. This is done in the following ways:

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1.MORTGAGE OF LAND

A mortgage of land by a company is called “mortgage debentures”.See KNIGHTBRIDGE ESTATE TRUST LTD V. BRYNE (1940) AC 613.

2.POWER TO MORTGAGE

Every trading company, unless prohibited by memorandum or articles, has implied power to borrow money for the purpose of its business and to give security for the loan by creating a mortgage or charge of its property. See GENERAL AUCTION ESTATE COMPANY V. SMITH (1891) 3 CH. 432.

3.COMPULSORY REGISTRATCION AT COMPANIES REGISTRY

Registration at the Companies Registry under Section 197 of CAMA within 90 days is mandatory because if not registered, it is invalid against subsequent creditors or receiver. After the period of 90 days, it cannot be accepted for registration without an order of the court. See Section 205 of CAMA.

4.REGISTRATION UNDER THE STATE LAND INSTRUMENTS REGISTRATION LAW

The registration after stamping must be done in each State Capital in respect of dealing with land situated in any particular State.

SECTION 173

REGISTRATION UNDER THE TITLE LAW, CAP 121 (LAGOS STATE)

If the land is within a registration district, it must be registered failing which the mortgage will be void after two months. See ONASHILE V. BARCLAYS BANK DCO (SUPRA). 

To be continued with DISCHARGE OF MORTGAGES

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