Capacity

1. Law.

If a company or individual lacking contractual capacity purports to enter a contract, the contract may not be enforceable.

Problems of contractual capacity may arise, for example, in relation to requirements for dual signatories to bind certain companies or to bind companies of particular kinds in certain jurisdictions.

Other potential capacity problems - relating more to individuals - include minors, mental incapacity or intoxication.

2. Banking.

In relation to the individuals whom a bank will authorise to open and operate a bank account, the appropriate level of seniority and the role of the individuals within the business of the customer.

3. Regulation.

An authorisation or entitlement to undertake a role, under a regulatory regime.

4. Tax and borrowings.

More generally, the ability to absorb or hold.

For example, tax capacity or borrowing capacity.

(Tax capacity being the ability to use tax reliefs efficiently to shelter otherwise taxable profits or gains. Borrowing capacity being the maximum amount of borrowing which can be sustained by a business, based on its expected future cashflows and its assets.)

See also

• Bandwidth
• CB&E
• Contract
• Dual capacity
• Intra vires
• Minor
• Regulation
• Single capacity
• Tax
• Tax relief