This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 367.— The amendment of the company's Act passed by the Dominion Parliament last year, says, that " the limitation on the borrowing powers of the company shall not apply to or include moneys borrowed by the company on bills of exchange or promissory notes, drawn," etc., etc. As a cheque is a bill of exchange within the meaning of the Bills of Exchange Act, would not a bank be justified in advancing money to a company in the form of an overdraft, provided always that they had the account covered before surrendering the cheques?
Answer.—We do not think that the amendment to the Company's Act respecting the limitations of the borrowing powers of joint stock companies would cover an overdraft; that is not borrowing on a bill of exchange, in the sense referred to by the Act. Although an overdraft is created by the company drawing cheques (which are bills of exchange) upon the bank, they cannot be said to be borrowing on these cheques, because when a cheque for which there are no funds is paid the amount thereof becomes a direct loan to the company, and the cheque plays no further part in it.