If you are the sole director of a company using Model Articles of Association, recent case law highlights the importance of reviewing whether your company’s constitutional documents are fit for purpose. Over the past few years, courts have considered whether the standard Model Articles, often adopted without amendment, are suitable for companies with one director. This question gained particular attention following a series of High Court decisions that appeared, at times, to be in conflict.
What is the Issue?
The Model Articles are the default rules for running a company, commonly adopted by private companies on incorporation. But their interaction with companies operated by sole directors has been questioned, particularly where the articles include requirements about quorum for board meetings or director decision-making.
The Conflicting Cases
- Hashmi v Lorimer-Wing [2022] EWHC 191 (Ch) (Re Fore Fitness)
In this case, the company had modified Model Articles which stated that a quorum for board meetings required more than one director. When the sole director attempted to make decisions, including bringing a claim on behalf of the company, the court found that the articles did not allow him to act alone. As a result, the sole director’s decisions were deemed invalid. The case raised significant concerns for companies with similar wording in their articles. - Re Active Wear Limited [2022] EWHC 2340 (Ch) (Re Active Wear)
Shortly after, the High Court considered a similar issue. In this instance, the company had adopted unamended Model Articles and again had a sole director. The court ruled that Article 7(2) of the Model Articles does permit a sole director to make decisions on behalf of the company. This decision directly challenged the approach in Re Fore Fitness and provided reassurance to many sole directors. - KRF Services (UK) Ltd [2024] EWHC 2978 (Ch) (KRF Services)
Most recently, the High Court revisited the issue in KRF Services, offering further clarity. The court considered whether a sole director, operating under unamended Model Articles, could validly sign a director’s resolution. The key question was whether Article 11, which requires a quorum of two directors, prevents sole director decision-making. The court reconciled Articles 7(2) and 11, ultimately confirming that where a company has only one director, Article 7(2) takes precedence, and that director can act alone. This decision aligned with the reasoning in Re Active Wear and offers renewed confidence to sole directors using the standard Model Articles.
Why this matters
These cases highlight a practical risk: even if your company uses the default Model Articles, certain provisions particularly around quorum could cast doubt on the validity of decisions made by a sole director, especially if there are amendments or inconsistencies in the articles.
What should you do?
If you are a sole director, now is the time to review your company’s Articles of Association; ensuring they are clear, consistent, and allow you to act effectively is crucial to protecting the decisions you make on behalf of the business.
At Tees, we have the expertise to review your articles and advise on whether they are suitable for sole director operation. Where needed, we can suggest and implement amendments to ensure your governance documents are robust, up-to-date, and compliant with the latest legal guidance. Get in touch with the Corporate team to safeguard your company’s decision-making.
