If you run a limited company on your own, there’s something you should check—your company’s “Articles of Association”. These are the rules about how your business is run, and most small companies use the default version (called “Model Articles”) when they first set up. But new court rulings have raised concerns about whether these standard rules really work for companies with just one director.
So, what’s the problem?
The issue is whether the standard rules actually allow a sole director to make valid decisions on their own. In some cases, the wording suggests that at least two directors are needed to make things official—even when there’s only one director in the company.
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
If your company’s rules are unclear—or if they’ve been changed in the past—you could run into problems later. For example, someone might challenge whether your past decisions are legally valid. That could be a real headache if you’re selling your business, signing contracts, or trying to raise investment.
What should you do now?
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.
