Sole directors and the Model Articles

06 February 2024

Companies must have Articles of Association, the constitution or rules which govern how that company is run.

As I’m sure you know, if the company has not adopted bespoke Articles then the Model Articles (prescribed by the Companies (Model Articles) Regulations 2008) will apply.

The Articles will usually include provisions about the minimum and maximum numbers of directors allowed, and the quorum for any meeting of those directors (that is, the number of directors who must be present for the meeting to be considered valid).

It is very common for private limited companies to have a sole director, who may or may not also be the company’s sole shareholder.

However, did you hear about a recent High Court ruling, in the matter of Hashmi v Lorimer-Wing [2022] EWHC 191 (Ch)?

The Model Articles allow a minimum of one director but then state that the quorum for director’s meetings is two directors (unless otherwise fixed by resolution).  The ruling suggested that this amounts to a requirement that there must never be less than two directors of a company incorporated under the unamended Model Articles, and that decisions taken by sole directors of such companies may be invalid and could be open to challenge.

There are a couple of ways around this: either your client appoints a second director and then both directors unanimously approve all future (and previous!) decisions made by the company.  Or, alternatively, you could replace the Model Articles with our own draft Articles, which specifically allow a sole director to make all decisions for the company, and then the director retrospectively ratifies all his actions.

The court’s decision means that you should ensure that if any of your clients’ companies were incorporated with the unamended Model Articles then they check whether some or all of the previous decisions of that sole director need to be ratified and whether they need to replace the Model Articles.

If you have clients who are in this situation, or if we can be of any assistance to you in a situation like this or in any other matter, then please do not hesitate to contact us here at Bourse.

“We have used the services of Bourse for many years and the service they provide is excellent. Staff are always helpful and professional and all our requests are actioned promptly. We would have no hesitation in recommending them.”

Chartered Accountants - Bristol