4 August 2022
A recent decision of the High Court in Hashmi v Lorimer-Wing in March 2022 has shown that the model articles for private companies may not suitable for companies with a sole director appointed.
If you are the sole director of a company which has adopted model articles of association (“Articles”), you should review your Articles immediately and consider making appropriate changes.
Legal professionals working with model Articles since 2006 have been aware of the potential inconsistency between model articles 7(2) and 11(2) whereby article 7(2) permits a sole director to take decisions alone provided there is no requirement in the articles for the company to have more than one director, but article 11(2) states that the quorum for a meeting of the directors shall not be less than two unless otherwise fixed.
Until this case, it has commonly been viewed that a company with a sole director can rely upon article 7(2). However, this judgment has now set case law to the effect that this is not in fact the case.
In the case of Hashmi v Lorimer-Wing, there was also a bespoke article 16, which stated that a quorum for meetings of the board was two directors. Whether this was a determining factor in the judge’s ruling cannot be known for certain, and we therefore recommend that any company which only has one director, undertakes a review of their company’s articles of association, and considers passing a shareholders’ resolution to ratify any previous actions by the sole director.
For further information on any of the points above contact
David Taylor at firstname.lastname@example.org.