Model Articles not suitable for Sole Director Companies

In the case of Hashmi v Lorimer-Wing, the High Court came to the surprising conclusion that article 7(2) of the Model Articles of Association (which provides that a sole director may take decisions without regard to any of the provisions of the articles relating to directors’ decision-making) does not supercede any quorum requirements contained in a company’s Articles of Association.  Accordingly companies who have adopted the Model Articles of Association will not be able to make valid director decisions/resolutions if they only have one director (except a decision to appoint a further director, or to call a shareholders’ meeting to do so) due to the requirement under article 11 of the Model Articles of Association for the quorum at directors’ meetings to be no less than two directors. 

Sole director companies that have adopted the Model Articles of Association should consider the effect of this and in particular whether it would be advisable for them to (a) amend their articles of association; and/or (b) ratify previous decisions/resolutions of the sole director.  Legal advice should be taken on a company’s individual circumstances.