We have commented previously on a surprising 2022 court decision that the Model Articles (used by many companies incorporated since 2009) did not allow a sole director to make decisions, because Model Article 11 requires a quorum of at least two directors. The court reached this decision in spite of Model Article 7 explicitly stating that a sole director can “take decisions without regard to any of the provisions of the articles relating to directors’ decision-making”.
Later in 2022, in the case of Re Active Wear Limited (In administration) [2022] EWHC 2340 (Ch), the High Court partially reversed this decision in the case of companies that had only ever had a single director, but suggested that a company that had previously had more than one director and then reduced to a sole director was still affected, and the only decision that any such sole director could make would be to appoint at least one other director.
Thankfully, in the recent case of Re KRF Services (UK) Ltd [2024] EWHC 2978 (Ch), the High Court has stated quite clearly that the Model Articles should be given the meaning that most lawyers and commentators had (prior to 2022) always given them: If your company has a sole director (irrespective of how many directors it had in the past) then that sole director can lawfully make decisions without having to be concerned with the remaining provisions of the articles.
So we’re back to where we all thought we were in the first place, but not before many companies have perhaps changed their Articles of Association unnecessarily.
For advice on your Articles of Association or any other company law matters, please contact our Corporate and Commercial department on 0116 289 7000 or info@bhwsolicitors.com.