Sole Directors Beware!

If you are the sole director of a company which has adopted the Model Articles of Association (or Articles based on them) then you need to be aware of a recent case which has surprised many lawyers.

Every company which is incorporated must have Articles of Association which in summary, govern the internal operation of a company.  The Companies Act 2006 provides a default set of Articles of Association which are known as the “Model Articles”. A company is free to adopt its own bespoke Articles of Association but it’s worth noting that bespoke Articles often incorporate parts of the Model Articles.

The Model Articles state that a sole director can run a company provided that there is no requirement for there to be more than one director. The Model Articles also say that there needs to be 2 directors for a board meeting to validly take place (i.e. quorate) but it has been a long-standing industry consensus that this does not impose a requirement for there to be at least 2 directors meaning a sole director can validly make decisions.

However, in Hashmi v Lorimer-Wing [2022] EWHC 191 (Ch), the High Court ruled against the well-established understanding and decided that the requirement for there to be 2 directors for a quorum does impose a requirement for a company to have two directors. The result of this is that a sole director cannot run a company using the Model Articles. Essentially, this casts doubt over the validity of all decisions made by a sole director of a company with the Model Articles.

If you are a sole director or a director who could conceivably become a sole director, you should therefore review the company’s Articles of Association with the above in mind.

If you would like BHW to review your Articles of Association or if you would like discuss any other company law matters, please contact our Corporate and Commercial department on 0116 289 7000 or info@bhwsolicitors.com.