The judgment discussed below rendered two provisions of the Model Articles as inconsistent. Decisions made by a sole director of a company using the Model Articles may therefore be invalid or void. This means that sole directors of companies incorporated under the Model Articles should amend the Model Articles before incorporating them into their Articles of Association, appoint an additional director and if necessary get retrospective approval for past decisions.
The High Court Judgement
The recent High Court judgment in Hashmi v Lorrimer-Wing [2022] EWHC 191 (Ch) concluded that Article 7(2) of the Model Articles (for private companies limited by shares) should not override Article 11(2).
Model Article 7(2) states that "if a company only has one director, and no provision of the articles requires it to have more than one director... the director may take decisions". On the other hand, Model Article 11(2) requires the quorum for directors' meetings to "never be less than two, and unless otherwise fixed it is two".
Prior to this judgment, Model Article 7(2), which only permits a sole director to make decisions alone if no other Articles require more than one director, has been widely understood to prevail over Model Article 11(2), granting sole directors the right to make all decisions on behalf of the company.
Significance and Consequences
Since the passing of the Companies Act of 2006, the Model Articles have been widely adopted by companies in England and Wales. This judgement is therefore significant as many companies with sole directors have adopted the Model Articles without amendments.
Following this judgement, private limited companies operating under the Model Articles might wish to amend the Model Articles before incorporating them into their Articles of Association, appoint an additional director and if necessary get retrospective approval for past decisions.
The full judgement can be found here, while the Model Articles for private limited companies can be accessed here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.