UK Companies are normally formed using model articles, they are contained in the Companies Act 2006 and replaced the previous Table A articles.
Model Articles were designed a ‘one size fits all’ solution and until now pretty much everyone including sole director companies have adopted them. The recent high court judgement has changed that!
In the model articles section 11(2) states
The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two.
The case of Hashmi v Lorimer-Wing 2022 was the result of a dispute between directors, leaving the company with one director. The High Court Judge decided in the case that Model Articles are not suitable for single director companies.
What should sole director companies do now?
Appoint another Director
It sounds obvious but might not work for everyone, the company probably has a sole director for a good reason so appointing another director isn’t probably a good idea?
Change the Articles
Assuming you don’t appoint another director, then you have to do this. Following the High Court decision hundreds of thousands of companies will now be doing this. But it won’t fix decisions already taken by a sole director!
How do you deal with decisions already taken by a Sole Director?
You will need a written shareholders resolution to ratify decisions taken by you as a sole director.
You have 15 days from signing the resolution to file at companies house!
So don’t panic, if you have model articles and you are a sole director, a resolution and new articles will fix the situation.