Can a Sole Director validly pass board resolutions if the company has adopted model articles?

For companies with a sole director, it is essential to understand the quorum requirements set out in the company’s Articles of Association.

What do the Model Articles say?

The Model Articles, for companies limited by shares for companies incorporated on or after 28 April 2013, include the following relevant provisions:

• Article 7(1): Director decisions must be made by majority at a meeting or unanimously under Article 8.
• Article 7(2): If there is only one director, and no other requirements, they can make decisions without the provisions of Articles 7(1) and 8.
• Article 11(2): Sets a default quorum of two directors, unless otherwise stated.
• Article 11(3): If quorum cannot be achieved, further directors must be appointed.

Previous Case Law

• Fore Fitness Holdings Ltd [2022]: The court found that where Model Article 11(2) was amended to require specific directors to achieve quorum, Article 7(2) did not apply. Therefore, a sole director lacked authority to make decisions.
• Active Wear Ltd [2022]: This company had only ever had one director. The court found that if Article 11(2) had imposed a quorum of two, it would render Article 7(2) redundant and ruled that 11(2) does not override 7(2) when unamended.

Recent Case Law

In the matter of KRF Services (UK) Ltd [2024] the court ruled that, where Model Articles have been adopted without any modification, a sole director can make all decisions of the company, and Model Article 11(2) does not impose a minimum number of directors, regardless of the number of directors previously appointed in the company.

What does this mean for companies?

The decision in KRF creates a clear and straightforward position, being:

• If a company’s Articles include a requirement for a minimum number of directors, the only thing a sole director can do is take actions to appoint further directors.
• As a result, where a company has adopted the Model Articles without amendment, or with amendments that do not introduce a minimum director requirement, a sole director can take any decisions on behalf of the company.

However, the High Court, when hearing actions at first instance, is not bound by other first instance decisions, so the decisions above would be open to a future court to decline to follow KRF. Therefore, you should review your company’s Articles carefully ensuring these are drafted properly to ensure they are clear on the company’s intentions to avoid any disputes over directors’ authority.

For further guidance on corporate governance or generally in relation to any other corporate matter, please call Sarah Ward, Head of our Corporate Team, on 01384 340 596 or e-mail Sarah at sward@georgegreen.co.uk for advice and assistance.