Although historically thought to be clear-cut, recent cases have raised, and then answered, a critical question concerning whether a sole director of a private limited company that has adopted the Model Articles can validly make board decisions. 

This question has arisen as a consequence of a conflict in the Model Articles, specifically: 

• Model Article 7 which provides: 

7.—(1) The general rule about decision-making by directors is that any decision of the directors must be either a majority decision at a meeting or a decision taken in  accordance with article 8. 

(2) If—

(a) the company only has one director, and

(b) no provision of the articles requires it to have more than one director, the general rule does not apply, and the director may take decisions without regard to any of the provisions of the articles relating to directors’ decision-making.

• Model Article 11 which provides: 

11.—(1) At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. 

(2) 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.

(3) If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision—

(a) to appoint further directors, or

(b) to call a general meeting so as to enable the shareholders to appoint further directors.

This contradiction raised concern whether a sole director could act validly, if Model Article 11(2) technically required two directors to form a quorum? 

The prevailing assumption prior to the case of Hashmi v Lorimer-Wing was that Model Article 7 took precedence over Model Article 11 thereby allowing a sole director to act without the need for two directors in order to form a quorum.  A position that appeared supported by other non-statutory guidance of the time. 

Recent Cases

However, a number of recent cases have demonstrated that decisions by sole directors of private limited companies that have adopted the Model Articles are not always clear and that the assumption that Model Article 7 takes precedence over Model Article 11 does not always apply. 

Hashmi v Lorimer-Wing [2022] (Re Fore Fitness Investments Holdings Ltd)

The case of Hashmi v Lorimer-Wing highlighted the complexities of sole director decision-making as per Model Articles. Fore Fitness Investments Holdings Ltd (FFHI) had two directors, Hashmi (H) and Lorimer-Wing (LW), both of whom were also shareholders. FFHI’s articles of association were based on the Model Articles, with certain bespoke provisions in particular Model Article 11(2) had been modified to include a requirement for specific directors to be present to form a quorum. H was dismissed as a director of the FFHI by LW. H brought an unfair prejudice petition under section 994 of the Companies Act 2006, following which LW served a counterclaim (acting on behalf of FFHI) against H for breach of directors’ duties. H sought an order for the counterclaim to be struck out, contesting LW lacked the power to direct FFHI on the basis that he did not have the requisite authority to do so as a sole director under FFHI’s articles (following the dismissal of H). 

The High Court held that where a company has articles (even bespoke ones) requiring two directors for a quorum (in this case the modification of Model Article 11(2) amounted to a requirement that the company have more than one director), a sole director does not have authority to make substantive decisions. The only decisions validly made by such a director would be to appoint another director or call a shareholders’ meeting under Model Article 11(3). 

As a consequence of Re Fore Fitness Investments Holdings Ltd, any decisions taken by a sole director of a company with unamended MA were ultra vires / invalid and open to challenge.  As such this resulted in some companies:  

• passing shareholder resolutions to ratify past board decisions;  

• passing shareholder resolutions to amend their articles disapplying Model Article 11(2) where only one director is in office so that a sole director shall constitute a quorum; 

• appointing an additional director to ensure meeting are always quorate. 

Re Active Wear Ltd (August 2022)

Later in 2022, in the case of Re Active Wear Ltd, the High Court once again had to consider whether a sole director had authority to make decisions on behalf of a private limited company that had adopted Model Articles.  

Active Wear Ltd (AML) was incorporated under the Companies Act 2006 on 1 June 2015 with unamended Model Articles and had, at all relevant times, only one director.  On 22 April 2022, the director purported to appoint joint administrators of AML.  The director applied to court for a declaration that the appointment was valid having regard to the High Court decision in Re Fore Fitness Investments Holdings Ltd. 

Here the High Court upheld decisions by a sole director of a company with unamended Model Articles, but crucially distinguished the facts from its earlier decision in the case of Re Fore Fitness Investments Holdings Ltd, namely: 

• AWL had always had only one director; and 

• AWL had not modified the Model Articles and therefore had not introduced a requirement for a minimum number of directors – the court refused to find a stipulation as to the quorum for a board meeting also set a minimum number of directors. 

This decision was more closely aligned with the approach generally taken by practitioners prior to Re Fore Fitness Investments Holdings Ltd, however the case meant there was now a distinction between: 

• companies that have adopted the Model Articles but modified them to include (whether expressly or implied) a minimum number of directors; 

• companies that have adopted the Model Articles (unamended) and have always had since incorporation, a sole director; and  

• companies that have adopted the Model Articles (unamended), have a sole director but previously had more than one director. 

Only sole directors of companies falling under the second distinction could take any decisions, whereas those falling under the first and third distinction could only take steps to appoint more directors or call a general meeting so as to enable the shareholders to appoint further directors. 

KRF Services (UK) Ltd [2024] EWHC 2978 (Ch)

A major clarification came in November 2024 in the case of Re KRF Services (UK) Ltd.  

KRF Services (UK) Ltd (KRF) had not always had a sole director.  As a consequence of financial sanctions on the person identified as the KRF’s ultimate beneficial owner and the restrictions the followed, this left the KRF with one director and no person wishing to be appointed as an additional director.  The financial sanctions impacted the KRF’s business to the extent that the sole director applied to place the KRF into administration in May 2024.  Whilst this application was not contentious there was a concern, as KRF had adopted the Model Articles unamended, the sole director did not have the authority to make the application. 

The High Court confirmed that even where a company with unamended Model Articles (or Model Article with amendments that do not introduce a minimum director requirement) had not always been run by a sole director, a sole director can take all decisions of the company.  

The court stressed that: 

• Model Article 11(2) does not imply a minimum director requirement. 

• Model Article 7(2) remains effective, even if multiple directors once existed. 

This decisively overruled the obiter dicta in Re Active Wear Ltd that suggested a historical multi-director structure might negate a sole director’s authority. 

Practical implications for directors and shareholders of existing private limited companies with Model Articles and those who are seeking to incorporate a new company with Model Articles

Whilst the decision in Re KRF Services (UK) Ltd is welcomed, directors and shareholders of companies should nevertheless tread carefully. 

For existing companies: 

• Review the articles: check whether your articles (including any bespoke amendments) set a minimum director number. 

• Rectify conflicts: if ambiguity exists, consider amending the articles to explicitly allow sole director decision-making and disapply Model Article 11(2). 

• Ratify past decisions: for peace of mind, pass shareholder resolutions ratifying decisions made by a sole director during periods of ambiguity. 

For new incorporations: 

• Draft clear, bespoke provisions that reflect your intention if a sole director is expected. 

Whether you are seeking to set up a new company as a sole director or wish to have your company’s articles reviewed to ensure they provide appropriate decision-making powers in all circumstances, it is important to speak to a specialist corporate and commercial solicitor. At Kitson Boyce, our experienced Business Team in Torquay, Exeter and Plymouth can provide you with the expert legal advice you need on all of the above matters. 

To discuss your position with me directly, do not hesitate to enter your details in the contact form below. Alternatively, you can speak to a member of the team by calling us on 01803 202020.