Since Re Active Wear Ltd [2022] EWHC 2340 (Ch) challenged the decision in Hashmi v Lorimer-Wing [2022] EWHC 191 (Ch)  (also known as Re Fore Fitness Investments Holdings Ltd), the general consensus has been that, where a company has adopted unamended model articles, Model Article 11(2) does not have the effect of requiring the company to have more than one director and the effect of Model Article 7(2) is to permit a sole director to take decisions on their own and to disregard the restrictions in the articles relating to directors’ decision making.

However, in that case the court expressed the view that Model Article 7(2) applies only where there has never been more than one director, and that where the number of directors falls to one, Model Article 11(3) (which restricts the remaining director to actions appointing a new director (or directors) or to call a general meeting to enable the shareholder to appoint a new director (or directors)) applies.  This meant prudent draftsmen would amend the articles to clarify that this was not the case.

We now have further guidance following that decision in KRF Services (UK) Ltd [2024] EWHC 2978 (Ch) where the court upheld the validity of the resolution based on the reasoning in Re Active Wear Ltd [2022] EWHC 2340 (Ch) but it also considered that where a company previously had more than one director, this was was irrelevant.

However, as each of these cases were heard in the High Court, it is worth noting that the High Court is not bound by its previous decisions. Therefore while the recent decision is helpful, a Court of Appeal decision confirming this point would provide the much needed authority.

In the interim, where a company has bespoke articles or has adopted an amended form of the model articles and the amendments impact the requirement for a certain number of directors and/or the quorum requirements for board meetings, companies with sole directors will still need to ensure that any ambiguity as to the authority and powers of the sole director under the articles are removed.

If you would like to discuss any of the matters raised in this article please contact Sing Li.