Clarifying single director company model articles
Articles of association are the internal rules which set out the basic management and administrative structure of a company.
Model Articles are the standard default set of rules which a company can adopt. Model Articles will not be suitable for all companies and therefore companies can either amend the Model Articles or adopt bespoke articles.
A recent High Court decision has clarified some uncertainty around Model Articles being suitable for sole director companies, which was prompted by a decision earlier this year in the case of Fore Fitness Investments Holdings Ltd. Fore Fitness suggested that any company incorporated with unmodified Model Articles could not operate with one director.
In the recent case of Re Active Wear Limited, the court ruled that an out-of-court administration appointment, instigated by a sole director of a company with unmodified model articles, had been able to operate from incorporation with only one director.
Although the decision in Re Active Wear will be welcomed by sole directors with unmodified Model Articles, the position in Fore Fitness may still apply to a company with Model Articles that have been amended to include a specific quorum requirement.
Going forward, if a company intends to operate with only one director, the articles should be drafted in a way that makes this clear. Sole directors who previously acted alongside co-directors may need to review their company articles of association.
Given that some uncertainty remains, sole-director companies, or any companies which may operate with a sole director, should consider whether it is necessary to amend their articles of association in the meantime.
Clarke Willmott can review company articles and discuss any implications current articles have on a company for sole directors. We can also assist with drafting new articles of association, any associated ancillary documents and filing them at Companies House. Further, we can advise generally on structuring a company to ensure that it can operate effectively in light of the For Fitness and Re Active Wear decisions.