Model articles: another look

Thinking back to the unusual Court decision of 2022 handed down by the High Court in Hashmi v Lorimer, the consequence at the time was Model articles (paradoxically) required sole director companies to have quorums of two.

The legal world grappled with the confusion of why sole director firms are permitted, yet their quorums had to be two.

As people reeled from the decision, faced with the prospect sole director decision making might therefore be invalid, we came up with practical workarounds which for firms might consist of:

1. boards of directors, of growth firms, ratify the previous decisions of sole director
2. where firm had not grown in number of directors, amend the company Articles so meetings would not require a quorum of two. 

Realistically, there wasn’t much else firms could do, to attempt to shore up the efficacy of decisions of sole directors in the wake of Hashmi v Lorimer. 

Since then, the High Court considered the matter again – in the recent case of Active Wear 2022, in which it seems that the High Court swung away from its thinking in the earlier case.  The Court seems to have tried to clarify that sole directors can act alone and sole directors can ignore the Model article requiring a quorum of two. 

Logically, that has sense to it.

For now, there appears to be more calm about the Model Articles for sole director firms.  But a future court decision could go in another direction. 

Always bear in mind the specific needs and uniqueness of your firm, and whether you would benefit from varying your Articles, by Special Resolution, as many firms have done – to shore up, clarify and give more scope to your governance.

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