Is it time to check your articles of association?

The recent High Court case of Hashmi v Lorimer-Wing (also known as Re Fore Fitness Investments Holdings Ltd) 2022 EWHC 191 (Ch) (Re Fore Fitness) has sparked debate amongst lawyers around the proper interpretation of certain provisions contained in the model articles of association for a private company limited by shares as set out in Schedule 1 to The Companies (Model Articles) Regulations 2008 (SI 2008/3229) (the Model Articles).

The case considered the proper interpretation of model article 7(2) (relating to decision making and there being only one director) and model article 11(2) (relating to quorum for directors’ meetings). 

Model article 7(2) states that if a company has only one director and no provision of its articles of association require it to have more than one director, that director may take decisions alone, without regard to any of the provisions of the articles relating to directors’ decision-making.

Whilst model article 11(2) states that the quorum for a quorate board meeting may be fixed but it must never be less than two directors.

The outcome

It was held in this case that the quorum provisions in model article 11(2) should be interpreted as imposing a requirement that a company must have a minimum of two directors in order for a board meeting to be quorate, and that this was reinforced by model article 11(3) setting out what the directors are able to do if there are insufficient directors to form a quorum.  Therefore, where model article 11(2) is included in articles of association, model 7(2) cannot apply because model article 11(2) is to be interpreted as meaning the company must have at least two directors.   

The judgment in Re Fore Fitness has been met with surprise by many as historically, model article 11(2) has been interpreted as setting the quorum for board meetings rather than imposing a minimum number of directors, and in circumstances where a company had a sole director model article 7(2) prevailed over other provisions of the Model Articles. 

Consequently, companies which have adopted the Model Articles and which have a sole director should now consider what steps they should take to address the outcome of this case. 

How Moore Barlow can help

If this is something that you would like to discuss further then a member of the Corporate Law Team would be happy to help.

At Moore Barlow, we provide corporate legal advice that is built around you and your business. We put your needs first and give you a succinct explanation of complex legal matters so that you can act quickly and confidently to any opportunities that may arise.