Sole director companies: are your articles appropriate?

This insight is part of our Legal Business News | Winter 2025 series. Explore the full series at the end of this piece.

If you are a sole director company, you might not realise that there is an issue with your articles of association. Until recently, the general consensus among lawyers was that a sole director company with model articles was fine.

However, three recent legal cases tried in the High Court have shed uncertainty and confusion over whether the statutory model articles of association are suitable for sole director companies. Sole directors should take pre-emptive action now to ensure their articles of association comply.

The first court case deemed model articles for sole directorship unacceptable, the second case took a different view and the third case deemed model articles to be fine. As the High Court is not bound by previous decisions, the position is unclear.

Sole director companies

Since 2009, it has been possible for UK private companies to have one sole director appointed, instead of a board comprising several directors, provided that the sole director is a natural person. Since then, many private companies have been incorporated with just one sole director or have allowed their number of directors to fall to one.

Following two 2022 High Court decisions, there has been some uncertainty about the decision-making powers of sole directors, particularly for companies using the statutory model articles of association. These ‘model articles’ are set out in the Companies Act 2006 and are the default articles of association often used by companies in the absence of bespoke articles. Last year, there was a third case on this issue, Re KRF Services (UK) Ltd [2024].

Articles of association

All companies need to have articles of association which must be publicly filed with Companies House. The articles set out the rules under which a company operates and are legally binding between the shareholders and between a company and its shareholders. A company, acting via its director(s), should always act in accordance with its articles of association. As a result, if a company’s articles require it to have more than one director and it has just one sole director appointed, there may be some doubt about the validity of actions taken by that sole director.

Model articles

The model articles for private companies limited by shares include the following arrangements:

model article 7(1): sets out the ‘general rule’ that any decision of the directors must be either a majority decision at a meeting or a unanimous decision;
model article 7(2): states that if a company only has one director, and no provision of its articles requires it to have more than one director, the general rule (above) does not apply, and the sole director may take decisions without regard to any of the provisions of the articles relating to directors’ decision-making; and
model article 11(2): provides that the quorum for directors’ meetings must never be less than two.

The High Court decisions in the first two cases (in 2022), Hashmi v Lorimer-Wing (Re Fore Fitness) and Re Active Wear Ltd, created uncertainty regarding the decision-making powers of sole directors, particularly for companies using the model articles, as the two cases took different approaches.

Case one: Re Fore Fitness

Before the judgment in this case, lawyers recognised the tension between model articles 7(2) and model article 11(2). The latter created a possible argument that more than one director would be required, as two directors would be needed for a valid quorum. However, the consensus of many legal professionals before the Re Fore Fitness decision was that model article 11(2) only applied when a company had more than one director. However, it did not create a requirement to have more than one director, as model article 7(2) allowed a sole director to take decisions on behalf of the company.

The Re Fore Fitness decision surprised many advisers. The case held that:

model article 11(2) required a company to have more than one director, because it required two directors for directors’ meetings to be quorate;
model article 7(2) therefore would not apply; and
companies with model articles would require a minimum of two directors to make valid decisions.

Following that decision, there was potential for challenging the actions of a sole director where a company had adopted the model articles.

Case two: Re Active Wear

This case concerned very similar issues but, conversely, this case provided some reassurance for companies with unmodified model articles. In the Re Active Wear case, it was held that:

model article 7(2) prevailed as it disapplied the remaining provisions in the sections of the model articles dealing with decision-making by directors;
model article 11(2) was therefore not relevant where a company had a sole director; and
as a result, a sole director did have authority to act.

Conflicting decisions

As both cases were heard in the High Court, they have the same level of legal authority. The conflicting decisions created uncertainty surrounding the validity of sole directors’ actions. Many sole director companies may have been advised to amend their articles of association and/or to appoint additional directors to remove the uncertainty around the validity of a sole director’s actions.

Case three: Re KRF Services

In December 2024, the third case in the High Court, Re KRF Services, again considered the validity of a sole director’s acts.

The case concerned the resolution of a sole director to make an administration application, where the company had adopted the model articles. The court upheld the validity of the sole director’s resolution based on the reasoning in Re Active Wear that, where a company has a sole director and its articles do not otherwise require it to have more than one director, model article 7(2) prevails over the provisions relating to directors’ decision-making in model article 11, including the requirement for a quorum of at least two in model article 11(2). If model article 11(2) were to be read as a requirement for more than one director, model article 7(2) could never be engaged, which was unlikely to have been the intended effect of the model articles.

Accordingly, this case held that, where a company has adopted unamended model articles, a sole director has authority to make valid decisions under model article 7(2).

Actions for sole director companies

This decision adds weight to the argument that, where a company director has adopted the model articles, no amendments are required to the articles to allow a sole director to run the company. However, all three cases are High Court decisions and the High Court is not bound by its previous decisions.

A prudent approach for sole director companies is to include suitable express arrangements in their articles to remove any ambiguity. An alternative approach would be to appoint an additional director.

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