English Court recognises sole director's decision-making powers

The High Court has recently held that the appointment of administrators by a sole director of a company with unamended Model Articles was valid.  

Background 

The document allegedly appointing the administrators of the company was a standard set of board minutes, reportedly chaired by a man and recording that a quorum was present. In fact, there was no meeting, and the decision was taken alone by the sole female director. 

The question for the court was whether the appointment was valid. The answer to that question depended on the proper construction of the company's articles, which were unamended Model Articles (prescribed for private companies limited by shares). 

Decision 

The court held that where a company was governed by unamended Model Articles, the sole director was entitled to take the decision to appoint the administrators on her own. 

In doing so, the court disagreed with the controversial decision in Re Fore Fitness Investments Holdings Ltd [2022] EWHC 191 (Ch) that a sole director did not have authority to commence litigation where the company's articles included Model Articles and a bespoke article regarding quorum for director's meetings. In Fore Fitness the court also suggested that unamended Model Articles would need to be adapted to permit a sole director to run a company, creating uncertainty over the actions of sole directors (past and present).

Key takeaways 

This is a welcome judgment for sole directors of companies with unamended Model Articles, recognising that they may take any decision relating to the conduct of the affairs of the company.

However, given the competing authority of Fore Fitness, directors and practitioners should exercise caution in relation to sole director companies, review the articles of association and consider whether previous acts require ratification and / or whether the appointment of additional directors or modification to the Model Articles is required.

Find out more 

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring and Insolvency team. 

Re Active Wear Ltd [2022] EWHC 2340 (Ch)