What is the quorum for sole director companies?

A company had three directors. After a disagreement, one of the directors was removed by the original director and the other director resigned. The removed director then presented an unfair prejudice petition, and the company counterclaimed.

The applicant applied to strike out the counterclaim on the basis that the original director was acting ultra vires in resolving to bring that counterclaim as the company’s articles required a quorum of two for decisions and being a mix of model and bespoke articles.

The judge reviewed the conflict between model articles 7(2) and 11(2) and also considered the bespoke article 16.1, which stipulated that the quorum for directors’ meetings was two and modified model article 11. Model article 7(2) provides that, where a company only has one director and no provision in the articles requires it to have more than one director, “the director may take decisions 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 directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two.”

The judge granted the application and held that Model Article 7(2) was clear in only permitting a sole director to manage the company in circumstances where no provision of the articles required it to have more than one director and that the bespoke Article 16.1 did require there to be multiple directors for board meetings to be quorate. The decision runs contrary to the wide-held belief that where a company has a sole director, model article 7(2) prevails over 11(2) giving a sole director decision-making powers.

Where dealing with a company with a sole director, particular attention should therefore be paid to the company’s articles to check whether the director has the power to bind the company to decisions.

Re Fore Fitness Investments Holdings Ltd [2022] EWHC 191 (Ch)

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