Should You Still Incorporate A Company With Model Articles? What A Judgement In

Posted by Liz Seyi on May 24th, 2022

For those who might otherwise be unaware, the Model articles of association take the form of a legal document outlining the standard default provisions that regulate how a company is run.

If you are looking to incorporate a limited company, articles in the firm’s constitution will set out the internal rules and regulations that the company’s members and directors are required to follow.

It is a legal necessity for any public or private company formed in England and Wales, Scotland, or Northern Ireland to have articles at the time of incorporation.

The question of having one, or multiple directors

The Companies Act prescribes a standard format for the “Model Form” articles, with this “Model Form” being applicable in the event of the company not having commissioned a set of bespoke articles for it.

However, there are various circumstances in which the suitability of the Model Form articles might be in question, and a recent court case has shone the spotlight on one potential issue: the number of directors required in order to form a quorum at a board meeting.

According to Model Article 11(2), the quorum for directors’ meetings may be fixed, from time to time, with this decision being made by the directors. However, it must never be below two, and in the absence of the quorum being otherwise fixed, it is indeed two.

Model Article 7 says that if the directors make such a decision, it is required to be either a majority decision at a meeting, or a unanimous decision, taken in compliance with Model Article 8.

Model Article 7 proceeds to state that in the event of (a) the company only having one director, and (b) no provision of the articles stipulating a need to have more than one director, certain formalities that would otherwise come into play for director decisions will not be applicable.

Clearing up the confusion about how Model Articles 7 and 11(2) work together

The exact mechanics of the relationship between the aforementioned Model Articles hasn’t always been entirely clear to some observers. Some people believed, for instance, that Model Article 7 gave just one director – a sole director – the ability to always act and make all decisions.

However, the recent court judgement stated that Model Article 11(2) actually amounts to a quorum of two directors being needed. This means it is necessary for two directors to be present if a meeting is to be quorate.

In practice, then, a company that makes use of the unamended Model Articles is required to have a minimum of two directors in order to manage the business and make decisions in relation to the company.

London Registrars is working closely with a team of specialists in company secretarial and business support services who can be by your side to assist you in fulfilling your corporate governance and compliance responsibilities.

Our team here can also assist with our process agency servicesFor more details about the advice, guidance and support we can provide, please do not hesitate to contact our specialists via phone or email.

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Liz Seyi

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Liz Seyi
Joined: August 13th, 2019
Articles Posted: 1,396

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