There are many reasons why Model Form Articles may not be suitable and recently, a court case highlighted such an issue with the number of directors needed for a quorate meeting.
Article 11 (2) says that a decision of the directors can apply when it comes to the quorum, though it must never be less than two and unless otherwise fixed, it will be two!
Article 7 states that any decisions of the directors must be a majority decision or a unanimous decision in accordance with Article 8. Article 7 then says that if a company only has one director, and no provision of the articles requires it to have more than one, certain formalities which would otherwise apply to director decision, actually do not apply.
It seems like a bit of a conflict between these two articles, as Article 7 meant that a sole director was able to act and make all decisions. Article 8 reverses that. So, the judgement in the recent case was that Article 11 (2) actually amounts to a requirement for a quorum of two directors.
Under the Companies Act 2006 a company can choose not to use the Model Form Articles at all, or to use some of them and amend others. If a private company wants to have a sole director it may do so, but will need to have specially prepared articles, or at least amend these provisions of the articles.
I'll blog again when I get further information on how/if Companies House is going to change anything following this court case. A review of Model Form Articles is obviously due.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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