The case of Hasmi v Lorimer‑Wing (2022) is one of the most important recent decisions on how UK companies operate when they have a sole director using the Model Articles. The judgment clarifies how the Model Articles function in practice.
In this article, we outline the key issues raised in the case and how later decisions in 2022 strengthened the position for companies operating with a single director.
Sole Director Governance Under the Model Articles
The case of Hasmi v Lorimer-Wing (2022) colloquially known as Re Fore Fitness Investments is commonly referenced in relation to companies acting with a sole director while having the Model Articles implemented into their incorporation.
Within the Model Articles, there are two provisions which came into question in relation to the sole director being able to hold a quorum or quorate:
Article 7: (1) The general rule about decision-making by directors is that any decision of the directors must be either a majority decision at a meeting or a decision taken in accordance with article 8.
(2) If—(a) the company only has one director, and (b) no provision of the articles requires it to have more than one director, the general rule does not apply, and the director may take decisions without regard to any of the provisions of the articles relating to directors’ decision-making.
Article 11: (2) 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.
In the details of the case, the company in question included a bespoke provision within their Articles. Namely, Article 16, which stated “the quorum for meetings of the Board shall be two Directors.” The High Court ruled that the company could not hold a quorum with only one director, and it was noted the Model Articles are not fit for sole director companies, however, these comments were obiter and therefore do not set a binding precedent.
The common interpretation of the Model Articles for sole directors, is that Article 7 prevails over Article 11. This would be confirmed later in the same year during the case of Active Wear Ltd (2022), where the judge ruled that following Article 11, in matters where the Model Articles were unmodified, Article 7 would be moot.