Bowling & Co Senior Partner Huseyin Huseyin and Corporate Lawyer Özgecan Sözeri discuss the implications of the Hashmi v Lorimer-Wing High Court ruling on directors of private companies.
If you are a sole director in a company with unamended model articles, the decision in Hashmi v Lorimer-Wing will impact you and your company. Most small to medium-sized companies use model articles at incorporation for convenience. This worked well until the Hashmi judgment raised an issue.
The case highlights the conflict between two articles found in the model articles of association for companies. Article 7.2 provides that a company can function with a single director unless the articles elsewhere provide otherwise. Article 11.2 on the other hand, states the quorum for directors must never be less than two, and unless otherwise fixed it is two. What it means now, according to this case, is that a company must have two directors to make valid decisions, otherwise its articles must be amended to remove the inconsistency between 7.2 and 11.2 before any further decision can be made.
The Hashmi v Lorimer-Wing case raises some important questions:
- What actions do single-director companies need to take to rectify their articles of association?
- What implications does the ruling have on past decisions made by a sole director?
- What, if any, are the implications on the security of any loans taken out by the company?
Watch our video to learn more about this High Court case and its implications for sole directors.
This is not legal advice; it is intended to provide information of general interest about current legal issues.