Follow the Rules or Else
15th November 2017Back to articles
When you need to take decisions in your company, it is essential to make sure they are taken properly and the correct procedures are followed.
In a recent case, it took the intervention of the Court of Appeal to determine whether administrators could be validly appointed by a single director of a company if its articles of association required that two directors be present for a board meeting to be quorate.
The facts of the case were complex, but the judge in the lower court concluded that the articles of association had been 'informally varied' by the consent of the only existing shareholder, who owned 75 per cent of the shares. The other 25 per cent were owned by a company that had been dissolved many years ago.
The decision was appealed by two of the company's creditors who opposed the appointment of the administrators. They argued that the appointment was invalid because the articles of association of the company were clear that a board meeting required two directors to be quorate and the decision was taken by a sole director.
The Court agreed that the company could not do informally what it could not do formally. It could not pass a board decision when the board was inquorate and the administrators' appointment was therefore invalid.
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