It sounds dramatic, but for some landlords and investors, it’s a real risk - and completely avoidable.
If your property company was formed using the standard Model Articles (as most small companies are), there’s a hidden contradiction that questions whether your decisions as a sole director are legally valid.
It’s an issue that’s already made its way to the High Court several times - and it could easily affect you if you run your portfolio through a limited company.
The Problem Hidden in the Model Articles
When most property companies are incorporated through Companies House, they automatically adopt the standard “Model Articles of Association.”
But these default rules don’t quite agree with themselves - and that contradiction has created serious confusion about what a sole director can and can’t legally do.
Here’s what the key sections say:
Article 7(1): Directors must make decisions at a board meeting or by a unanimous written decision (the general rule).
Article 7(2): If there’s only one director, and the articles don’t require more than one, that director can make decisions “without regard to any of the provisions of the articles relating to directors’ decision-making.”
Article 11(2): The quorum for a directors’ meeting can be changed, but it can’t be less than two by default.
Article 11(3): If there are fewer directors than the quorum, the only permitted actions are appointing another director or calling a general meeting to appoint one.
So which article takes priority? If your articles say you need two directors for a valid meeting, but you only have one - are your decisions even legal?
What the Courts Have Said
This isn’t theoretical. The issue has already been tested several times in the High Court, and the outcomes have been inconsistent:
2022 – Hashmi v Lorimer-Wing: Sole-director decisions under standard Model Articles were ruled invalid.
2022 – Active Wear Limited: The court said they were valid, but only under specific circumstances.
2024 – KRF Services (UK) Ltd: The court concluded that both earlier cases could be correct - depending on the facts.
In other words, even after three rulings, there’s still no absolute certainty.
That means any decision you make as a sole director - signing a lease, approving accounts, changing shareholders - could be challenged later.
The Simple Fix
Thankfully, the solution is straightforward: update your company’s Articles of Association.
By adding clear wording to confirm that a sole director can make decisions on behalf of the company, you remove the contradiction entirely. Once updated, you can continue running your business confidently, without worrying that paperwork errors might one day invalidate your decisions.
It’s a quick process that ensures your company is properly protected.
Why It Matters for Landlords and Property Businesses
For property investors, governance isn’t just a box-ticking exercise.
A technical error in your company documents could cause serious delays if you’re selling a property, refinancing with a lender, or bringing in new shareholders.
Banks and solicitors increasingly request evidence that decisions were made correctly - and if your company uses unamended Model Articles, that evidence could be questioned.
The fix costs far less than the potential fallout.
Protect Your Company - and Your Portfolio
If you’re the sole director of your property company, don’t leave this to chance.
Our Company Secretarial team at Property Tax Advice can review your Articles, make the necessary amendments, and file the changes with Companies House. Once complete, your position as a director is legally watertight, and your company can operate without fear of challenge.
Get in touch today to have your Articles reviewed and corrected.
It’s one of those rare admin tasks that genuinely protects your investment and your peace of mind.
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