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Since the final implementation of the Companies Act 2006 in October 2009, there have been a huge number of articles published by the legal sector advising companies to review their articles of association.  The usual argument for this has been that up to date articles will remove any areas of conflict between the 2006 Act and earlier Companies Acts and will also allow companies to take advantage of new beneficial provisions of the 2006 Act.  The High Court, however, has recently provided another reminder as to why it is a good idea for articles of association to be up to date, but perhaps more importantly why directors and shareholders alike should be aware of the provisions and procedures contained in them.

In Rolfe v Rolfe, the company concerned was governed by articles of association that incorporated the Table A model articles as set out under the Companies Act 1948.  The dispute related to the validity of the appointment of a director.  W was appointed as a director of the company at the request of a retiring director B and his appointment was approved by the continuing director R.  Under Article 95 of the 1948 Act Table A, directors have the authority to fill a casual vacancy on the board as and when it is necessary but the person then appointed will only hold office until the next annual general meeting of the company at which he must be reappointed by the shareholders.  In this case, no such reappointment took place at the next meeting and R, the sole remaining director had died in the interim.  The court determined that W’s failure to observe this approval procedure meant that whilst he was validly appointed as a director for the period leading up to the general meeting, thereafter he was not validly appointed and the company was left with no directors.

Obviously this was an oversight by both R and W but it serves to illustrate that the articles of association, whilst often thought to have little effect on the day to day running of a company can have a devastating effect if they are not treated with due care and attention.

As a further point to note, the concept of directors holding office only until the next general meeting remained a standard provision of Table A for private companies until 1 October 2007.  Unless it has been specifically disapplied, any private limited company incorporated before this date will be subject to this rule and may wish to double check the validity of the appointment of its directors.

Re: Tulsesense Ltd; Rolfe v Rolfe [2010] EWHC 244 (Ch)

Rebecca Gardner
Solicitor

If you would like any further information about the issues raised in this article please contact Rebecca Gardner, or any other member of Goodman Derrick LLP’s corporate team on 0207 404 0606.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.