Updating post from Reddit.
I’ve been dealing with a solicitor on a recent purchase who has told me, as I am a sole director, my mortgage lender won’t allow me to approve a purchase as I need two or more directors. I am the sole employee, director, investor etc. the company is just me. I’m unsure why the law claims I need to have a second director. This relates to a recent case Hashmi vs. Lorimer Wing.
The resolution they are offering is for a solicitor at the same firm to change the company articles for £750 plus VAT. I assume this means adding one or two lines of text that say I can approve things by myself.
I’ve asked, and apparently most mortgage providers are now requesting a second director so there’s no point getting a new mortgage offer.
The situation seems ridiculous. This is alongside having to apply for independent legal advice so a solicitor can sign to say I understand that if I don’t pay the mortgage the bank will take the flat.
Has anyone found themselves in a similar situation, and what did they do? I see a few options in this case:
appoint my partner as a second director so there are two directors in the company. I’m unsure what the costs and implications down the line might be.
suck it up and pay the £900 just to get it done once.
find someone cheaper to rewrite the company articles. This will likely create further delays.
Appreciate any advice, and the solicitors explanation is below:
Hashmi v Lorimer-Wing: This case highlights the potential issues that arise when a company with a sole director tries to operate under Model Articles. In this case, the judge ruled that a sole director could not make decisions alone because the company's Model Articles required a quorum of two directors.
As things stand your company has adopted model articles which don’t allow sole director to approve board resolution. To comply with the lender’s requirements, we will need to amend the company articles. Our corporate team can assist with this subject to a fee.
Just add your partner or a mate as director, its free and takes 10 minutes update on companies house. Once the deal is done you can remove them if you want. Its all just nonsense pointless bureaucracy so just play the dumb game.
it's because you've adopted the model article of associations, so these just need to be amended. Easy.
Sure, but is £900 a fair price? Seems excessive.
no idea how much this costs, when you set up your company who advised you? they should have been aware of this when adopting the model AoAs
That is a rip-off you can do it yourself at companies house for a small fee but you may do it wrong, so its up to you.
Their are two options
I confirm that this is a requirement for all companies where there is 1 director and an old Model Articles have been adopted. The amended articles will need to be signed and dated by the companies and uploaded to Companies House. The amended articles confirm that the 1 director can make decisions for the company in their sole capacity.
A recent court case (Fore Fitness Investments Holdings Ltd, Hashmi v Lorimer-Wing [2022]) has established that a company which uses the Model Articles, without amendment, must have a minimum of two directors in order to make decisions, including the decision to take out a mortgage.
Specifically, you need to amend article 11.2, which currently says that a minimum 2 directors are required to form a “quorum”, so that the minimum requirement is 1.
Hi, first I’ve heard about this. I’ll be financing next year.
Just checked mine. Why does this not apply? This article seems to be designed to solve any issue with one director.
• Article 7(2): “If the company only has one director, and 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.”
The judgement talks about Article 7 and why it someimes doesnt get arround this issue, you can read about it here:
Thanks. This article states in cases where a company only ever had one director (in my case) the clause clearly applies.
Still good to know. Some lenders might not distinguish.
Is this a new company for a property purchase?
Did you pay for someone to set up the company?
If yes and yes then get that someone to fix their mistake!
If no, add your partner in as a director with 0% shares.