The Companies (Model Articles) Regulations 2008 set out the default provisions that apply to a company’s articles of association if the company has not adopted its own bespoke articles. These regulations include Model Article 7 and Model Article 8, which outline the powers and responsibilities of directors in relation to decision-making.
The directors can make decisions in two ways under MA 7 and 8. MA7 stated that the general rule of decision-making is by way of a majority decision at a meeting, or the decision can be made by way of a written resolution under MA 8. However, under MA8, the decision must be taken unanimously by all the eligible directors.
The eligible directors are the directors who would have been entitled to vote on the matter had it been proposed at a physical meeting.
The casting vote as a remedy to any deadlock under Model Article 13
A deadlock occurs when the directors of a company are unable to make a decision or reach a consensus because of a disagreement or equal voting on a particular issue. This can be a serious problem for the company, as it can prevent the directors from effectively managing the affairs of the company. Model Article 13 has dealt with that matter by giving the chairman of the meeting a casting vote to overpass the deadlock. I.e., he would have another vote to favour any decision he may think fair.
However, in making decisions under Model Article 7 and Model Article 8, directors are required to act with care, skill, and diligence. This means that they must be competent and knowledgeable about the subject matter of the decision and must take all relevant factors into account before making a decision. They must also act in good faith and in the best interests of the company and its shareholders.
If a director breaches his duties under Model Article 7 or Model Article 8, he may be held liable for any losses suffered by the company as a result. In some cases, directors may also be personally liable for the debts of the company if they have acted recklessly or dishonestly in making decisions.