Understanding Re KRF Services (UK) Ltd and its impact for SMEs using the model articles of association

Key contact: Jon Lawley

The High Court has provided a clearer answer to the question can a sole director run their business, or must new directors be appointed? We explain the impact of the recent judgment in Re KRF Services (UK) Ltd on the powers of single company directors.

What are the model articles?

All limited companies (no matter their size) must have articles of association. Articles of association set out the rules that company directors must follow when running their companies; including for sole directors. To assist SME business owners, the government drafted the model articles of association with the intention of simplifying matters for SMEs and avoiding the need to instruct solicitors to draft bespoke articles.

Sole directors and the model articles

Some smaller companies are run by single owner directors who both own all the shares in the company and are responsible for the day-to-day management of it as directors. When these individuals take decisions on behalf of a company incorporated with the model articles, they will either be doing so in their capacity as a director or as a shareholder.

The authority of sole directors is governed by articles 7(1), 7(2), 11(2) and 11(3) of the Model Articles: –

• article 7(2): where there is a single director appointed with no contrary provision of the articles of association, they may disregard the so-called ‘normal rule’ that directors will take decisions in a board meeting or by a ‘unanimous decision of the eligible directors’;

• article 11(2):  the quorum for a directors’ meeting can be fixed from time to time, but it cannot be less than two, and the default quorum is two; and

• article 11(3): if the total number of directors appointed is less than two, then they may not make any decisions apart from appointing new directors or calling a general meeting to allow the shareholders to appoint new directors.

A literal reading of the above provisions would restrict a single director from running their business as a sole director (for instance they would not be able to enter into contracts with third party suppliers on behalf of the company). Most practitioners previously took the view that article 7(2) of the Model Articles meant that sole directors were excluded from the effects of articles 11(2) and (3).

The situation prior to Re KRF Services

In 2022, in Fore Fitness Holdings Ltd, the High Court ruled that where a company had adopted the model articles but had inserted a bespoke article requiring a minimum of two directors to pass a decision of the company, then any decision of the directors would require a minimum of two directors even if only one was appointed. However, the latter case of Re Active Wear Ltd (Re Active Wear)concerned a scenario where the company had only appointed a single director and had adopted unamended the Model Articles. In this case, the High Court distinguished the facts from those in Fore Fitness and held that Article 7(2) of the Model Articles would prevail over the requirement for two directors set out in Model Article 11(2).

Unfortunately, Re Active Wear introduced some uncertainty due to comments made by the judge that, where a company with a sole director had previously appointed other directors, article 7(2) would not apply. This did not ultimately form part of the final decision given that in Re Active Wear there had only ever been one director appointed, but this added further layers of complexity to this area of law.

Fortunately, the recent case of Re KRF Services (UK) Ltd (Re KRF Services) has clarified the position and has been welcomed by practitioners.

How Re KRF Services has clarified the situation

In Re KRF Services, only one director remained appointed following the imposition of financial sanctions against its ultimate beneficial owner. As a result, no other directors wished to join. Crucially, there had previously been at least one other director appointed, and the company had adopted the Model Articles without modification. The sole director passed a resolution to file an administration application, and the question was whether the individual had the authority to do so.

The High Court ultimately decided that they did and to rule otherwise would have rendered Model Article 7(2) completely toothless. Therefore, article 7(2) of the Model Articles applied here notwithstanding the comments made by the judge in Re Active Wear that article 7(2) would not apply where a company with a sole director had appointed another previously. This applies in respect of unamended Model Articles only – amended articles that adopted a minimum number of directors would still be construed in the same way. 

Key takeaways for small business owners

• Model articles are not a one-size-fits-all solution. While they are meant to be convenient, they may not account for all the nuances of how a sole director should manage the company.

• As a sole director, it is important to understand that, whilst you have significant autonomy in company decision making, this autonomy is still subject to your company’s articles of association. If you intend to operate as a sole director, it may be worth seeking legal advice and asking your solicitor to draft bespoke articles to facilitate this.

• Broadly speaking, the case law now distinguishes between two scenarios:
• if the company adopts bespoke articles of association, which set a higher quorum, Model Article 7(2) will not apply; and
• if the company has appointed a single director, it is irrelevant that there may have been another director appointed in the past.

Click here to read the High Court’s decision in Re KRF Services.

For further advice about the model articles or other corporate law issues, please contact our award-winning corporate team. 

Acuity Law Represents Discover Momenta in Acquisition by Liva Healthcare

Key contact: Jon Lawley

One of the UK’s leading law firms, Acuity Law, has represented the selling shareholders of Discover Momenta and its subsidiary, Momenta Newcastle, in their acquisition by Liva Healthcare, enhancing their ability to offer treatment options for chronic diseases linked to lifestyle choices.   

Momenta provides and licenses digital, virtual and in-person healthy lifestyle programmes to National Health Service (NHS) organisations, local authorities and other third parties across the UK, to help manage long-term conditions such as obesity, Type 2 diabetes and cardiovascular disease.

Liva, a digital platform offering human-led interventions for chronic health problems, will expand its reach through the acquisition of Momenta. The deal consolidates Liva’s position as a global leader in therapeutic lifestyle solutions, leveraging the strengths of both companies to improve patient care, with Acuity representing the selling shareholders throughout the acquisition process.

Jon Lawley (Partner) and Joe Smith (Associate) fronted the Acuity team on behalf of the selling shareholders.

Jon Lawley at Acuity Law, said: “We’re thrilled to have used our expertise to support the selling shareholders during the acquisition by Liva. This move represents a key milestone in expanding treatment options for those with lifestyle-driven health issues, and it’s incredible to be part of something that has the potential to make a real difference in people’s lives.”

Harry MacMillan, on behalf of the selling shareholders of Discover Momenta, said: “Acuity’s expertise has been invaluable throughout this process. The opportunity to join forces with Liva is truly exciting, and we’re confident that by combining our programmes with their position as a leading provider of long-term disease care, we can better address the growing demand for treatment.”

Liva’s acquisition of Momenta follows new funding from IBL Group and existing investors to accelerate its growth plans. The deal marks a pivotal step in Liva’s efforts to scale cost-effective treatments for chronic diseases, having already helped over 80,000 patients better manage lifestyle-related conditions. Over 155,000 people have participated in Momenta’s programmes.

Headquartered in Cardiff, Acuity Law is a fast-growing law firm with over 150 lawyers supporting business clients throughout the UK. The firm’s ambitious growth strategy has seen it open offices in Birmingham, Leeds and Liverpool in recent years, adding to its presence in Bristol, London and Swansea.

Need help with an acquisition or sale? Contact our Corporate team.

We take you through a new set of company law changes on the horizon this year

Author: David Williams

Key contact: John Grant

2025 has landed, and companies and their directors will need to be aware of a new set of company law changes on the horizon this year.

Company law changes mean updated expectations of company directors. This set of anticipated reforms are thanks to implementation of the Economic Crime and Corporate Transparency Act 2023 and the progression of the Company Directors (Duties) Bill through Parliament.

We’ve summarised the main points so you can make sure you stay compliant in 2025.

1. Economic Crime and Corporate Transparency Act 2023 (ECCTA): Provisional timeline for implementation

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) is intended to reform the role of Companies House, enabling it to become a more active gatekeeper of information filed on behalf of companies.

From Spring 2025: it is intended that anti-money laundering supervised firms and sole traders (such as accountant or solicitors registered with their respective professional bodies) will be able to apply to become authorised corporate service providers with Companies House. This would permit them to carry out identity verification services with individuals who can voluntarily verify their identity. It is planned that all directors and persons of significant control will eventually need to have their identity verified by either Companies House or an authorised corporate service provider.

From Autumn 2025: The identification verification requirements should become compulsory for all new directors and persons of significant control and a 12-month period in which all existing directors and persons of significant control will need to verify their identity will begin.

Following this, it is intended that any person making filings at Companies House will need to verify their identity, but this requirement is not expected to be implemented until 2026.

Note: be prepared for potential delay!

The new requirements noted above have been pushed back from their original implementation timeline already so there is a reasonable possibility of further delay – especially as implementation will require the passing of Statutory Instruments by Parliament.

From 01 September 2025: The new criminal offence of failing to prevent fraud under ECCTA will come into force.  

Under this new offence, large business structures or companies may be held criminally liable where an employee, agent, subsidiary or other associated person commits fraud intending to benefit the organisation. The offence will only apply to large companies (businesses with more than 250 employees and a turnover of more than £36 million or more than £18 million in assets), not-for-profit organisations and incorporated public bodies. It will a valid defence for businesses to show that they had reasonable procedures in place to prevent fraud.

2. Directors’ Duties Updated: Company Directors (Duties) Bill

The Company Directors (Duties) Bill is a private members bill due for a second reading on 4 July 2025. The Bill will amend the director’s duties under the Companies Act 2006. requiring directors to balance their duty to promote the success of the company with duties to the company’s employees and the environment.

The passage of the bill remains in its early stages and so the text of the amendment has not been finalised. Its overall impact if passed will therefore remain an open question until later in the year. Nevertheless, if the bill becomes law, directors will  need to reconcile these new duties with the duties that already exist under the Companies Act 2006. 

It will be important for company directors to stay up to date with changes to companies  law and their duties as directors in order to avoid unanticipated legal issues.

For further advice on understanding how the changes impact your business, and on implementing new duties, contact our Corporate team.

Andrew Barnsley, founder and Managing Partner of Acuity Alliance Partner Adam Street Advisers, fills us in on his business journey, and the importance of good advice during the transactional process

Key contacts: Beverley Jones, Jon Lawley, Steve Berry

Tell us about your business. How do you help your clients?

We are a corporate finance advisory boutique. We tend to work primarily with founders, entrepreneurs and family-owned businesses who are looking to raise money, to grow their business or are at the stage where they’re looking to sell. So, we cover quite a broad spectrum.

We have deep experience in the healthcare and education sectors. However, we have completed transactions in a broad range of sectors such as food and beverage, fashion, engineering, manufacturing, leisure, software, technology and AI enabled businesses.

You’re an entrepreneur yourself. What was your journey towards founding your own business?

I’m a frustrated banker!  I got my first job doing deals in the healthcare sector when I was 30 after doing my MBA. By 32, I had set up a corporate finance advisory business. Over the last 20 years, that has evolved into what Adam Street is today.

How do clients find their way to Adam Street?

We do very little marketing. It’s 100% reputation and referrals, people know where to find us. We’ve built a really strong community amongst owners of private companies, they all know other entrepreneurs and, as a result, they tell people to come and see me. We also have a strong referral network, of which Acuity is a part.

What legal issues do your clients come up against? When do you bring in a lawyer?

I send them to a lawyer because they are about to embark on the biggest transaction of their lives: selling or raising equity for their business. They need to understand fully not just what we do, but how we work with lawyers to make sure that the transaction gets the best result for them.

The client needs to understand the legal process in doing a transaction: that it needs to cover everything from property (if they have a lease or own freehold), employment elements involving their workforce, any kind of investment agreement or SPA, finance and corporate matters. So, once we refer into the top at Acuity, it gets filtered out to all of your different teams.

It’s really, really important for us to work with quality, experienced lawyers, because we do so much work upfront and the deal has to be executed properly. Our lawyers have to be prepared to work hand in glove with us and listen to us from a commercial perspective, and we rely on them from a legal perspective – it’s a true collaboration, so it has to be the right partnership.

What do you wish your clients knew?

I wish my clients knew a good lawyer from a bad one. Many clients are going through the process for the first time and just tend to chase the lowest priced lawyer. We’ll often get a client come to us who will say they have a mate who knows somebody who’s a lawyer, and we have a call with that firm and realise quickly that they’re not going to do a good job on a deal. We have to explain to the client why that is the case, and it can be awkward.

What are the hallmarks of a good adviser?

A good adviser is somebody who is going to work very closely with their clients. If I take on a client, I’m working with that client all the way through the transaction until it completes.

Having a relationship based on trust with the client is important (… and we have a saying that a good client is one that listens!)

Who in the corporate world has most inspired you?

On the global stage, the obvious ones – global entrepreneurs that have built up these amazing businesses, taking massive risks and putting everything they own into it.

But I’m also inspired by smaller-scale businesspeople. I’ve worked with a number of elderly entrepreneurs who have been inspirational.

What has been your biggest learning point in business?

Nothing happens as you expect it! You set off to do one thing and, trust me, it will be completely different by the time you finish it. I think that’s a good thing. We like variety. Sometimes it’s frustrating from a planning perspective, but it makes life interesting.

What’s the best thing about being an Acuity Alliance Partner?

I’ve had a lot of partners over the years, but this is the partnership where we’ve just gelled. It’s a very symbiotic relationship, I’d say.

Are you buying, selling a business, or raising equity? Make sure you get the right advice. Contact Adam Street Advisers and our Acuity Corporate team. Sign up to My Digital Lawyer for guidance, document generation, insights and more from our Acuity Alliance Partners.

Acuity Law Advises AIM Listed Facilities by ADF PLC on its Latest Acquisition and Placing

Acuity Law has advised Facilities by ADF plc (ADF) on its acquisition of Autotrak Portable Roadways Ltd (Autotrak) for up to £21.3 million (acquisition) and its associated fundraising which raised gross proceeds for ADF of £10 million (the placing) and sell down by certain existing shareholders.

ADF is the leading provider of premium serviced production facilities to the UK film and high-end television industry (HETV). Its acquisition of Autotrak, one of the market-leading suppliers of portable roadway panels to the film and TV sector in the UK, is the next step in the delivery of ADF’s vision to be a one-stop shop for film and HETV production, operating across multiple businesses and run by talented local management. 

The placing, which was carried out by way of an accelerated bookbuild and retail offer through Cavendish Capital Markets Limited, was run alongside the acquisition process to raise funds for ADF to part fund the consideration payable pursuant to the acquisition. The placing was one of the largest fundraises carried out on the AIM Market this calendar year to date.

The Acuity team comprised corporate partners Beverley Jones and Andrew McGlashan, Property team partner Steve Morris and they were assisted by Chiara Howfield, Shawnee Evans, Swyn Llyr and Carys Griffith. Acuity partner Beverley Jones who led the team on the transaction said:

“We are delighted to have supported ADF in this latest strategic acquisition and look forward to seeing how this enhanced partnership contributes to the future growth and success of both companies.”

ADF CEO Marsden Proctor said:

“We are delighted to complete the acquisition of Autotrak, which marks a material step in our stated strategy of being the provider of choice for the HETV & film industry across a diversified product and service offering. We had the pleasure of working with the Acuity Law team who once again provided a superb service, and we couldn’t be more satisfied with the experience.”

ADF is an established client of Acuity, which advised on its 2022 acquisition of Location One, the UK’s largest integrated TV and film location service and equipment hire company.

What New Founders Need to Know About Fundraising

Our Acuity Law start-up events can be a treasure trove of guidance drawn from lived experience – as well as a great opportunity to get to know other founders, investors and (of course!) our expert Acuity lawyers.

In summer 2024, start-up founders from incubator programmes run by UCL, King’s College London and Imperial, as well as accelerator programme Digital Health London, got together with some of our investor network to share knowledge and best practices.

Together, they came up with the following top tips for new founders.

1. The first raise is the hardest

Having to prove yourself without revenue or traction can mean a small pool of potential investors – but have faith that the right investors are out there for you.

Top tip: Focus on finding people who believe in you as a founder.

Accelerators, family, friends, friends of friends, friends of friends of friends – you get it. Broadening your network will be key at this stage, and putting in the legwork now will give you the traction to attract more established investors at subsequent rounds.

In a slower market, investors are more cautious, targeting cash-savvy startups prioritising profits over revenues and demonstrating they can look after the bottom line and build even in a harsh economic environment. They might not be looking for profitability right now, but they will want to see profit before growth in today’s market.

2. Always be fundraising

As a founder, you’re either in a fundraising process right now, or you’re thinking about what you need to achieve before the next fundraising process. If you have just closed a fundraising round, you may feel as though you have shelved that job for several months. But now is actually a great time to put the work into relationship building – building a rapport with recent investors and those investors that you recently spoke to, updating them on your progress and investing in your network.

Top tip: capitalise on all interest and expand your network.

If an investor is interested, ask them to connect you to others. Even if they are not the right fit for you, they might know someone who is – so be confident. Be bold and ask for access to their network. You can do the same with peers in your industry – for example asking approaching series B founders for introductions or even mentorship.

Top tip: Make sure you are EIS and SEIS assured to provide tax relief for investors as an additional incentive.

3. Get your pitch right

If you are pitching cold to an investor, work to build rapport in the first instance. You could begin communications by asking for advice, hooking them in as early adopters/testers and soliciting feedback, then follow up with communications that build traction and a relationship, telling the story of your business. Follow up regularly with news, creating anticipation and keeping them in the loop.

Top tip: Don’t attach your entire pitch deck in the first cold email outreach.

Let your story unfold over time. Follow ups can be more important than the first pitch or conversation.

Top tip: Research VCs.

Know their profile, their portfolios and their roles. If you’re pitching to an analysts or an associate rather than a partner, do the grandparent test: if you pitched it to your grandparents, would they understand what you’re talking about? More junior analysts and associates may lack to confidence to clarify your pitch – but their report will influence partner decisions.

Top tip: Get a CRM that you enjoy using and suits your needs.

Top tip: Have your data room ready so you can respond instantly to any expressions of interest.

4. If you ever get the opportunity to raise more than you need, give serious consideration to taking it.

You may worry about the dilution you might take by taking on extra funding but, generally speaking given the current fundraising environment, if there is money on the table, it’s always a good idea to seriously consider taking it. The extra time and resources it will buy you could increase your valuation at the subsequent funding round.

If you need additional advice on fundraising rounds, or your corporate governance, our specialist Acuity start-up lawyers are on hand for further advice.