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Law for Business

Knowhow - guidance - precedents

25 APR 2013

Directors - changes to Model Articles - positive change to remove one of the last significant forms of discrimination

From 28 April 2013 the Mental Health Discrimination Act 2013 ("the MHDA") removes Model Article 18(e) from the Model Articles of Association for private companies.  This is seen as a step forward in removing discrimination in the law in this area. The MHDA also removes the equivalents in the PLC and RTM Models.

 

What does Model Article 18 do?

Model Article 18 concerns the ability of the company to treat a director's appointment as ceasing. This is upon the happening of certain events, e.g. upon being the subject of a bankruptcy order or where the director is prohibited by law from being a director (e.g. is disqualified under the Company Directors' Disqualification Act 1986 for persistent breaches of the Companies Act 2006). 

Model Article 18(e) enabled a company to treat a director as ceasing to hold his/her appointment "by reason of that person's mental health, a court makes an order which wholly or partly prevents that person from personally exercising any powers or rights which that person would otherwise have."

Its removal is aimed at attacking the outdated idea that persons with mental health issues can never recover. 

It should be noted that Model Article 18(d) remains and so a director's appointment may cease by reason of physical or mental incapacity (subject to a medical practitioner's opinion).  There is therefore still protection for the company as well.

 

Should I change my bespoke articles?

This will depend upon what they currently say and whether or not it is a new company or an existing company.

There is little guidance available on this but it seems that for new companies if your company's bespoke articles incorporate this Model Article by reference then you will not need to do anything. 

However, if your bespoke articles are for an existing company and incorporate this then the position is less clear.  It seems that you may not need to update to the new version.  However, it is unlikely that the company would be able to use that provision in relation to a director as it would fall foul of anti-discrimination legislation.  We think that many companies will want to make it clear that they are in line with good practice and good behaviours and so will want the company's articles to reflect this.

We will, of course, keep you posted.

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