The UK Supreme Court has delivered a landmark judgment clarifying the extent and nature of a company director’s fiduciary duty to promote the success of the company under section 172 of the Companies Act 2006. The decision in Saxon Woods Investments Limited and others v Francesco Costa [2026] UKSC 21 reinforces that “good faith” encompasses not just a director’s genuine belief but also requires loyal, transparent, and collaborative conduct, and is a cautionary tale for any director tempted to play a lone hand in corporate governance.

Background

The case concerned Francesco Costa, a director and chairman of Spring Media Investments Limited, who disagreed with the company’s exit strategy as agreed in a shareholders’ agreement (“SHA”). The SHA obliged the company to work towards an exit by 31 December 2019, with shareholders committing to co-operate in good faith. Mr Costa believed the company would achieve a better outcome by delaying the sale, and he actively worked to undermine the board’s agreed strategy by concealing his actions from fellow directors, misleading them about compliance with the SHA, and employing delaying tactics. As the trial judge summarised, Mr. Costa’s mindset was “they wouldn’t like it now if they knew, but they will thank me in the long run”. Alas, Mr Costa’s strategy met its downfall not in the form of Banquo’s ghost, but the COVID-19 pandemic, which destroyed any prospect of a sale, resulting in significant losses.

Saxon Woods, a minority shareholder, brought proceedings under sections 994–996 of the Companies Act 2006 for relief from unfair prejudice. The trial judge found unfair prejudice but ruled that Mr Costa had not breached his fiduciary duties because he genuinely believed his strategy was in the company’s best interests. The Court of Appeal reversed that finding, concluding Mr Costa had acted dishonestly and in breach of section 172(1). Mr Costa appealed to the Supreme Court, arguing that section 172(1) imposed a wholly subjective test requiring only genuine belief in the company’s best interests.

The Supreme Court’s Decision

The Supreme Court unanimously dismissed Mr Costa’s appeal, holding that he had breached his duty under section 172(1) of the Companies Act 2006. Lord Briggs, delivering the Court’s judgment, clarified that the duty to act in “good faith” extends beyond a director’s subjective thought process to encompass conduct. The judgment emphasised several critical points:

i. Good Faith as Conduct, Not Merely Belief

The requirement that a director act “in good faith” applies not just to the director’s thinking but also to his or her conduct in pursuing what the director believes is best for the company. A director cannot pursue a dissenting strategy covertly, concealing it from fellow directors or misleading the board, even if the director genuinely believes it serves the company’s best interests.

ii. The Board’s Collective Role

Under typical company constitutions, responsibility for managing a company’s affairs rests with the board collectively, not with individual directors acting unilaterally. The individual director must bring his or her independent view to the board’s attention and must not covertly pursue a strategy contrary to the board’s decision.

iii. Fiduciary Duty and Loyalty

The section 172 duty codifies the pre-existing equitable principle of loyalty owed by fiduciaries. The Court confirmed that this duty involves an objective element: the court will assess whether the director’s conduct was loyal and in good faith, irrespective of the director’s genuine belief in the merits of his or her strategy.

iv. Consistency with Company Constitution

The Court noted that a director’s duty must be exercised consistently with the company’s constitution. Mr Costa’s covert sabotage of the board’s agreed Exit strategy violated both section 171(a) (acting in accordance with the company’s constitution) and section 171(b) (exercising powers only for the purposes for which they are conferred)

v. No Room for Subversion

The judgment made clear that the codification of directors’ duties in the 2006 Act was not intended to create chaos or paralysis in corporate governance by permitting individual directors to undermine collective board decisions covertly. Such conduct is “manifestly disloyal” and in bad faith.

Implications for Northern Ireland Directors

While this watershed judgment arises from English company law, its principles are highly persuasive in Northern Ireland, given the close alignment of corporate legislation and the application of UK Supreme Court decisions across the jurisdiction, it raises five areas for Northern Ireland directors to be alert to.

i. Heightened Scrutiny of Conduct

Northern Ireland directors can no longer rely solely on their subjective belief in acting for the company’s good. Courts will scrutinise their conduct objectively to assess whether it demonstrates loyalty and good faith. Any attempt to conceal strategic actions from fellow directors, or to mislead the board, will be viewed as a breach of fiduciary duty.

ii. The Board as the Governance Keystone

The judgment reinforces the central role of the board in corporate governance. Directors in Northern Ireland must ensure that major strategic decisions are discussed and resolved collectively. Where disagreement arises, the dissenting director must articulate their view openly and allow the majority to decide. Acting unilaterally, particularly in covert fashion, is impermissible.

iii. Enhanced Personal Liability

The Supreme Court upheld the Court of Appeal’s remedy of an unconditional buy-out order at a pre-loss valuation, demonstrating that breaches of Section 172 can attract significant personal financial consequences. Northern Ireland directors should be acutely aware that failing to act transparently and loyally could leave them personally liable for losses or unfair prejudice to shareholders.

iv. Implications for Shareholder Agreements

The case also underscores that, whilst a Shareholders’ Agreement does not completely constrain directorial discretion to reconsider strategy (particularly where circumstances change post-contract), directors must not covertly deviate from board-approved plans. Any proposed change must be brought to the board for proper consideration.

v. Governance Best Practice

For Northern Ireland companies, particularly SMEs and family businesses where governance structures may be less formal, this judgment is a clarion call to tighten procedures. Regular board meetings, clear documentation of decisions, and open communication channels are not mere formalities, they are essential safeguards against accusations of disloyalty and breaches of fiduciary duty.

Exeunt: The Moral of the Story

As Shakespeare might have penned it: “This above all: to thine own company be true.” The Supreme Court’s judgment in Saxon Woods confirms that directors owe a duty of loyalty that demands not only sincere belief in the company’s interests but also transparent, honest, and collaborative conduct. For Northern Ireland directors, the message is crystal clear: the stage of corporate governance is no place for soliloquies or secret plots. To paraphrase Hamlet, the question is no longer “to be or not to be honest”, it is “to be honest or not to be a director at all.”