The UK Supreme Court has issued its long-awaited judgment in Saxon Woods Investments Limited and others v Francesco Costa [2026] UKSC 21. The ruling provides critical clarification on the scope of a director's statutory duty to promote the success of the company under Section 172(1) of the Companies Act 2006—a framework directly persuasive across the Caribbean and Channel Islands.
The case arose from a minority shareholder's unfair prejudice petition against a director who had covertly pursued a parallel corporate strategy, bypassing and misleading the rest of the board. The trial judge originally found that while the director’s conduct caused unfair prejudice, he had not breached his Section 172 duty because he sincerely and subjectively believed his strategy was in the ultimate long-term interest of the company.
The Supreme Court unanimously dismissed the director's appeal, firmly ruling that the good faith requirement applies to a director’s actual conduct, not merely their internal thought process. A genuine subjective belief does not grant an individual director carte blanche to act covertly or subvert the board's constitutional responsibility.
Key Takeaways for Insolvency Practitioners:
- Creditor Interest Shift: Because the Section 172 duty shifts to prioritise the general body of creditors as a company approaches the zone of insolvency, this judgment provides officeholders with a much wider, objective basis to plead breach of duty claims against rogue directors.
- Eradication of the "Sincere Dissent" Shield: Directors can no longer escape liability for asset-stripping or parallel restructurings by arguing they subjectively meant well; concealment from the wider board is now a clear, actionable breach of loyalty.
- Sources: Review the detailed legal analysis via TLT LLP's Lessons from Saxon Woods v Costa and the corporate bar updates on Littleton Chambers' Saxon Woods Just Handed Down.
UK Supreme Court: Covert Actions Defeat a Director's Subjective "Good Faith" Defence