The Supreme Court’s recent decision in Saxon Woods Investments Ltd v Costa [2026] UKSC 21 is an important judgment on directors duties. The case provides useful guidance on what it means for a director to act in “good faith” and serves as a reminder that even well-intentioned directors can face liability if they act outside proper governance processes.

What happened in the case?

The dispute arose within Spring Media Investments Limited, whose shareholders had entered into a shareholders agreement requiring them to work together in good faith towards a sale of the business by the end of 2019. If that did not happen, an investment bank was to be engaged to help achieve the sale. 

Mr Costa, the company’s chairman and a significant indirect shareholder, believed a delayed sale would ultimately generate more value. Rather than openly presenting that view to the board and shareholders, the courts found that he took steps which delayed the agreed exit strategy and restricted the flow of information to other directors. As a result, the planned sale did not proceed and the opportunity to sell was later lost.

A minority shareholder, Saxon Woods Investments Ltd, subsequently brought an unfair prejudice claim. The courts found that the company had breached its obligations under the shareholders agreement. This was because the agreed exit process required the parties to work together in good faith towards a sale by the end of 2019, whereas Mr Costa’s conduct meant the company was not genuinely pursuing that agreed objective. 

The Supreme Court ultimately confirmed that a director cannot justify misleading or concealing information from fellow directors simply because they genuinely believe they are acting in the company’s best interests.

Why does the decision matter?

The key issue was the scope of a director’s duty under section 172 of the Companies Act 2006, which requires directors to act in the way they consider, in good faith, would be most likely to promote the success of the company. 

Mr Costa argued that because he genuinely believed delaying the sale was the right thing to do, he should not be liable. The Supreme Court disagreed. It held that “good faith” is not purely subjective. Directors cannot engage in conduct involving concealment, deception or disloyalty towards the board and then rely on their personal belief that the outcome would benefit the company. 

In short, a director’s belief that they are doing the right thing will not excuse a failure to act openly and properly through the board.

The judgment reinforces a fundamental principle of company law: companies are generally managed through collective board decision-making, not by individual directors acting alone. 

How does this affect directors and shareholders?

For directors, the decision is a clear warning that genuine commercial judgment must still be exercised through proper board processes. Directors must ensure that significant decisions are supported by transparent discussion and accurate information sharing. A director who withholds information or seeks to steer outcomes behind the scenes risks breaching their statutory and fiduciary duties.

For shareholders, the case demonstrates the importance of carefully negotiated shareholders’ agreements. The courts confirmed that obligations to work together in good faith towards agreed objectives can create legally enforceable rights. Where those rights are undermined, shareholders may have access to remedies through an unfair prejudice petition. 

How can directors and shareholders protect themselves?

In light of the decision and as part of their corporate governance processes, businesses should consider:

• Reviewing board governance procedures and ensuring major strategic decisions are properly documented.
• Encouraging open discussion and challenge at board level, particularly where directors disagree on strategy.
• Recording the reasons for key decisions and the information considered by the board.
• Reviewing shareholders’ agreements to ensure exit provisions, good faith obligations and dispute resolution mechanisms are clearly drafted.
• Seeking legal advice early if disagreements arise between directors or shareholders about the company’s future direction.

The message from the Supreme Court is clear: directors are expected to act honestly, transparently and collectively. Companies with strong governance arrangements and well-drafted shareholders’ agreements will be best placed to avoid the sort of costly dispute seen in Saxon Woods v Costa.