Directors cannot go it alone: what Saxon Woods v Costa means for the boardroom

The Supreme Court’s decision in Saxon Woods Investments Ltd v Costa [2026] UKSC 21 sends a clear message that directors cannot pursue their own preferred strategy behind the board’s back, even if they genuinely believe they are acting in the company’s best interests. 

The case considered the standard expected of a director who genuinely disagrees with fellow directors about the best route for the company’s success. The Court held that a director’s duty to act in good faith under section 172 of the Companies Act 2006 is not just about a director’s internal thought process; it also requires good faith in the way the director acts, and this should be considered objectively. 

This is an important judgment which gives clarity to directors’ decision-making and governance. In boardroom terms, this is a case about how decisions are made just as much as what decision is ultimately reached. It draws a clear line: genuine belief does not give a director carte blanche to mislead colleagues or sidestep collective governance and the strategy the board has chosen.

The facts

Francesco Costa, a director and former chairman of Spring Media Investments Limited, disagreed with the board-backed exit timetable reflected in a shareholders’ agreement, because he believed a later sale would achieve a better return. Trusted with leading on the exit, he then pursued that slower strategy covertly, keeping other directors and shareholders out of the process, rebuffing attempts to obtain information, misleading the board into thinking the company was complying with the agreed exit plan, and using delaying tactics. Costa genuinely believed that they would “thank me in the long run”, but the strategy backfired when Covid destroyed the prospect of a beneficial exit. Saxon Woods, a minority shareholder, complained that Costa had frustrated the exit rights under the shareholders’ agreement and caused them unfair prejudice. 

Legal analysis

Section 172 requires a director to act in a way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.

Costa argued that, so long as he genuinely believed his preferred course would promote the company’s success, the court could not find a breach of section 172 merely because he concealed what he was doing from fellow directors. 

The Court considered the meaning of the duty of good faith under section 172. Does a director comply with section 172 merely because they subjectively believe that their own strategy is the best approach for promoting the company’s success, even if they act outside the normal collective board process to pursue it? The Court did not simply revisit a commercial disagreement about the timing of a sale; it examined the legal limits of unilateral director conduct in the face of fiduciary duties and board decision-making norms.

The Court rejected Costa’s argument in emphatic terms, focussing its reasoning on loyalty and governance:

• The section 172 duty reflects the pre-2006 common law fiduciary duty of loyalty to the company. It imports an objective standard of honesty and loyalty in the way the director acts towards the company — good faith must be reflected in conduct, not merely in motive.
• A director may hold an independent and genuine view about strategy, but they must bring it openly to the board for collective consideration and must not covertly pursue a different course in a way that subverts the board’s constitutional role. Secretly implementing a dissenting strategy is inconsistent with that constitutional role, inconsistent with the duty of loyalty, and a breach of the section 172 duty. 

The Court did not need to decide specifically whether the breach of the shareholders’ agreement in itself automatically amounted to a breach of the section 172 duty. Lord Briggs stated that this would not have been easy to determine, and no conclusive view was given, but he made some general observations. The mere fact that a company has contracted to pursue a certain route to success cannot altogether close off any analysis by its directors whether it would be better served by changing course, even if that were to involve a breach of contract. Whether such a change of course should be pursued would, however, be a matter for the business judgment of the board collectively.

Remedy

Saxon Wood had been unfairly prejudiced, and the Supreme Court upheld the Court of Appeal’s order requiring an immediate unconditional buy-out of Saxon Woods’ shares by Costa. 

Practical messages

For directors, the practical messages are clear:

• Disagreement is permitted, but concealment is not.  If a director believes the board is pursuing the wrong course, the answer is to surface a disagreement at board level, debate it and seek to persuade colleagues, not to run a parallel strategy through advisers or selective disclosures. Courts will not lightly second-guess commercial judgement and collective decisions of the board.
• Delegation is not a licence to rewrite the mandate. Where the board has delegated responsibility for a process, the delegate must use those powers for the purpose for which they were conferred, not to frustrate the agreed strategy.
• Directors should treat transparency with the board as a core discipline, not least in sale processes, financing rounds and other moments of strategic sensitivity and where a director has a personal, shareholder or investor-aligned interest in the outcome.
• Record why decisions are considered to promote the company’s success. Process matters: a defensible decision is much easier to defend if the board papers, minutes and communications show a candid, informed and properly reasoned decision-making process.

To discuss any of the issues raised by this judgment, please contact your usual contact in the Burges Salmon Corporate and M&A team or Nick Graves, Head of Corporate.