Key Takeaways
- The Supreme Court has confirmed that a director’s fiduciary duty of good faith is subject to an objective test. Directors cannot excuse covert, dishonest or disloyal conduct simply by claiming to honestly believe it was best for the company.
- Section 172 Companies Act 2006 requires directors to both think and act in good faith, working transparently and respecting collective board decisions.
- Directors who conceal information, mislead the board or pursue strategies in secret may breach their duty, even if they believe they are pursuing the company’s best interests.
- Breaching the duty of good faith can result in personal liability, removal from office, and potentially director disqualification.
- Minority shareholders can bring unfair prejudice petitions where a director acts disloyally or outside the agreed governance structure.
- Evidence of secretive or misleading behaviour towards other directors is vital to proving an objective breach of fiduciary duty.
- There is generally a six-year time limit for most breach of duty claims against directors, so prompt action is important to protect your interests.
- Failing to act can result in lost legal remedies and further harm to your company or investment if director misconduct goes unchallenged.
- If you suspect a breach or need guidance on your rights, contacting our solicitors at an early stage can secure the best outcome and protect your position.
What Does the Supreme Court’s Saxon Woods Ruling Mean for Director Fiduciary Duty and Good Faith?
Can a director escape liability by insisting they truly believed their secretive actions would benefit the company? The Supreme Court’s decision in Saxon Woods Investments Ltd v Francesco Costa [2026] UKSC 21 has made it clear: the director fiduciary duty of good faith is not purely about personal belief. Directors who conceal vital information, act against agreed board strategy or mislead their colleagues cannot hide behind good intentions. Their conduct is judged against objective standards of honesty and loyalty under section 172 Companies Act 2006.
This article explains what the Supreme Court’s ruling means for the law in England & Wales, why it matters for business owners, directors, shareholders and investors, and how the new objective test for good faith operates. You will learn how courts distinguish between honest business judgment and conduct that crosses the line into breach, what evidence is essential if you bring or defend a claim, and how the clarified law strengthens the position for unfair prejudice petitions and other remedies.
If you are involved in a shareholder dispute, suspect a breach of director fiduciary duty or need strategic advice, our solicitors can help you act decisively. Call 0207 459 4037 or book a free consultation to protect your position.
What Is a Director’s Fiduciary Duty of Good Faith in England & Wales?
A director’s fiduciary duty of good faith requires each director to act honestly, loyally and in the best interests of the company as a whole. This means prioritising company interests above personal benefit or the interests of others. Good faith is not just about internal conviction, but about open, collaborative engagement with the board and decisions that further the company’s long-term success.
Directors who breach this fundamental obligation—by concealing plans, misleading the board or undermining agreed strategy—risk legal action and the breakdown of boardroom trust and commercial relationships.
For shareholders and investors, fiduciary duty is a vital safeguard if management acts covertly or disloyally. If you are concerned about director conduct or involved in a boardroom dispute, our solicitors at Go Legal can advise you on enforcement or defence options.
How Does Section 172 Companies Act Define the Director’s Duty to Act in Good Faith?
Section 172 of the Companies Act establishes the statutory duty for directors to “act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.” This wording captures both the director’s honest belief and the requirement for loyalty, honesty and transparent, collective governance.
Following Saxon Woods Investments Ltd v Francesco Costa [2026] UKSC 21, courts will carefully examine what a director believed was best for the company, but also whether their conduct meets the standard of transparency, integrity and loyalty required.
What Factors Must Directors Consider Under Section 172?
- Likely long-term consequences of decisions
- Interests of employees
- Relationships with suppliers, customers and others
- Impact on the community and environment
- The company’s reputation for high standards
- Fairness between shareholders
If you are uncertain about your governance processes, our solicitors can review your approach and help reduce the risk of director dispute litigation.
To deepen your understanding, read our guide on Directors’ Duties UK: Fiduciary Obligations & Breach Under Companies Act 2006.
What Happened in Saxon Woods? Understanding the Supreme Court’s Ruling
The Supreme Court in Saxon Woods Investments Ltd v Francesco Costa [2026] UKSC 21 considered whether a director could act in secret, misleading the board, if they genuinely believed their approach benefited the company. Mr Costa, as chairman, delayed a sale beyond an agreed deadline, convinced this would maximise returns for all shareholders. To fulfil this secret strategy, he:
- Blocked other directors from involvement in the sale process
- Falsely told the board the shareholders’ agreement was being fulfilled
- Gave instructions to professional advisers without board authority
- Used deliberate tactics to delay a sale until he felt market conditions were right
The board and minority shareholders were kept in the dark. When the market turned, a valuable opportunity was lost and minority shareholders suffered. The Supreme Court held that Mr Costa’s genuine belief did not justify his covert and disloyal conduct. Fiduciary good faith demands full engagement, disclosure and action through the board, not just personal conviction.
Why Was the Director’s Conduct Not Protected by Genuine Belief?
The Supreme Court made it clear that honest intentions do not excuse covert or deceptive actions. Undermining board governance, misleading directors or acting alone fails the test for good faith—even if done for what the director believes are the right reasons. Directors must show honest loyalty to the company as a whole and act through the board, not in secret.
Case Law Table: Objective Good Faith and Director Duties
| Case | Facts | Outcome | Why It Matters |
|---|---|---|---|
| Saxon Woods Investments Ltd v Francesco Costa [2026] UKSC 21 | Director delayed sale, misled the board, concealed intentions, sincerely believed his actions would benefit the company | Supreme Court found breach of duty; honest belief did not excuse covert conduct | Confirms that loyalty, transparency and collective governance are essential |
| BTI 2014 LLC v Sequana SA and others | Directors approved dividend with known liability to creditors | Supreme Court considered how creditor interests impact director duties under s.172 | Clarifies when director duties shift to creditors as insolvency approaches |
Is the Good Faith Duty Subjective or Objective After the Supreme Court Decision?
The Saxon Woods Supreme Court decision confirms that the duty to act in good faith is not purely subjective. There is now an objective standard which courts apply. While courts will give weight to a director’s honest belief about what benefits the company, if a director’s conduct is secretive, dishonest or excludes collective governance, it will be judged against an objective yardstick.
Directors are no longer permitted to act covertly or dishonestly, even if they think they are right. Concealed strategies, misleading colleagues or acting alone will not meet the modern standard for directors’ good faith.
You may also find our article on Shareholder Disputes: Legal Solutions for Resolving Business Conflicts useful if you are facing this issue.
What Laws and Deadlines Apply to Director Fiduciary Duty Good Faith?
Director fiduciary duties are a mix of long-established equitable principles and the statutory general duties in the Companies Act. The main legal framework is the Companies Act 2006, with sections 171 to 177 listing core director obligations.
Principal duties include:
- Duty to act within the company’s powers
- Duty to promote success in good faith
- Duties around conflicts of interest, care, skill and diligence
Claims by shareholders over unfair prejudice in the company’s affairs are typically brought under sections 994 to 996. Companies or their liquidators can also sue directors directly for damages if a breach is proven.
Deadlines (Limitation Periods):
- Unfair prejudice petitions do not have a strict limitation period, but prompt action is vital. Delay may prevent relief.
- Company actions for breach of duty are usually subject to a six-year limitation period from the breach date, which may be extended for fraud or concealment.
- Check time limits carefully or get advice before bringing a claim.
Our specialist litigation solicitors can clarify your time limits and guide you through all procedural requirements.
What Evidence Is Needed to Prove a Breach of Good Faith Duty?
Proving a breach of good faith requires persuasive documentary and witness evidence. Courts look to what a director did, what they knew and whether they concealed or manipulated information at key moments.
Evidence may include:
- Board minutes and resolutions recording what was discussed and decided
- Emails, messages and memos between directors or with advisers
- Adviser instructions and engagement letters showing if the board authorised them
- Documents proving efforts to inform or exclude other directors
- Records of misrepresentation, withholding or manipulation of key facts
If you need help assessing your evidence or whether your case is strong enough, book a meeting with one of our litigation specialists.
What Remedies and Outcomes Can Follow a Breach of Director’s Fiduciary Duty?
Remedies for breaches of the director’s duty of good faith are serious, and the court can choose from a wide range depending on the loss or prejudice suffered.
Key consequences include:
- An order requiring the director to purchase the affected shareholder’s shares at a fair value, often with no discount for minority shareholding
- Compensation or account of profits for losses suffered or unauthorised personal gains
- Potential removal or disqualification of the director from office
- Injunctions prohibiting harmful conduct or requiring positive corrective actions
- In rare cases, winding-up the company
Can Shareholders Bring Unfair Prejudice Petitions for Breach of Good Faith?
Yes. Sections 994 to 996 of the Companies Act allow shareholders to petition the court where company management unfairly prejudices their interests. This is particularly relevant where directors act in secret, fail to follow board procedures, or exclude the minority from participation.
What Damages, Orders or Sanctions Can the Court Impose?
Courts can:
- Order compulsory share purchases or specify a fair basis for valuation
- Award compensation or require repayment of profits received improperly
- Regulate future company conduct or restrain misconduct
- Disqualify a director from office in especially serious cases
If you want strategic advice or support for possible claims, our shareholder litigation solicitors can help.
Do Directors Owe Fiduciary Duties to Shareholders or Only to the Company?
In most cases, a director’s fiduciary duty of good faith is owed to the company as a whole, not to individual shareholders or groups. This upholds the company’s legal identity and protects long-term, collective interests.
However, in some situations:
- Directors of small, quasi-partnership companies may owe additional duties to certain shareholders.
- When a company nears insolvency, directors may be required to consider creditors’ interests, as discussed in BTI 2014 LLC v Sequana SA and others.
If your business faces a multi-party dispute or financial issues, our teams can ensure you understand and properly discharge your obligations.
What Are Practical Steps for Directors and Shareholders to Protect Their Position?
Directors and shareholders can reduce risk and protect their interests through careful governance and timely action.
Step-by-Step: What to Do If You Suspect Director Misconduct
- Collect board minutes, emails and policy documentation showing meetings and decisions.
- Review the articles and any shareholders’ agreement for rules on transactions or exits.
- Take prompt legal advice—early steps can make resolution easier and less costly.
- Consider mediation or negotiated settlement before turning to court proceedings.
- Log attempts to discuss or resolve concerns internally—courts respect efforts at resolution.
- Take action without undue delay to avoid losing rights or remedies.
Our team can guide you on both proactive governance and action if disputes arise.
Our Winning Approach to Director Fiduciary Duty Good Faith Disputes
Our solicitors take a results-driven approach to director and shareholder disputes, expertly combining detailed legal knowledge with commercial insight.
We provide:
- Clear assessment of all statutory and fiduciary duties, including a detailed review of section 172 duties and risks
- Step-by-step support for evidence gathering and document management
- Tactical advice on negotiation and mediation to limit cost and preserve relationships
- End-to-end commercial dispute resolution, from unfair prejudice and derivative actions to disqualification proceedings
- Transparent fees, including fixed-fee work and advice on managing cost
- Access to in-house accredited mediators for early and effective settlement
If you are navigating a boardroom dispute or want to mitigate future risk, speak with our senior litigation team for confidential and practical guidance.
Frequently Asked Questions
What is the difference between fiduciary duties and the Companies Act general duties?
Fiduciary duties are traditional court-developed duties focused on loyalty and acting in the beneficiary’s interests. Companies Act general duties (such as section 172) add statutory detail and clarify what is expected from directors.
Can a director be sued personally for a breach of good faith?
Yes. Directors can be held personally liable for losses or gains resulting from their breach. Courts may require compensation to the company or shareholders.
How do courts decide whether a director’s conduct was in good faith?
Courts review both what the director actually believed and how they conducted themselves. Secret, deceptive or self-willed conduct usually fails the test, regardless of motive.
What sort of behaviour will always breach the good faith duty?
Acts such as dishonesty, excluding colleagues, withholding critical information, or refusing to follow agreed board strategy nearly always breach good faith.
Do directors ever owe duties to creditors or employees?
Directors’ primary duty is to the company. When insolvency looms, they may need to consider creditors’ interests, as confirmed in BTI 2014 LLC v Sequana SA and others. Duties to employees mainly arise under separate legislation.
What is unfair prejudice and when can it be claimed?
This is a shareholder remedy for conduct by those in control that unjustly harms shareholder interests—often through exclusion, lack of transparency or breach of directors’ duties.
Is mediation available in director dispute cases?
Yes. Mediation is efficient and well-suited to business disputes where relationships matter.
What if a director makes a genuine mistake but is open with the board?
Open, transparent discussion usually distinguishes honest error from breach. Liability often arises only where there is secrecy or the board is misled.
How can board minutes or emails help prove or defend a breach claim?
They are vital evidence, showing information flow, participation and how disputes or concerns were addressed and resolved.
Who pays the court costs in a director breach dispute?
The general rule is that the losing party pays the winner’s costs, but courts may take account of the parties’ conduct and settlement efforts.
Get Specialist Advice on Director Fiduciary Duty and Good Faith Today
Understanding the objective standard for director fiduciary duty after the latest Supreme Court guidance is essential. Good faith now requires open, loyal and transparent conduct in the boardroom. Whether you are a director protecting your position or a shareholder concerned about secretive or disloyal decisions, early action can make a decisive difference.
The risks of delay or facing director disputes alone are significant. Our solicitors have deep expertise in complex director and shareholder disputes, unfair prejudice petitions and breach of duty claims throughout England & Wales.
