What does it really mean for a director to act in good faith?
That question sits at the heart of Saxon Woods Investments Limited and others v Costa (case UKSC/2025/0149), which was heard by the Supreme Court in June 2026. Judgment is still awaited, but the case is already a useful reminder for directors, shareholders and owner-managed businesses.
What is Saxon Woods v Costa about?
The dispute concerns allegations that a chairman misled the board and frustrated structured share-sale exit provisions in a shareholders’ agreement. At first instance, the High Court declined to order an unconditional buy-out because it found that the defendant subjectively believed he was acting in the company’s best interests.
The Court of Appeal took a different view. It found that the statutory duty to act in “good faith” under section 172(1) of the Companies Act 2006 includes a core fiduciary duty to act honestly, judged by objective standards of ordinary commercial practice.
Why directors’ duties matter for owner-managed businesses
For businesses, this matters because directors’ duties are not abstract legal concepts. They become very tangible in the face of conflict. Additionally, in many companies, directors and shareholders are often the same people. That can make decisions around exits, sales, funding, delays, board conduct and shareholder rights more personal. A director may genuinely believe they are protecting the company, but that belief still needs to be evidenced and justified against the company’s documents, the shareholders’ agreement, the board process and the rights of other shareholders.
How businesses can reduce the risk of shareholder disputes
That is why structure, records and process matter, and why having the right legal advisory support in place can make a significant impact in mitigating commercial risk.
Where relationships are under strain, directors need to be mindful and careful about how decisions are made and recorded. Board minutes, written advice, proper consideration of shareholder agreements, and clear communication can all become important if the decision is later challenged. Therefore, putting proper documentation processes in place can be a vital protection.
Good faith is not just a phrase in the Companies Act. In practice, it can become the dividing line between a difficult commercial decision and a serious shareholder dispute.
Our practical takeaway from this case is simple: If your business is navigating shareholder issues, director duties, exit provisions or board decision-making under pressure, then early advice can help clarify the risks before positions become entrenched.
S King Legal supports businesses with corporate legal advice, shareholder issues, directors’ duties and commercial decision-making. Where reserved legal work is required, S King Legal undertakes this through one of the authorised firms they consult with.