Directors’ Duties: Why Good Intentions Are Not Enough

The UK Supreme Court has ruled that a director who secretly acts against an agreed board decision breaches their duty of loyalty – even if they honestly believe they are acting in the company’s best interests. Here’s what Saxon Woods Investments Ltd v Costa [2026] UKSC 21 means for directors, shareholders and family businesses.

Summary

Directors cannot rely on personal belief alone to justify going against a board decision. The Supreme Court has confirmed that acting in a company’s best interests under section 172 of the Companies Act 2006 also requires directors to act openly and in line with decisions properly made by the board. Secretly pursuing an alternative strategy – even with good intentions – is a breach of statutory duty.

Supreme Court reinforces directors’ duty of loyalty

In Saxon Woods Investments Ltd v Costa [2026] UKSC 21, the Supreme Court delivered an important reminder: directors cannot simply rely on good intentions when making decisions for a company. The Court confirmed that directors who secretly undermine agreed board decisions risk breaching their statutory duties, even where they genuinely believe they are acting in the company’s best interests.

What happened in Saxon Woods Investments Ltd v Costa?

A director had been given responsibility for managing the sale of a company. The board and shareholders had agreed the business would be sold before the end of 2019.

However, the director believed a delay would achieve a better price. Rather than raising his concerns with the board and seeking agreement, he pursued his own strategy behind the scenes, deliberately concealing information from fellow directors and taking steps to delay the sale without their knowledge.

The strategy failed. The COVID-19 pandemic significantly reduced the company’s value, and a minority shareholder brought an unfair prejudice petition, arguing the director had breached his duties to the company.

The director argued he had honestly believed delaying the sale was in the company’s long-term interests, and that this satisfied his duty under section 172 of the Companies Act 2006 to promote the success of the company.

Why the Supreme Court disagreed

The Supreme Court held that directors owe a duty of loyalty to the company that extends beyond personal belief. Directors must also act openly and consistently with the company’s agreed arrangements.

Secretly pursuing a strategy that conflicted with an agreed board decision was described by the Court as “manifestly disloyal” and incompatible with acting in good faith – and therefore a breach of the director’s statutory duty.

What are directors’ duties under the Companies Act 2006?

Directors owe several statutory duties under the Companies Act 2006, including:

• Acting within their powers
• Promoting the success of the company for the benefit of its members as a whole (section 172)
• Exercising independent judgment
• Exercising reasonable care, skill and diligence
• Avoiding conflicts of interest
• Not accepting benefits from third parties
• Declaring interests in proposed or existing transactions

Of these, the duty under section 172 – to promote the success of the company – is perhaps the most widely discussed.

What does this mean for directors?

The judgment is a useful reminder that directors cannot act unilaterally simply because they believe they know what is best for the company. Where a director disagrees with a board decision, the appropriate course is to:

1. Raise concerns openly with the board
2. Participate fully in the board’s decision-making process
3. Respect decisions properly made by the board

Using delegated authority to pursue a different strategy in secret may expose both the director and the company to significant legal risk.

While Saxon Woods involved a substantial corporate transaction, the same principles apply equally to owner-managed and family businesses, where informal decision-making can often become the norm – and where the boundaries between personal view and board decision are most easily blurred.

FAQs

How mlplaw can help

Directors’ duties are more than a legal formality – they are fundamental to good corporate governance and to protecting the long-term interests of a company.

At mlplaw, our corporate team advises directors and shareholders on directors’ duties, governance, shareholder arrangements and corporate transactions. If you would like advice on directors’ responsibilities or strengthening your company’s governance framework, our team would be pleased to help.