Court rules: director’s honesty and integrity are legal obligations

14 November 2025 | posted in Commercial law Corporate and business law Dispute resolution Employee share schemes Employment law Family law Immigration law Media and entertainment law Music law Private client law Property law

This insight is part of our Business Law newsletter | Autumn 2025 series. Explore the full series at the end of this piece.

A recent court ruling holds that company directors’ actions must be not only well intentioned but also objectively honest and fair. This case is particularly significant for company directors and shareholders navigating the complex interplay between a director’s fiduciary duties, a shareholders’ agreement and a director’s own view of what is best for a company and its shareholders.

Here, we examine the Court of Appeal decision in Saxon Woods Investments Ltd v Costa (Re Spring Media Investments Ltd) [2025] EWCA Civ 708. This case has clarified the scope and limits of directors’ duties under section 172 of the Companies Act 2006 (act).

Background

Section 172 of the act requires a director to act in a way they consider, in good faith, to be most likely to promote the success of the company for the benefit of its members as a whole. It lists certain matters that directors must consider when making decisions.

Saxon Woods Investments Ltd (Saxon Woods), a minority shareholder in Spring Media Investments Ltd (company), brought an unfair prejudice petition under section 994 of the Companies Act 2006. Saxon Woods alleged that Mr Costa, the company’s chairman and also a shareholder, had caused the company to breach a shareholders’ agreement by failing to work in good faith towards an “exit” (a sale of the company or its assets) by a specified date. No sale was achieved by the specified date and Coronavirus then had a devastating impact on the business and the value of the company’s shares. Following an investment round in 2024, in which Saxon Woods did not participate, Saxon Woods’ shareholding in the company was reduced from around 22% to less than 1%.

The High Court found that, while the company had breached the shareholders’ agreement in not working towards an exit by the specified date, Mr Costa had not violated his section 172 duty, as he genuinely believed his actions were in the company’s best interests.

Court of Appeal decision

The Court of Appeal took a different view. It held that Mr Costa had misled the board about the company’s progress towards an exit, and that this deception constituted a breach of his duty under section 172. Crucially, the court clarified that a director’s belief that they are acting in the company’s best interests must meet both a subjective and an objective standard.

In other words, it is not enough for a director to subjectively believe they are doing the right thing. If their conduct falls short of what an honest and reasonable person would consider acceptable, they may still be in breach of the duty. The court held that section 172 requires a director to act in what the director considers, in good faith, to be most likely to promote the success of the company. The requirement that the director acts in good faith includes, as a core fiduciary duty, the director acting honestly towards a company.

This ruling marks a significant shift from earlier interpretations of this duty that focused primarily on the director’s subjective belief.

Takeaways for directors

For directors, this case serves as a timely reminder that honesty and integrity are legal obligations. Misleading fellow board members or shareholders, even with good intentions, can result in serious legal consequences. For shareholders, particularly minority investors, the decision strengthens the tools available to challenge conduct that undermines their interests.

At Moore SGD Law, our specialist lawyers understand the challenges you face as a business owner. Working closely with our tax, accounting and finance colleagues at Moore Kingston Smith, we deliver integrated support to meet your legal as well as your wider commercial needs.

This article is provided for information purposes only. It does not constitute legal advice and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances.

Business Law newsletter | Autumn 2025