The UK Supreme Court’s decision in Saxon Woods Investments Ltd v Costa [2026] UKSC 21 is not an insolvency case. However, it has important implications for directors of financially distressed companies and for office-holders assessing potential claims against former directors.

The decision addresses a recurring dilemma: what can a director do when they genuinely believe the board is pursuing the wrong strategy?

The Court’s answer on the facts was clear. A director may challenge assumptions, seek further information and advice, express dissent and vote against the majority. What a director cannot do is use delegated authority or control information covertly to implement a strategy which the board has not approved.

Read alongside BTI 2014 LLC v Sequana SA [2022] UKSC 25, Saxon Woods helps clarify both whose interests directors must consider as insolvency approaches and how disagreements within the boardroom must be handled.

What happened in Saxon Woods?

The case arose out of a shareholders’ agreement requiring Spring Media Investments Limited to pursue an agreed exit strategy.

The company’s chairman, Mr Costa, believed delaying the sale process would ultimately produce a better outcome. Acting on that belief, he excluded other directors from key information, resisted enquiries, gave instructions to advisers inconsistent with the board’s mandate and delayed implementation of the agreed strategy.

Although the trial judge accepted that Mr Costa genuinely believed he was acting in the company’s best interests, the Supreme Court held that this did not excuse his conduct.

The Court emphasised that section 172 Companies Act 2006 requires a director to act in good faith, not merely hold a sincere belief about what would promote the company’s success. A genuine belief in the desired outcome cannot justify covert, misleading or disloyal conduct.

The company’s governance arrangements were central. Management authority rested with the board collectively, While Mr Costa had been delegated responsibility for implementing the agreed exit strategy, he was entitled to advocate a different course, but not to use that delegated authority to pursue a rival strategy which the board had not approved.

How does this fit with Sequana?

Sequana addressed a different question: whose interests must directors consider as a company moves towards insolvency?

The Supreme Court confirmed that the so-called “creditor duty” is not a standalone duty owed directly to creditors. Rather, it modifies the directors’ duty under section 172.  The rule is engaged when the company is insolvent or bordering on insolvency, where an insolvent liquidation or administration is probable, or where a transaction under consideration would place the company in one of those situations.

Once the creditor-interest rule is engaged, the weight to be given to creditors’ interests increases as the company’s financial position deteriorates. If insolvent liquidation or administration becomes inevitable, creditors’ interests become paramount.

Saxon Woods does not alter that framework. Instead, it focuses on governance. If directors disagree about what creditors’ interests require, the disagreement must be resolved through proper board processes rather than unilateral action.

In short:

  • Sequana concerns whose interests matter.
  • Saxon Woods concerns how directors must pursue their views about those interests.

Implications for distressed boards and their advisors

Financial distress often presents boards with competing but reasonable options.

One director may favour an immediate administration to minimise further creditor exposure. Others may support a short trading period to complete a refinancing or preserve a going-concern sale.

Neither Sequana nor Saxon Woods dictates the correct commercial outcome. What matters is the quality of the board’s process.

Boards should:

  • Insist on up to date information, review it carefully, and make informed decisions based on the financial position of the company at that point.
  • Seek specialist restructuring advice early enough to influence the decision and act on that advice.
  • Increase the frequency of review the more precarious a company’s financial position becomes. 
  • Identify who receives value or protection and who bears additional risk, including new creditors, contingent claimants and connected parties. Consider each company in a group on its own facts.
  • Record the reason for all decisions, including the likely creditor outcome of an immediate process. Minutes should capture the information, advice, competing views, reasons and review points, supported by the underlying forecasts, board packs, valuations and relevant communications.
  • Where a director disagrees with the majority, the appropriate response is for the director to challenge assumptions, seek further information, obtain advice and ensure their position is documented in minutes and the board documents.

What Saxon Woods makes clear is that a director cannot implement a rejected strategy behind the board’s back.

Potential misfeasance claims

The decision may also prove significant in misfeasance investigations.

Where a company subsequently enters liquidation, a liquidator considering a potential misfeasance application under section 212 of the Insolvency Act 1986 should distinguish between:

  • an informed but unsuccessful commercial judgment; and
  • deliberate conduct that circumvented the board’s decision-making process.

The latter may support claims based on breaches of sections 171 and 172 Companies Act 2006 and, depending on the facts, other fiduciary or statutory duties.

Board minutes remain important, but they are unlikely to be the end of the enquiry.

Communications with advisers, lenders and stakeholders, together with contemporaneous financial information, may be crucial in determining whether a director acted loyally or pursued a concealed agenda.

Key takeaway

Saxon Woods is not a creditor-duty case, but it may prove an important authority when the conduct of directors in distressed situations is examined.

Sequana tells directors whose interests must be considered as insolvency approaches. Saxon Woods reminds them that even a sincerely held view about those interests must be pursued through proper corporate governance.

For directors operating in the insolvency “twilight zone”, the message is straightforward: robust dissent is permitted and often valuable, but covert action is not. The distinction between principled disagreement and disloyal implementation may ultimately prove critical when the company’s conduct is reviewed with hindsight.