In many boardrooms, a familiar defence is invoked when things go wrong: ‘I genuinely believed I was acting in the best interest of the organisation.’
For years, that subjective belief prevailed and offered comfort.
However, in light of the UK Supreme Court ruling delivered on 14 July 2026, there is a paradigm shift in this state of affairs. In Saxon Woods Investments Ltd vs Francesco Costa, UKSC 21, the court delivered a unanimous decision that will shape corporate governance across the Commonwealth, including Kenya.
Francesco Costa was the chairman of Spring Media Investments Ltd. The company and its shareholders had formally agreed, through a shareholders’ agreement, to sell the business by December 31, 2019.
Costa was entrusted by the board to lead the sale process. Privately, Costa disagreed. He believed a delayed sale would yield a higher price. Instead of convincing his fellow directors, he unilaterally decided to delay the sale. He gave quiet instructions to investment bankers to slow the process, withheld information from the board, and allowed board minutes to show that the sale was on track when it was not.
Then the Covid-19 pandemic struck. Valuations collapsed and the sale failed. A minority shareholder holding 22.3 per cent brought an unfair prejudice claim. Costa’s argument was straightforward: his motives were pure and that he honestly thought delay would maximise the company’s shareholder value.
The court was interpreting Section 172 of the UK Companies Act 2006, which is mirrored in Section 143 of Kenya’s Companies Act 2015 and, in the public sector context, Chapter 1, paragraphs 1.7 and 1.8, Chapter 4, paragraphs 4.2 and 4.3 of Mwongozo, the Code of Governance for State Corporations.
The court held that the duty to act in good faith has two elements. Subjectively, did the director honestly believe he was promoting the company’s success? Objectively, was his conduct itself consistent with good faith? Covert deception, concealment and disloyalty, the court ruled, can never satisfy good faith, even if driven by a genuine belief that it is best for the company.
Costa was ordered to personally buy out the minority shareholder at the pre-pandemic valuation.
In light of this, there are two key learnings for boards. First, dissent must be overt. The duty of a director who disagrees with a board resolution is to disclose the disagreement openly to the board, argue the case and seek a formal review.
Second, collective responsibility is not optional. Once a resolution is passed, it binds all directors, including those who dissented.
Mwongozo requires that dissent be minuted, but it does not allow a dissenting director to sabotage the implementation of a board resolution.
The enduring message from London to Nairobi is clear: in governance, being right in your own mind is not enough.
How you act and whether you respect the collective authority of the board are what the law will ultimately judge.