Shareholder rights scrutinised in landmark case

The recent case of Saxon Woods Investments Limited v Francesco Costa has garnered attention for its examination of shareholder rights and director responsibilities within corporate governance. Delivered by the Court of Appeal of England and Wales on 9 June 2025, the judgement navigates complex issues surrounding allegations against Mr Francesco Costa, chairman of Spring Media Investments Limited, who reportedly managed the company in a manner detrimental to minority shareholder Saxon Woods Investments Limited ("SW").

The case originated from a petition filed under section 994 of the Companies Act 2006, which focuses on unfairly prejudicial conduct towards shareholders. This appeal followed a 2024 ruling by Deputy High Court Judge Mr Simon Gleeson, who determined whether the management of the company's affairs unfairly disadvantaged SW. The court ultimately mandated Mr Costa to buy out SW's shares, addressing significant underlying concerns about corporate governance.

Saxon Woods held a 22.33% share in the company while Mr Costa possessed a substantial indirect interest estimated at around 30%. The core issue revolved around the company's non-compliance with a shareholder agreement (SHA) requiring it to pursue an 'Exit' strategy by the end of 2019. The judge noted that the company's failure to achieve this Exit was primarily due to Mr Costa’s failure to act in good faith, thus classifying his conduct as unfairly prejudicial towards SW.

The judgement highlighted Mr Costa's intentions, revealing a belief that postponing the Exit might be in the best interest of all shareholders. However, the court found this stance contradicted the explicit agreements outlined in the SHA. This situation raised essential questions about the fiduciary duties owed by directors to their shareholders, probing whether Mr Costa’s actions exhibited good faith or were largely self-serving.

Critically, the court observed that Mr Costa’s disregard for potential buyers constituted a breach of the agreement’s stipulation for good faith consideration of exit opportunities. The court emphasised a significant legal principle: that unfairness can exist independently from financial harm suffered by a shareholder. This principle was particularly pertinent in shaping the court's determination.

In addressing Mr Costa's defence concerning allegations of breaching his fiduciary duties, the Court of Appeal overruled the previous judgement's characterisation of his conduct. It affirmed that he had indeed violated section 172 of the Companies Act, which mandates directors to act in the best interests of the company. The court noted that justifications based on personal beliefs do not absolve directors from their obligations to the board and to fellow shareholders.

As the judgement concluded, it mandated that arrangements be made for the buy-out of SW’s shares at a fair market value as of 31 December 2019, despite any depreciation in the company’s worth following external challenges, including the Covid-19 pandemic.

Saxon Woods Investments Limited v Francesco Costa serves as a pivotal reminder of the essential nature of equitable treatment for shareholders and the rigorous obligations imposed upon directors in corporate governance. The implications of this ruling extend beyond this individual case, underscoring the necessity for directors to fulfil their fiduciary responsibilities towards all shareholders consistently and transparently, regardless of personal interests.

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