Unfair prejudice shareholder claims in light of the decision in Saxon Woods

Shareholder disputes – Saxon Woods Investments Limited v Francesco Costa [2025] EWCA Civ 708

In a recent dispute involving a minority shareholder’s attempt to exit a company, a claim arose when the shareholder requested that the directors facilitate an exit in accordance with the terms laid out in the shareholder agreement. The director at the centre of the ensuing unfair prejudice petition argued that he had acted in good faith, even when hiding his true actions from the shareholders, believing the company could secure a more favourable exit valuation in the future. Despite this assertion, his actions were found to deviate from the obligations stipulated in the shareholder agreement – particularly the requirement to act in good faith to pursue an exit strategy by a specific date which also led to a finding of unfair prejudice.

On appeal, the court upheld the view that the director’s conduct constituted unfair prejudice and additionally found that he breached his duties under section 172 of the Companies Act, which mandates directors to promote the success of the company while having regard to the interests of its members. The director’s reliance on his subjective opinion that a potential better outcome was possible was ultimately dismissed as an insufficient defence, given his failure to honour the shareholder agreement’s expectation of good faith and, in particular, with due consideration to his conduct towards the shareholder.

Practical impact

The Court of Appeal’s latest decision emphasises that directors are not only bound by their duty to promote the success of the company, but that they must also adhere to the obligations set out in any relevant shareholder agreements. The personal belief that a more profitable outcome can be achieved does not absolve them from their responsibilities under such agreements, neither does it shield them from claims of unfair prejudice. 

If a director acts in a way that disregards the interests of the company’s members, shareholders are not without protection. Legal remedies exist for those who suffer from conduct that fails to honour both statutory duties and agreed contractual obligations, ensuring accountability and protection for minority shareholders. 

How can funding help?

If a lack of funding is preventing you from exploring a potential shareholder dispute, third party litigation funding is a way to finance litigation with funds provided by a third party litigation funder. It is non-recourse financing – the funder only gets repaid (and is paid a multiple of its investment amount) if the claim is successful.

“Enable” is a bespoke all-in-one litigation funding product developed by Weightmans in conjunction with a broker, funder and insurer which mitigates the cost risks of litigation for commercial claims requiring litigation funding and adverse costs cover.