In Saxon Woods Investments[1], a director took independent action believing it would be best for the business. The Supreme Court ruled that where directors disagree on the best way forward, the statutory duty to act in the best interests of the company means that no individual can act alone and responsibility for management rests with the board collectively.
While the case involved a specific dispute, its message applies to all directors.
[1] Saxon Woods Investments Limited and others (Respondents) v Francesco Costa (Appellant)
Your duties as a company director
It is easy to assume these issues only affect large corporate organisations. In reality, the more informal governance that can sometimes arise in smaller companies can increase the risk of disputes.
The Companies Act 2006 sets out seven statutory duties that apply to all directors, who must:
- Act within their powers.
- Act in good faith to promote the success of the company.
- Exercise independent judgment.
- Exercise reasonable care, skill and diligence.
- Avoid conflicts of interest.
- Not accept benefits from third parties.
- Declare any interest in a proposed transaction
Beyond the Act, when a company is insolvent or likely to become so, directors who allow the company to continue to trade when there is no reasonable prospect of avoiding insolvency can be liable for wrongful or even fraudulent trading. With one in every 198 registered companies entering insolvency between 1 July 2025 and 30 June 2026[2], this is a live issue for many.
Directors must also ensure compliance with a wide range of other legislation, including health and safety and environmental regulations.
[2] Commentary – Company Insolvency Statistics June 2026 – GOV.UK
When things go wrong
Directors may face personal liability, regulatory investigations, disqualification or even criminal prosecution. In some cases, personal assets may be at risk.
While strong governance and informed decision-making remain the best defence, insurance can provide valuable financial protection if claims arise.
How Management Liability (ML) insurance can help
Unlike many commercial insurance policies, ML insurance protects senior management against the consequences of claims made against them personally. Although cover varies, policies typically include the following heads of cover:
· Directors’ & Officers’ (D&O) Liability
Protects directors and senior managers against allegations of wrongdoing committed while carrying out their role. Cover can include:
- Legal defence costs.
- Representation at regulatory investigations.
- Compensation and settlements where legally insurable.
- Protection for directors’ personal assets.
As with all insurance, deliberate dishonesty, fraud and regulatory fines are typically excluded.
Policies generally operate on a ‘claims-made’ basis, responding to claims first made during the policy period, meaning even directors who have since stepped down continue to benefit.
· Entity Cover
For private companies, this cover extends protection to the company itself for certain legal liabilities, such as health and safety investigation costs or defamation claims.
· Employment Practices Liability
Protects organisations against a range of employment-related claims, such as legal defence costs, tribunal awards (where insurable), settlements and certain discrimination cases.
A valuable safeguard
Directors make complex decisions every day and carry significant personal responsibilities in doing so. While good governance is essential, ML insurance provides an important safeguard when claims or investigations arise.
Reviewing your cover regularly can help ensure both your business and the individuals leading it are appropriately protected. If you’d like to discuss your existing Management Liability insurance or review your current arrangements, speak to your usual Bartlett contact.
Bartlett is a trading name of Bartlett & Company Ltd, which is authorised and regulated by The Financial Conduct Authority (FRN: 301695)