Misreading the directors’ fiduciary duty of good faith

Abstract

ABSTRACT The fiduciary duty of good faith, now set forth in section 172 of the Companies Act 2006, expressly positions shareholders at the centre of the company’s interests, and assigns the priority entitlement to shareholders relative to all other stakeholders. The provision constitutes an attempted codification of the common law duty to act in good faith in the corporate interest, which remains immensely important in interpreting and applying the modern good faith requirement. However, this article submits that a reductive shareholder-determined articulation of the pre-2006 corporate interest seems practically misconceived, if not indeed in some sense conceptually impossible as a managerial behaviour obligation, and represents a departure from the common law doctrinal origins that is problematic for contemporary English company law and policy. Instead, the article provides a more functional and nuanced understanding of the salient cases, which focus typically on the company as a body corporate, and the particular free floating commercial objects of that entity.