Company chair's exit dispute questioned under truthfulness, appeal court rules against individual
Updated Article:
Published at 10 Jun 2025
Court slaps Costa for shady moves during exit process: Court of Appeal rules controlling director breached fiduciary duties, ordering buyout of minority shareholder.
In a jaw-dropping decision, the Court of Appeal has handed down its judgment in a high-stakes dispute involving Spring Media Investments (SPI) and minority shareholder Saxon Woods Investments (SWI). The court yesterday (9 June) upheld SWI's appeal and overturned the February 2024 High Court decision, finding Francesco Costa, SPI's chairman, had acted in a shady manner, breaching his fiduciary duties, and ordering him to buy out SWI's shares.
THE NITTY-GRITTY
The drama unfolded back in 1996 when SPI's founders, including Mark Loy, laid the groundwork. The company swiftly grew, reaching a turnover of GBP 23 million by 2012, paving the way for potential expansion into New York. To fund this move, Loy sought investments, networking with Costa, who later joined the board. A shareholders' agreement was squared away in 2013, detailing an exit strategy by 31 December 2019.
In late 2016, talks began between Loy and Costa to sell Loy's shares, but by early 2018, no ink was dry. By November 2018, relations between the parties soured as SPI engaged Jefferies to handle the exit process, with Costa tasked with the relationship. SWI cried foul, claiming Costa caused SPI to breach the shareholders' agreement by failing to work diligently towards an exit and neglecting to consider viable exit opportunities.
THE HIGH COURT
In its 22 February 2024 judgment, the High Court sided with SWI, citing that SPI conducted its affairs unfairly, prejudicing SWI. The court mandated Costa to buy out SWI's shares, contingent on a final offer from a third party worth more than USD 75 million, post-debt, by the end of 2019. Both parties appealed.
THE COURT OF APPEAL
SWI argued that Costa violated his duties under section 172 of the Companies Act 2006 by intentionally misleading the board and pursuing a self-serving strategy. SWI contended that the court erred in connecting the buyout order to the third-party offer condition and that the judge misunderstood the nature of the prejudice suffered. SWI claimed that it had been denied the opportunity to exit SPI by 31 December 2019.
Costa, on the other hand, maintained that the shareholders' agreement imposed only an obligation for SPI and investors to work together in good faith towards an exit during the investment period. Costa further argued that a November 2019 offer from Metric Capital Partners wasn't an actual exit, as it involved the rollover of a substantial portion of shares, and that the High Court didn't perform a thorough causative assessment.
THE RECKONING
The Court of Appeal rejected Costa's case, backing SWI's appeal, with judges deeming Costa's conduct a breach of his fiduciary duties under section 172 of the Companies Act 2006. The court determined that Costa's actions were prejudicial to SWI, finding it unjust to leave SWI as a minority shareholder in a company controlled by Costa, who disregarded SWI's rights.
The court exercised its power under section 996 of the Companies Act 2006 to provide a remedy for Costa's breach of fiduciary duty. Costa was ordered to buy SWI's shares on a non-discounted basis, pro rata to SPI's open-market value as at 31 December 2019. The final value will be determined by the High Court after hearing expert evidence.
THE PLAYERS
In the courtroom drama titled Saxon Woods Investments v Francesco Costa, SWI was represented by Edward Davies KC and Jack Rivett, with Jack Rivett hailing from Erskine Chambers. The legal eagle duo was backed by Stephenson Harwood. Costa was represented by Lord Wolfson of Tredegar KC and Patricia Burns, with Patricia Burns of One Essex Court, supported by DLA Piper.
In the financial aspect of Spring Media Investments (SPI), Francesco Costa's breach of fiduciary duties as a controlling director, as judged by the Court of Appeal, could potentially impact the business decisions and relationships within the company. The decision may also influence future shareholders' agreements in similar business ventures.