Corporate disputes in England are expected to intensify, driven by shareholders’ and investors’ willingness to challenge longstanding rules and tougher judicial scrutiny of directors. Frances Baird and Punam Shah reflect on the landscape for corporate disputes following an eventful period, and consider what 2026 has in store.

Boundaries drawn for unfair prejudice petitions

In 2025, the court considered and reaffirmed the boundaries of unfair prejudice petitions brought pursuant to section 994 of the Companies Act 2006 in some notable decisions. Section 994 gives a shareholder the right to apply to court for relief where a company’s affairs are being conducted in a way that is unfairly prejudicial (by eg a failure to abide by the articles, or breaches of a shareholders’ agreement, or breaches of directors’ duties) to the interests of members. Principally intended for cases involving abuse of corporate control where the petitioner has no other recourse, the most common remedy of a petition is that the majority buys out the minority.

In Sean Ronnan & Anor v Richard Stansfield & Anor [2025], the High Court clarified that it is usually not appropriate for an unfair prejudice petition to be presented by majority shareholders. Although the court did not rule out the possibility of a majority shareholder pursuing an unfair prejudice petition altogether, this is only where it is practically impossible to do otherwise, and such cases will be exceptionally rare. (Further commentary on this case can be read here.)

In Farnsworth v Chave [2025], the High Court gave a cautionary note to claimants who might seek to use unfair prejudice petitions to procure findings against improper parties and then use those findings for other purposes. The court considered the “desirability test” for removing parties under Civil Procedure Rule 19.2(3), which sets out the Court’s power to add or remove parties when it is desirable to do so in order to resolve the matters in dispute. The Court exercised its discretion to remove two respondents as they were not involved in conducting the company’s affairs, no meaningful remedy was sought against them, and the petition was being used to sidestep a different claim (Part 7 proceedings). The court stated that it would be disproportionate to require those respondents to “participate and fund what amounts to a trial of corporate claims against them, but dressed up as a petition about unfair prejudice to a shareholder”.

Although these decisions encourage a degree of restraint, unfair prejudice petitions are expected to remain the most prominent minority shareholder action going into 2026.

Tougher scrutiny of directors, and fiduciaries held to account

Shareholders are increasingly willing to challenge not only the outcome of board decisions, but also the quality of their board’s oversight. The fundamental duty of directors to act in good faith to promote the success of the company for the benefit of its members as a whole is enshrined in section 172 of the Companies Act 2006. In 2025 the court considered the scope and application of those duties in a landmark case.

In Saxon Woods Investments Ltd v Costa [2025] the Court of Appeal signalled a shift towards holding directors to the highest standards of honesty and transparency. The director in question caused the company to breach its contractual obligations to achieve an exit because the director believed a better price could be achieved. The court clarified that (i) the “good faith” duty requires honesty, which applies to actions as well as deliberations, and (ii) the test for honesty includes subjectively assessing a person’s mental state and then applying an objective standard, ie whether the person is dishonest by the standards of ordinary decent people. Even where motives are aligned with company interests, “they wouldn’t like it now if they knew, but they will thank me in the long run” is not a justification for directors to behave dishonestly.

Disputes concerning directors’ duties get further big billing in 2026, with two appearing in The Lawyer’s “Top 20” cases for this year. Hipgnosis Music (In Liquidation) v Mercuriadis and others concerns the alleged breach by a director of his duties by diverting a business opportunity to another company. In Secretary of State for Business and Trade v Greensill, director Lex Greensill faces disqualification proceedings due to alleged misrepresentations and non-disclosures to insurers and investors. We await to see how the court approaches these disputes in light of Saxon Woods, which appears to have weakened the defences available to directors accused of having breached their duties.

Directors, as fiduciaries, will also heed the decisions of the Supreme Court in Rukhadze & Others v Recovery Partners Group Ltd & Anor [2025] and Hotel Portfolio II UK Ltd v Stephens [2025]. Both of these cases deal with the strict obligations on fiduciaries to account to their principals for unauthorised profits made in connection with the fiduciary relationship.

In Rukhadze, the Supreme Court clarified how the “no profit rule” operates. Any unauthorised profits made as a result of the fiduciary relationship are treated by equity as being held on constructive trust for the principal on receipt by the fiduciary, and should be paid on request by the principal, or otherwise be treated as property of the principal.

The court confirmed that this can apply to profits made after the fiduciary relationship has ceased, and a “but for” causation test need not be applied. The court built on that decision in Hotel Portfolio, considering the application of the “no profit rule” where the defendant had dishonestly assisted a fiduciary in making an unauthorised profit that was subsequently dissipated. Emphasising the creation of a “real free-standing trust in its own right” in respect of secret profits, the court confirmed the requirement to account for them to the principal, regardless of any subsequent loss in their dissipation, and without the application of any “but for” test.

It remains to be seen whether more claimants will be minded to pursue errant fiduciaries and their assistants in light of the clarity over this purposefully punitive remedy. No doubt wronged principals and their advisers will be giving careful consideration to the availability of such claims.

Clarity on privilege: farewell to the “shareholder rule”

As with all litigation, much turns on the evidence available to the parties. In recent years, there have been repeated challenges as to the extent to which shareholders acting against their company can access that company’s legal advice. Over time the “shareholder rule” had developed, which prevented a company from withholding legal advice from its shareholders in a dispute, unless the advice was obtained for litigation. The reason for the rule was that shareholders, as owners of the company, have a proprietary interest in its legal advice.

Last year, this centuries old rule was overturned in the Privy Council case of Jardine Strategic Ltd v Oasis Investments II Master Fund Ltd [2025]. Shareholders wanted access to legal advice that the company had obtained pre-litigation in order to determine the fair value of shares, that value being an issue in their claim. The Privy Council ruled that the shareholder rule is inconsistent with modern doctrines of company law, whereby a company is a separate legal entity from its shareholders. The court said that “like the emperor wearing no clothes in the folktale … the [shareholder rule] is altogether unclothed”.

While this represents the loss of a helpful tactical weapon for shareholders, the decision has been welcomed by boards as regaining a ‘safe space’ to take advice on corporate matters, without the risk of it being disclosed if any internal conflict arises. The courts might look forward to fewer satellite disputes around the privilege status of documents, at least until the next battleground opens up.

Reliance in the context of investor protection litigation

What constitutes reliance in the context of securities litigation has been subject to some differing first instance judgments. However, in Credit Suisse Life (Bermuda) Ltd v Bidzina Ivanishvili and ors [2025] the Privy Council noted the issues that had arisen regarding the existing test, and formulated a test that is better suited in practice.

The practical and common sense approach set out by the Privy Council in Ivanishvili is a welcome development for investors and should serve to lower the threshold that a claimant has to meet. It is unclear however what the impact will be on s90A FSMA claims given the additional qualifying words in the statute. Further clarity is expected as the Court of Appeal grapples with the test in Various Claimants v Standard Chartered PLC this year. (Our previous article on this case can be read here.)

Final thoughts

As was seen last year, the court is prepared to ensure that (i) unfair prejudice petitions involve the correct parties, (ii) directors face clearer accountability standards; and (iii) the tests for privilege and securities litigation are further refined. Looking ahead, these developments suggest that 2026 will bring even more discipline to the corporate disputes landscape and redefine the winners and losers.

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