(1)A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—
(a)the likely consequences of any decision in the long term,
(b)the interests of the company's employees,
(c)the need to foster the company's business relationships with suppliers, customers and others,
(d)the impact of the company's operations on the community and the environment,
(e)the desirability of the company maintaining a reputation for high standards of business conduct, and
(f)the need to act fairly as between members of the company.
(2)Where or to the extent that the purposes of the company consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes.
(3)The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.
Cases considering section 172 (312)
[2026] UKSC 21 · 14 July 2026Interprets
The court treated the provision as the statutory form of the fundamental fiduciary duty of loyalty. It accommodates the board’s collective responsibility and does not exclude overlapping breaches of other general duties (see paras [42]-[50]).
Good faith governs both a director’s genuine assessment of the company’s interests and the conduct used to pursue it. A genuine business judgment does not excuse covert and disloyal subversion of the board’s collective decision (see paras [51]-[61]).
[2022] UKSC 25 · 5 October 2022Interprets
The section states the general duty to promote the company’s success and preserves any applicable rule requiring directors to consider or act in creditors’ interests (see paras [64]-[72]; [140]-[157]).
The primary duty is to act in good faith in the way the director considers most likely to promote the company’s success for the benefit of members as a whole. It ordinarily reflects shareholder primacy, while requiring regard to other listed and relevant interests (see paras [64]-[67]; [140]-[141]; [163]).
The subsection preserves the common law rule which, in financial distress, requires directors to consider or act in the interests of creditors. It qualifies rather than creates a separate duty owed to creditors (see paras [68]-[72]; [76]-[77]; [153]-[157]; [209]-[227]).
[2015] UKSC 23 · 22 April 2015
The section formed part of the statutory context governing directors’ duties and creditors’ interests. The majority held that those duties could not be defeated by attributing the directors’ own illegality to the company (see paras [18]-[20]; [103]-[105]).
The provision states the director’s duty to promote the company’s success for members as a whole. The judgment used it as the general duty qualified by the preserved rule concerning creditors’ interests (see paras [47]; [124]).
The preserved rule requiring directors in specified circumstances to consider creditors’ interests would be defeated if directors of an insolvent company could use their control and illegality to defeat the company’s enforcement claim (see paras [18]-[20]; [124]-[130]).
292 more judgments, and what each says about section 172, are in the
case-law panel in the full Act.
325.This duty codifies the current law and enshrines in statute what is commonly referred to as the principle of “enlightened shareholder value”. The duty requires a director to act in the way he or she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole and, in doing so, have regard to the factors listed.
326.This list is not exhaustive, but highlights areas of particular importance which reflect wider expectations of responsible business behaviour, such as the interests of the company’s employees and the impact of the company’s operations on the community and the environment.
327.The decision as to what will promote the success of the company, and what constitutes such success, is one for the director’s good faith judgment. This ensures that business decisions on, for example, strategy and tactics are for the directors, and not subject to decision by the courts, subject to good faith.
328.In having regard to the factors listed, the duty to exercise reasonable care, skill and diligence (section 174) will apply. It will not be sufficient to pay lip service to the factors, and, in many cases the directors will need to take action to comply with this aspect of the duty. At the same time, the duty does not require a director to do more than good faith and the duty to exercise reasonable care, skill and diligence would require, nor would it be possible for a director acting in good faith to be held liable for a process failure which would not have affected his decision as to which course of action would best promote the success of the company.
329.In requiring directors to have regard to the interests of employees, this provision replaces section 309(1) of the 1985 Act.
330.Subsection ( 2) addresses the question of altruistic, or partly altruistic, companies. Examples of such companies include charitable companies and community interest companies, but it is possible for any company to have “unselfish” objectives which prevail over the “selfish” interests of members. Where the purpose of the company is something other than the benefit of its members, the directors must act in the way they consider, in good faith, would be most likely to achieve that purpose. It is a matter for the good faith judgment of the director as to what those purposes are, and, where the company is partially for the benefit of its members and partly for other purposes, the extent to which those other purposes apply in place of the benefit of the members.
331.Subsection ( 3) recognises that the duty to promote the success of the company is displaced when the company is insolvent. Section 214 of the Insolvency Act 1986 provides a mechanism under which the liquidator can require the directors to contribute towards the funds available to creditors in an insolvent winding up, where they ought to have recognised that the company had no reasonable prospect of avoiding insolvent liquidation and then failed to take all reasonable steps to minimise the loss to creditors.
332.It has been suggested that the duty to promote the success of the company may also be modified by an obligation to have regard to the interests of creditors as the company nears insolvency. Subsection ( 3) will leave the law to develop in this area.