Section 172 of the Companies Act 2006: Desperate times call for soft law measures

Georgina Tsagas

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Section 172 of the Companies Act 2006 has been afforded much attention during parliamentary discussions on the codification of directors’ duties and has since the enactment of the Companies Act 2006 occupied much space in discussions among scholars who share an academic interest in the shareholder/stakeholder debate, in policy documents on law reforms following a series of corporate failures, as well as in company law lecture notes provided by Law Schools across the UK. With the UK leaving the EU, it is a critical time to discuss enlightened decision-making on boards, considering that, arguably, one of the key benefits of joining the EU with regard to UK company law, was that the UK was prompted to consider incorporating provisions affording a certain level of protection to the interests of other constituencies across a wide range of company and securities law Acts and regulations. What often escapes the attention of participants in discussions surrounding s. 172 CA 2006, is the section’s limitations not so much in terms of it prioritising the interests of shareholders over the interests of other constituencies, but with regard to its enforcement and utility overall. The purpose of this paper is twofold. First it aims to shed some light on the background and function of section 172 CA 2006. Secondly, after considering the challenges, shortcomings and dilemmas surrounding the function of this section, it suggests ways forward by proposing a change in the mode of regulating this aspect of managerial conduct. Ample evidence suggests that section 172 CA 2006 in terms of enlightened decision-making and in its hard law form will not facilitate the goal of promoting the ‘good governance’ of companies that have a high impact on society. Thus, the paper aims to advance an important aspect of UK corporate law in the making: namely suggest the use of alternative means available in the soft law sphere, that could support a more pluralistic and democratic formation of corporate decision-making.
Original languageEnglish
Title of host publicationShaping the Corporate Landscape
Subtitle of host publicationTowards Corporate Reform and Enterprise Diversity
EditorsNina Boeger, Charlotte Villiers
PublisherHart Publishing
Number of pages20
ISBN (Electronic)9781509914326
ISBN (Print)9781509914302
Publication statusPublished - 22 Feb 2018


  • section 172 CA 2006, Companies Act 2006
  • directors' duties
  • Corporate Governance Code
  • ESG


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