The Sequana ruling on the duty of directors to creditors in the event of insolvency gives a level of clarity, explain Lois Horne, Macfarlanes LLP, and Matthew Weaver KC, Radcliffe Chambers
In BTI 2014 LLC v Sequana SA & Others [2022] UKSC 25, the Supreme Court, in what Lady Arden called a ‘momentous’ decision, has considered when directors, in meeting their duties to the company, should give weight (and how much weight) to the interests of the company’s creditors.
The Court has confirmed that the duty to consider creditors' interests is not a separate duty and nor is this requirement new. However, this judgment provides some clarity over when a board needs to attach more weight to creditors’ interests in its decision making. This will always remain fact specific and, even with this clarity, a prudent board will want to ensure that it has a proper understanding of where the company sits on a sliding scale between solvency and insolvency when making key decisions.
