Supreme Court ruling on duty to creditors

The Supreme Court has published its long-awaited judgment in BTI 2014 LLC v Sequana SA and others ([2022] UKSC 25) which discusses when directors of a company in financial difficulties should consider the interests of the company's creditors.

The majority in the Supreme Court has:

• affirmed the existence of the duty to consider the interests of creditors;
• clarified that it is engaged where the directors know, or ought to know, that the company is insolvent or bordering on insolvency or that an insolvent liquidation or administration is probable; and
• explained that where interests of creditors are engaged and diverge from those of shareholders:
  • if liquidation is inevitable, creditors’ interests are paramount; and
  • prior to that, there will be a fact-sensitive balancing exercise to weigh up the competing interests by reference to the degree of distress.

For further discussion of the case, including the facts and best practice advice for boards, see the briefing published by our Restructuring, Turnaround and Insolvency team.