Under Irish and UK law, company directors owe fiduciary duties to act in good faith in the interests of the company. The company's interests in this context usually means the collective best interests of the members. However, UK and Irish authorities have developed directors' common law duties, such that in cases of insolvency, directors have a duty to consider the interests of the company's creditors.

The Supreme Court handed down its long-awaited judgment in BTI 2014 LLC v Sequana SA on 5 October 2022. This important case addresses the duties of directors to consider the interests of creditors as a company approaches insolvency.

While the judgment will be welcomed by many as providing some useful guidance on a number of issues, there still remain some key areas of uncertainty which, as we consider in further detail below, will present clear challenges for directors seeking to navigate their way through a company’s financial difficulties.

Après plus de deux années mouvementées marquées par une pandémie, des conflits géopolitiques mondiaux, un ralentissement économique majeur suivi d’une succession record de rebonds des marchés financiers publics et privés, le milieu des affaires a dû adapter sa gestion du risque, et ce, à maintes reprises à travers ces situations exceptionnelles. Dans ce contexte, les entreprises font et feront face à des défis de taille.

After more than two turbulent years of a pandemic, global geopolitical conflicts, a serious economic downturn followed by a series of record rebounds in public and private financial markets, the business community has had to adapt its risk management repeatedly through these exceptional situations. In this context, companies face and will continue to face major challenges.

ON 18 OCTOBER 2022, THE LUXEMBOURG PARLIAMENT PASSED A LAW (THE “LAW”) INTRODUCING AN ADMINISTRATIVE PROCEEDING BY WHICH A COMPANY MAY BE DISSOLVED WITHOUT LIQUIDATION (PROCÉDURE DE DISSOLUTION ADMINISTRATIVE SANS LIQUIDATION) (THE “ADMINISTRATIVE DISSOLUTION PROCEEDING”) AT THE REQUEST OF THE PUBLIC PROSECUTOR (PROCUREUR D’ETAT). THE LAW IS THE FIRST PART OF THE LARGEST-EVER REFORM TO MODERNISE LUXEMBOURG BANKRUPTCY LAW.

Objective of the Administrative Dissolution Proceeding

The Supreme Court of the United Kingdom (“SC”) has recently handed down a decision in the case of BTI v Sequana, dealing with the powers and duties of company directors. The appeal was expected to be of considerable importance.

This alert is especially relevant to companies, and directors of companies, in financial distress, as well as creditors and insolvency practitioners.

Key Takeaways

On 5 October 2022, the UK Supreme Court delivered its judgment in the case of BTI 2014 LLC v Sequana SA & Ors [2022] UKSC 25. This judgment arose from an appeal brought by BTI 2014 LLC against a decision of the English Court of Appeal in 2019.

The Supreme Court has handed down its long-awaited judgment, which as Lord Reed noted, considered issues that go to the heart of our understanding of company law and are of considerable practical importance to the management of companies.

Background to the Appeal

Between the lines... For Private Circulation-Educational & Information purpose only Vaish Associates Advocates… Distinct. By Experience. I. Supreme Court: The actual gain or loss is immaterial, but the motive for making a gain is essential. The Supreme Court (“SC”) has, in its judgment dated September 19, 2022, in the case of Securities and Exchange Board of India v. Abhijit Rajan [Civil Appeal No. 563 of 2020], held that in deciding cases pertaining to insider trading, the actual gain or loss is immaterial, but the motive for making a gain is essential.

A much-anticipated UK decision confirms directors' obligations to creditors, but changes little in practice