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The court offers guidance on reversing lawful dividend payments and when directors need to take intoaccount creditors’ interests.

On 6 February 2019, the UK Court of Appeal published a judgment in BTI v. Sequana that will impact both creditors and directors of English companies.

Following our 2016 article, the Court of Appeal has upheld the decision of the High Court that dividends are liable to challenge as transactions defrauding creditors under section 423 of the Insolvency Act 1986 (the “IA”).

Facts 

Mr Kuldip Singh Birdi was made bankrupt in March 2012, on the Petition of HMRC. Three Applicants (the “Applicants”) to these proceedings had all submitted proofs of debt as creditors in Mr Birdi’s bankruptcy. Together, their claims total £189,983.

The First Respondent in these proceedings, Mr Price, was appointed as Mr Birdi’s Trustee in Bankruptcy at a meeting of creditors held in July 2012. In January 2014, Mr Price retired from practice and was removed as Trustee and the Second Respondent, Mr Pettit was appointed in his place.

How deep is the “pool of facts in which it is permissible to fish for the basis of the new cause of action” if a party wishes to benefit from the ‘relation back’ doctrine when calculating limitation periods? The Court of Appeal gives guidance on the meaning of “the same or substantially the same facts” for the purpose of CPR r 17.4(2).

With the gradual opening of energy supply markets allowing new energy providers to challenge the established providers and bring increased competition to the market, the last two decades have seen an increase in smaller energy providers entering the market and sharing a growing customer base. But what happens to the customers when an energy provider becomes insolvent?

On 6 February 2019 the Court of Appeal gave its decision dismissing Sequana’s appeal against a decision of the High Court in 2016, that payment of a dividend by a company can be susceptible to challenge under section 423 Insolvency Act 1986 (IA86).

Background

In high stakes restructurings, directors can be under significant pressure from different parts of the capital structure to take (or refrain from taking) certain actions. It is critical that the board understands whether it owes duties to members or creditors (or both). For such an important issue, the law has previously been remarkably unclear.

SUMMARY

The Court of Appeal of England and Wales (“CA”) made a significant ruling on two matters affecting the powers and duties of directors of English companies.

It is little wonder why Andrew Tinkler’s removal from the Stobart Group (and subsequent court case) attracted so much media attention: