The long, long awaited Supreme Court Judgment in the Sequana case is finally here. Firstly, for those who may have forgotten what the Supreme Court was grappling with, the issue was 'whether the trigger for the directors’ duty to consider creditors is merely a real risk of, as opposed to a probability of or close proximity to, insolvency'. 

Background

On 5 October 2022, the Supreme Court handed down its long-awaited judgment in BTI 2014 LLC v. Sequana S.A. [2022] UKSC 25 concerning the trigger point at which directors must have regard to the interests of creditors pursuant to s.172(3) of the Companies Act 2006 (the "creditors' interests duty").

Introduction

Today, the UK Supreme Court considered for the first time the existence, content and engagement of the so-called “creditor duty”: the alleged duty of a company’s directors to consider, or to act in accordance with, the interests of the company’s creditors when the company becomes insolvent, or when it approaches, or is at real risk of, insolvency.

Following a long wait of 18 months, the Supreme Court has today confirmed that the appeal of the decision in BTI –v- Sequana is unanimously dismissed.

The key question that many of us have been waiting for the answer to is: Does the creditor duty set out in s172(3) of the Companies Act 2006 exist and if so, when is it engaged?

It is axiomatic – at least as a prima facie proposition – that insolvency is only concerned about assets which belong to the insolvent when the insolvency commences (or, as it is often said when a concursus creditorum is established on the commencement of insolvency). South African insolvency law respects property rights which have accrued under our law prior to the commencement of insolvency proceedings, including security interests such as mortgages, liens and cessions.

Before October 3, 2022, the rules of procedure in the Saskatchewan Court of Appeal (unlike those in most other appeal courts in Canada) imposed a stay of proceedings in most cases as soon as a Notice of Appeal was served and filed. That has now changed.

The Supreme Court has refused permission for the case of Lock v Stanley to be appealed, meaning that the Court of Appeal’s approach to questions around the assignment by a liquidator of claims in the insolvent estate stands.

Most notably the Court of Appeal confirmed that a liquidator is under no duty to offer defendants the right to acquire the claims against them unless the failure to do so would be perverse.

A comprehensive review has begun into the effectiveness of Australia’s corporate insolvency laws in protecting and maximising value for the benefit of all interested parties and the economy. Undertaken by the Federal Government’s Parliamentary Joint Committee on Corporations and Financial Services, the review is seeking submissions by 30 November 2022.

mourant.com 2021934/84654107/1 GUIDE Insolvency claims in Guernsey Last reviewed: September 2022 Contents Introduction 2 Misfeasance / breach of statutory duty 2 Wrongful trading 2 Fraudulent trading 3 Preferences 3 Transactions at undervalue 4 Extortionate credit transactions 4 Director disqualification 4 Relief from sanctions 5 Contacts 5 2 mourant.com 2021934/84654107/1 Introduction When a company enters into a formal insolvency process, the office holder will conduct an examination into the affairs of the company.

On 28 September 2022, the Federal Government, through the Parliamentary Joint Committee on Corporations and Financial Services (PJC), began an inquiry into corporate insolvency in Australia.

The announcement follows calls from industry for a ‘root and branch’ review of corporate insolvency law in Australia.

Submissions are open until 30 November 2022 and the PJC intends to table a report to Parliament by 30 May 2023.