In a landmark judgment for company directors, the Supreme Court has clarified the scope of the so-called “Creditor Duty” and when this duty will be triggered, in the case of BTI 2014 LLC -v- Sequana SA and others.

This is particularly important in the current climate of financial instability and provides a ‘guiding light’ for directors on how to minimise the risk of personal claims against them where their company is, or may be, at risk of insolvency.

What is the “Creditor Duty”?

The United Kingdom Supreme Court (the “UKSC”) recently delivered its eagerly anticipated judgment in BTI 2014 LLC v Sequana SA and others[2022 UKSC 25] (“Sequana”). The reasoning in Sequanawill be highly persuasive in the Cayman Islands, as well as other common law jurisdictions.

Sequana is a helpful decision for at least the following reasons:

BTI 2014 LLC (Appellant) v Sequana SA and Others (Respondents)

Summary

The UK Supreme Court has, for the first time, considered the existence, content and engagement of an obligation on directors to take into account the interests of creditors when a company becomes, or is on the cusp of becoming, insolvent (otherwise known as the “creditor duty”).

In brief

The UK Supreme Court has handed down its long-awaited judgment in relation to the case of BTI 2014 LLC (Appellant) v. Sequana SA and others (Respondents) [2022] UKSC 25, concerning the duty of directors of a company registered under the Companies Act 2006 to consider (and act in accordance with) the interests of the company's creditors.

Contents

The Supreme Court has been given its first opportunity to “address the existence, scope and engagement of an alleged duty of company 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”. The corporate restructuring and insolvency community has been waiting for this “momentous” judgment with anticipation for the last 17 months.

The facts of the case:

UK Supreme Court gives important judgment on directors’ “creditor duty”

The UK Supreme Court in BTI 2014 LLC v Sequana SA and ors [2022] UKSC 25[1] has given an important judgment clarifying the nature of the so-called “creditor duty.”  The “creditor duty” is an aspect of the fiduciary duty of directors to act in the interests of their company which requires the directors to take into account the interests of creditors in an insolvency, or borderline insolvency, context.

Welcome to the October 2022 edition of the HFW Commodities bulletin.

In this extended edition, a number of our partners from across the globe have taken time to reflect on the profound impact of the Russian invasion of Ukraine on the commodities sector. It includes contributions from our offices in Australia, Geneva, London and Singapore, with articles on energy and food security, sanctions, insolvency, regulation, the energy transition and force majeure.

On the back page, you will find details of the latest news and where you can meet the team next.

On 5 October 2022, judgment was handed down by the Supreme Court in the case of BTI 2014 LLC v Sequana SA (Sequana) and others. The judgment is significant to company directors, insolvency practitioners and litigators as it clarifies how directors should comply with their duties to creditors in the context of insolvency.

The Supreme Court has handed down its long-awaited judgment in BTI 2014 LLC v Sequana SA [2022] UKSC 25.

Basic facts

Ross Miller, Simmons & Simmons LLP

This is an extract from the third edition of GRR's The Art of the Ad Hoc. The whole publication is available here.

Introduction