Dr Wood will be giving a talk on Sequana on Thursday 16th February 2023. Here are the details:
Title: Directors and the creditor duty pre- and post-insolvency: a critique of the Supreme Court decision in Sequana.
Dr John M. Wood, Lecturer in Law, Lancaster University, UK.
Abstract:
The Supreme Court handed down its long-awaited judgment on 5 October 2022 which confirmed the common law duty of directors to take into account and give appropriate weight to the interest of the company’s creditors in certain circumstances. The scope, extent, and noted limitations of this ‘creditor duty’ will be explored in this presentation.
In Sequana, it was discussed at length, with the majority of the court in agreement that the point at which the directors should have regard to creditors’ interests is when they know or ought to have known that the company is insolvent or bordering on insolvency; or that an insolvent liquidation or administration is probable. While the case confirmed that insolvency is to be determined in accordance with the balance sheet or cash flow test and did reject the premise that directors should have regard to creditors’ interests whenever there is a real rather than a remote risk of insolvency, in practice the court’s decision could lead to confusion as to when the trigger point of ‘bordering’ or ‘probable’ insolvency has been reached. In addition to this discussion point, other matters that will be examined include what this creditor duty means for directors, and the extent this consideration applies to include the interests of shareholders.
