Vol 17 (2020) - Issue 1

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Directors’ Duties to Consider the Interests of Creditors when Nearing Insolvency

Synopsis

In the recent decision of BTI 2014 LLC v Sequana SA [2019] EWCA Civ 112 the English Court of Appeal provided welcome guidance on when the duty to take account of creditors’ interests arises. This is the first time the English courts have expressly considered the precise point in time before insolvency at which the duty arises. The issue has not yet arisen for determination in the Cayman Islands, although it is likely that the Cayman courts would follow this decision. The duty of directors to consider creditors’ interests is owed to the company, not to creditors. The duty to act in the interests of creditors might include considering whether the company should be placed into liquidation – the Cayman decision of Skandinaviska Enskilda Banken AB v Conway & Another (as Joint Official Liquidators of Weavering Macro Fixed Income Fund Ltd) is a prime example of the consequences of not doing so – or whether a company has assets of sufficient value to declare a dividend and still be able to meet its liabilities.