Vol 19 (2022) - Issue 6

Article preview

The Supreme Court’s Decision in BTI 2014 LLC (Appellant) v Sequana SA and others (Respondents) [2022] UKSC 25: Is This a Case of All Change or No Change? Or Is It Somewhere in Between?

Synopsis
'This appeal raises questions of considerable impor tance for company law. It concerns the fiduciary duty of directors to act in good faith in the interests of the company. In this context, the interests of the company have until recent times been treated as be ing the interests of its members as a whole. So under stood, the duty has been given statutory expression in a modified form in section 172(1) of the Compa nies Act 2006 [('the 2006 Act')], which requires di rectors to act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.
However, where the company is insolvent or, accord ing to some authorities, is at some earlier point in the decline of its fortunes, it has been said that the duty to act in the interests of the company should not be interpreted as a duty to act in the interests of the members as a whole, but should instead be un derstood as a duty to act in the interests of the com pany's creditors as a whole, or as a duty to take the creditors' interests into account together with those of the members...
...the proposition that directors are under a duty in respect of creditors' interests raises a number of questions. For example, is it correct to say that there is such a duty? If it is, when does the duty arise: on insolvency (however that may be defined), or at some earlier point? What is the content of the duty? Is it a duty to treat the creditors' interests as paramount, or are they merely to be treated as a relevant considera tion, along with others? What are the consequences of a breach of the duty? In particular, what forms of relief are available? These are only a few of the ques tions which aris...
This appeal is the first occasion on which any of these issues has had to be decided by this country's highest court. They go to the heart of our understanding of company law, and are of considerable practical im portance to the management of companies...'
So said Lord Reed in the portentous opening paragraphs of his judgment in BTI 2014 LLC v Sequana SA. He was one of the five Supreme Court Justices who heard this appeal in May 2021. The appeal was unanimously dis missed on 5 October 2022, in the form of a 160 page judgment, comprising separate judgments from four out of the five Justices who heard the appeal.
This article analyses this hugely anticipated deci sion and considers the extent to which the landscape has changed for directors, insolvency practitioners and those who advise them. Is this new law? Is it welcome clarification? Or is it something else altogether?