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Directors & creditors: in whose interest?

20 January 2023 / Nicholas Dobson
Issue: 8009 / Categories: Features , Company , Insolvency , Commercial
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BTI v Sequana: Nicholas Dobson considers the limit of directors’ duties to company creditors

In brief

  • All members of the Supreme Court held that the directors of a company, who had paid a dividend when there was a real risk (but not a probability) that the company might become insolvent at an uncertain but not imminent future date, did not act unlawfully.
  • However, when a company is irretrievably insolvent, creditor interests become a paramount consideration in directors’ decision-making.

At law school (in Methuselah’s younger days), I foggily recall being told that directors must promote the best interests of the company as a whole. However, director duties were amplified considerably by the Companies Act 2006 (CA 2006). For within Chapter 2 (General Duties of Directors), nestles s 172(1). This provides that, while company directors must act in good faith so as most likely to promote the success of the company for the benefit of its members as a whole, in doing so, directors must have regard (among others)

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