Creditor Duty At The Twilight Zone: A Critical Analysis Of BTI 2014 LLC V Sequana SA [2022] UKSC 25 And Its Implications For Directors' Duties Under Indian Company Law
- IJLLR Journal
- 2 hours ago
- 2 min read
Satsang Kumar, LLM Scholar (Constitutional Law), Dr Ram Manohar Lohiya National Law University, Lucknow.
ABSTRACT
The decision of the United Kingdom Supreme Court in BTI 2014 LLC v Sequana SA [2022] UKSC 25 is a landmark in company and insolvency law. For the first time the highest court in England was squarely asked to determine the existence, scope, content, and trigger of the so-called creditor duty the obligation on directors to have regard to creditor interests when a company's financial health deteriorates. The court unanimously held that such a duty exists, that it arises as a qualification upon the primary fiduciary obligation under Section 172(1) of the Companies Act 2006 (UK), and that it is triggered when a company is actually insolvent, on the brink of insolvency, or probably heading for insolvent liquidation or administration. Critically, a mere real risk of future insolvency does not suffice.
This paper goes through the judgment issue by issue covering the existence of the duty, its applicability to dividend decisions, its content, and the trigger question and offers some critical observations on the reasoning. It then sets the ruling in its comparative context, looking briefly at Australia and New Zealand. Most importantly, it asks what all of this means for India, examining Section 166(2) of the Companies Act 2013 and the creditor- protection framework of the Insolvency and Bankruptcy Code 2016, and argues that Indian law has the conceptual resources to develop a creditor duty of its own, modelled on though not identical to the principle affirmed in Sequana.
Keywords: Creditor Duty; Directors' Fiduciary Duties; Insolvency; Section 172 Companies Act 2006; Section 166(2) Companies Act 2013; IBC 2016; West Mercia Rule; Twilight Zone; Corporate Governance.
