Credit, Collections & Insolvency News
The UK’s Supreme Court has dismissed a claim calling for the law to be changed to force company directors to start taking creditors into account at the first risk of insolvency.
The ruling clarifies the current legal position under which directors’ duties to creditors are triggered only when a company is either insolvent or on the brink of bankruptcy, rather than when the first signs of insolvency risks appear. “
The case comes after debt collector BTI filed a lawsuit against French paper maker Sequana seeking to reclaim a €135m (£188m) dividend paid out to it by its subsidiary AWA in May 2009.
Although AWA was solvent at the time, the Scottish paper manufacturer had long-term pollution-related liabilities that meant there was a real risk it might become insolvent in the future.
BTI later sought to reclaim the €135m debt from Sequana following AWA’s in October 2018, almost a decade after it first paid out the dividend.
The debt collector had sought to argue that AWA’s decision to pay Sequana a dividend was taken in breach of its creditor duties, due to the risk of potential insolvency.