The Impact of Sequana on the Directors’ Obligation to Consider Creditor Interests in Financially Distressed Companies: Was it Worth the Wait?

In many Commonwealth jurisdictions, including Australia and the United Kingdom (‘UK’), it has been established that, as part of their duty to act in the best interests of the company, directors have an obligation to consider the interests of their company’s creditors when their company is in some form of financial distress. In October 2022, the UK Supreme Court delivered its long-awaited judgment in BTI 2014 LLC v Sequana SA on this issue. This judgment, which was lengthy and wide-ranging, was the first one handed down by the most senior court in the UK on the topic. Undoubtedly, because of the seniority of the Court and the fact that the judgment is wide-ranging, the case will be cited in many subsequent cases in various jurisdictions that have to rule on whether directors are in breach of the obligation. This article analyses the impact of the judgment on the law as it relates to the directors’ obligation and asks whether the wait for the judgment was worth it. Does the decision add anything to the law that we have on the obligation, and if so, what? Or does the judgment leave stakeholders still floundering when it comes to the critical issues that have been raised in relation to the obligation?