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Name: BTI 2014 LLC and BAT Industries Plc v Sequana SA 2

Facts

There was a creditor challenge to a payment of dividends by a subsidiary to a parent based on incorrect accounts said to represent a breach of the directors’ fiduciary duties and a challenge to a reduction of capital that had taken place on the basis of a statement of solvency.

Decision

When signing a statement of solvency directors don’t have to contemplate the consequences of calamity on some or all fronts but to form an opinion whether the co can at the date of the statement pay its debts taking into account contingent or prospective liabilities and issues such as when they will fall due, in what currency and what assets will be on hand to meet them.

Directors’ duties towards shareholders change to become duties to creditors but there need to be warning signs of trouble ahead, going beyond a mere risk thereof arising from provisions and contingent liabilities in the accounts.

Principle

Five QCs argued this case for 32 days – there is in the judgment of the court a rich vein of guidance to be mined.