BTI 2014 LLC v Sequana S.A. & Ors

BTI 2014 LLC v Sequana S.A. & Ors

Section 423 applies to the payment of dividends if the statutory purpose is present; the May 2009 dividend was a transaction at an undervalue with the requisite purpose, so the order for relief under section 423 stands. The directors' duty to consider creditors' interests is triggered only when the company is insolvent or likely to become insolvent, not merely when there is a real risk of insolvency; thus, the directors did not breach their duties in authorising the May dividend.

Parties
Appellant: BTI 2014 LLC; Respondent/appellant: Sequana S.A.; Respondent: Antoine Courteault; Respondent: Pierre Martinet; Respondent: Clive Mountford; Respondent: Martin Newell; Respondent: SELARL C. Basse; Respondent: BAT Industries PLC; Respondent: Windward Prospects Limited
Jurisdiction
England and Wales
Judgment Date
06 February 2019
Procedural Posture
Civil Appeal / Court of Appeal Judgment on Appeal From High Court
Outcome
Appeal and cross-appeals dismissed except for Sequana's cross-appeal on the interest rate issue in the section 423 claim.
Legal Topics
Directors' Duties, Creditors' Interests, Unlawful Dividends, Transactions at Undervalue, Section 423 Insolvency Act 1986, Section 172 Companies Act 2006
Company Law Insolvency Law Directors' Duties Creditors' Interests Unlawful Dividends Transactions at Undervalue Section 423 Insolvency Act 1986 Section 172 Companies Act 2006

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Parties

BTI 2014 LLC

Appellant

Sequana S.A.

Respondent/appellant

Antoine Courteault

Respondent

Pierre Martinet

Respondent

Clive Mountford

Respondent

Martin Newell

Respondent

SELARL C. Basse

Respondent

BAT Industries PLC

Respondent

Windward Prospects Limited

Respondent

Procedural Posture

Civil Appeal / Court of Appeal Judgment on Appeal From High Court

Legal Issues

  1. 1 Does section 423 Insolvency Act 1986 apply to the payment of otherwise lawful dividends?
  2. 2 When does the duty of directors to consider creditors' interests arise, especially in the context of paying dividends?
  3. 3 Was the May 2009 dividend paid by AWA to Sequana a transaction at an undervalue with the statutory purpose under section 423?

Ratio Decidendi

Section 423 applies to the payment of dividends if the statutory purpose is present; the May 2009 dividend was a transaction at an undervalue with the requisite purpose, so the order for relief under section 423 stands. The directors' duty to consider creditors' interests is triggered only when the company is insolvent or likely to become insolvent, not merely when there is a real risk of insolvency; thus, the directors did not breach their duties in authorising the May dividend.

Court Disposition

Appeal and cross-appeals dismissed except for Sequana's cross-appeal on the interest rate issue in the section 423 claim.

Orders

  • Order for relief under section 423 against Sequana affirmed, subject to variation on interest rate.
  • Directors not liable for breach of duty under section 172(3) Companies Act 2006.