Introduction
BTI 2014 LLC v Sequana SA1 provides the first principled justification of the creditor-regarding duty of company directors in the vicinity of insolvency.2 Said duty, deriving from common law,3 was articulated for the first time in the 1987 West Mercia Safetywater4 ruling by the UK Court of Appeal, which was itself influenced by the earlier ruling in Kinsela5 by the New South Wales Court of Appeal.6 In certain circumstances, as per the West Mercia ruling, the interests of the company, for the purpose of the directors’ duty of good faith in its interests, are to be understood as including the interests of its creditors as a whole.7 The rule in West Mercia recognised the creditor-regarding duty in common law, but the standing of this duty had never been explained in terms of its underlying rationale — that is, until Sequana.
This case note traces the rationale underpinning the creditor-regarding duty, as expressed in Sequana, while seeking to critically examine the complexities arising from the exercise of directorial duties in the vicinity of insolvency. This note, starting with an overview of the case, presents the ‘relative economic interest’ concept underlying the creditor-regarding duty. Subsequently, it explains the notion of the paramountcy of interests of shareholders or creditors and the balancing of interests between them, explaining that each notion is applicable to a different stage of the company’s lifecycle. The article proceeds by critically examining the mechanics of the creditor-regarding duty, with reference to paramountcy and balancing of interests. The former is operationalised by the substitution function, which is shown to be incongruent with statute and corporate law theory. The latter is proven an abstract target for directorial conduct, generating major complexities both as a matter of principle and practicality during the discharge of directorial duties.
As a takeaway, this case note finds that following the Sequana ruling of the UKSC, the creditor-regarding duty is still an area of common law that is nebulous, fuzzily defined, and difficult to navigate. Not only that, but also the theory behind it seems not to be fitting for the corporate law landscape. Thus, the current operationalisation of the creditor-regarding duty, as explained in Sequana, is found unfit for purpose.
Case Overview
As the ruling states, ‘[t]he resolution of the issues in this appeal is not fact-sensitive’.8 Bearing that in mind, a brief overview of the case facts is still in order, to provide context:
AWA LLC, a non-trading holding company, faced a contingent liability of an uncertain amount related to an ongoing environmental risk,9 while holding an uncertain-value insurance portfolio.10 Sequana SA, the parent company and sole shareholder of AWA, owed a substantial debt to the latter.11 As AWA directors believed insurance policies could adequately cover the environmental claim, they declared a dividend to Sequana in May 2009, which nearly extinguished Sequana’s debt.12 At the time, AWA was solvent on a balance sheet and cash flow basis.13 Nevertheless, when the environmental liability materialised, it proved to be on the higher side of the estimations, pushing AWA into insolvency, as it was unable to repay it.14
As assignee of AWA’s claims, BTI, brought a claim against AWA directors, alleging the May dividend payment breached their fiduciary duties and seeking to recover the respective amount.15 The argument was that the directors should have considered creditors’ interests when deciding on the dividend, due to the ‘real risk of insolvency’ at the time.16 In 2018, AWA entered administration, whilst Sequana entered liquidation shortly afterwards.17 The UKSC upheld the creditor-regarding duty but dismissed the real risk trigger, concluding that the duty was not applicable.18 Directors had reasonable grounds to believe that they could repay the environmental liability when granting the dividends, as the company was far removed from the insolvency scenario.
The Rationale behind the Creditor-Regarding Duty
The justification behind the rule in West Mercia rests on the ‘relative economic interest’ concept:19 For as long as the company is financially stable,20 the predominant economic interest in the management of its affairs is borne by its shareholders.21 Accordingly, directorial management is focused on the generation of profits, which may be either distributed in the form of dividends or reinvested in the company’s operations in the form of retained earnings. In this stage of the company’s lifecycle, the interests of shareholders are aligned with those of creditors, as the generation of profits pre-requires that company debt is repaid. There would be no point in establishing a creditor-regarding duty whilst the company is financially healthy: the prioritisation of the interests of shareholders as residual claimants of the company, guarantees that the interests of creditors, as holding a higher ranking in the distributional order of priority in the event of the company’s insolvency, are served as well.22 Therefore, the treatment of the company’s interests in times of financial health, as equivalent to shareholders’ interests, is justified.23
Nevertheless, when financial distress kicks in, the dynamics shift. As residual claimants to the company’s estate, shareholders find themselves empty-handed in the company’s insolvent liquidation. In other words, after the disappearance of the equity cushion, shareholders play a no-lose game due to limited liability.24 Their vested interests lie in the company’s resurgence into solvency, despite the high risk that the continuation of trading entails for the company.25 Creditors, on the other hand, still have ‘skin in the game’ in the event of the company’s insolvent liquidation, thanks to their higher rank in the distributional order. As creditors become the de facto residual claimants to the corporate estate, a depletion of the company’s funds prior to liquidation by the continuation of trading would undermine their interests. Although a return to solvency is to their benefit, as it is for shareholders, it is not as safe as the preservation of corporate assets for distribution.26 In Bowen’s words ‘[a] creditor is […] likely to be more conservative while a shareholder is likely to be more entrepreneurial’.27 This is how near-insolvency creditors’ interests diverge from those of shareholders.
While shareholders play the role of gatekeepers of managerial decision-making in times of financial stability, they are no longer interested in that in times of trouble. Thus, a moral hazard problem arises, whereby directors — backed by shareholders — are inclined to engage in excessive risk-taking to save what they can; whereas creditors are the ones directly impacted by directorial behaviour. Directors are still striving for profit at a time when emphasis should be placed on liquidity. Said agency costs are further exacerbated by the informational asymmetry between directors and creditors to the detriment of the latter.28 It is this hazardous incentive-structure of directors in times of financial trouble that is sought to be rectified by the operation of the creditor-regarding duty.29
To put it briefly, in times of financial stability, it is shareholders who bear the primary economic interest in the company; whereas, in times of financial distress, shareholders are out of the distributional landscape and it is creditors who bear the primary economic interest in the business. This is what Lord Briggs refers to as who has the most ‘skin in the game’; that is, who between the two risks the greatest damage if a proposed course of action fails.30
Paramountcy and Balancing of Interests
The previous section portrayed the ‘relative economic interest’ rationale which necessitates the creditor-regarding duty. The aim of this duty is to restore the twisted incentive structure of directors, at a critical time when the main economic interest in the company lies with creditors but directors are still bound by their fiduciary duty to the company for the benefit of shareholders.31 Thanks to the operation of the creditor-regarding duty, creditors have their interests considered and the morally hazardous situation is alleviated.
In a situation whereby the economic interest borne by either shareholders or creditors is paramount, the exercise of directorial duties is as follows: In the case where shareholders’ interest is paramount, directors are expected to promote the success of the company for the benefit of shareholders; no creditor-regarding duty arises. In the case where creditors’ interest is paramount, the creditor-regarding duty is at play and creditor interests are the exclusive focus of directorial decision-making (paramountcy). Despite the practical straightforwardness of this set-up, it is not as straightforward to conceptually incorporate it into corporate law (see section titled: ‘Paramountcy and its Complexities’).
In numerous instances, it is neither shareholders’ nor creditors’ interests that take precedence, but both are relevant simultaneously. In such cases, it is probable that the interests of these two groups are in conflict with each other.32When both groups possess an economic stake in the company’s affairs, yet their interests are best achieved through divergent managerial strategies, a balancing of their interests is in order. Nevertheless, the mechanics of the balancing exercise, as envisioned in Sequana, are of limited accessibility and questionable operability (see section titled: ‘The Balancing of Interests and its Complexities’).
It is noted that the balancing of interests phase is chronologically, and logically, prior to the phase of creditor interest paramountcy. Despite that, paramountcy is addressed first to aid reader comprehension by presenting the simpler scenario before the more complex one.
Paramountcy and its Complexities
Ιn Sequana, Lord Reed, Lord Briggs (with whom Lord Kitchin agreed), and Lord Hodge view the creditor-regarding duty as an aspect, a transformation, or modification of the fiduciary duty of directors to act in the interests of the company, as per section 172(1) CA 2006.33 Accordingly, and as voiced most emphatically by Lord Reed,34 there is a ‘modifying rule’ which provides for a modification/qualification of the directors’ fiduciary duty. In particular, the content of the duty remains to act in good faith in the interests of the company.35 Nonetheless, company interests are not understood as equivalent to shareholder interests (as the traditional understanding suggests),36 but as comprising (also or only) the interests of creditors.37
The modification lies in (a) the substitution of the words ‘for the benefit of members’ by the words ‘for the benefit of creditors’, in the context of section 172(1) CA 2006, once insolvent liquidation is unavoidable; and (b) the consideration of both creditors’ and shareholders’ interests at an earlier point in the company’s decline than the point of unavoidability of its insolvent liquidation.38 In other words, the modifying rule, once triggered, represents a shift of the predominant interest in the company, so as to cater for corporate creditors, ‘based upon their entitlement to be paid the debts owed to them’.39 This section voices a three-fold critique to the substitution aspect of the modifying rule (under (a)), which operates in the paramountcy of creditor interests phase, finding it unfit for purpose.
Contrary to the position voiced above, Lady Arden has the opinion that the understanding of the creditor-regarding duty as a modification of the fiduciary duty per section 172(1) CA 2006 is inconsistent with section 172(3) CA 2006. For her, said statutory provision operates as a placeholder, granting the authority to the courts to develop this area of law.40 In particular, section 172(3) CA 2006 subjects the fiduciary duty of section 172(1) CA 2006 to any enactment or rule of law requiring directors, in certain circumstances, ‘to consider or act in the interests of creditors of the company’.41 Notably, it makes no reference to a substitution like the one envisioned by Lord Reed, as set out above. Hence, the requirement to ‘consider’ creditors’ interests is nowhere near equating them with company interests. From a textualist point of view, the substitution of members by creditors as beneficiaries of corporate success under section 172(1) CA 2006, which results in the modification of the directors’ fiduciary duty, is unfounded.42 The introduction of a switch of the beneficiaries of corporate success ends up creating a self-standing duty to creditors, which goes beyond what section 172(3) CA 2006 provides.43
Lady Arden also argues against the modifying rule, following a purposive line of reasoning. She points out that the purpose of the rule in West Mercia (the rule introducing the creditor-regarding duty) is ‘to redress the situation in which creditors, who now have a greater economic interest in the company than shareholders, have no control over the conduct of its business’.44 Thus, such a corrective purpose, which, by definition, seeks to protect from harm, shall not be twisted so as to seek the value maximisation of the insolvent estate for distribution to creditors.45 Besides, protecting creditors does not necessarily require the company to be run for their benefit.46 The latter would be doing way more than required by the rule. Therefore, reciting the rule in West Mercia to modify the main beneficiary for whom corporate success is promoted is in conflict with the purpose of the rule itself. Rather, the rule in West Mercia, staying true to its purpose, is meant to require the consideration of creditors’ interests, rather than promote the success of the company for their benefit, which supersedes the rule’s purpose.
The third line of criticism against the legitimacy of the modifying rule concerns the ontology of the company and how well the alternative ontology fits into the current corporate law landscape. The equation of company interests to creditors’ interests is a statement with ontological weight, as it makes a claim on the fundamental nature of the company as an entity.47 Rather than being a claim on the economic structure of the company, it voices a philosophical idea as to its substance. Equating something to something else is a definitional exercise, appealing to the entity’s essence. Thus, the (occasional) equation of the company with its creditors, is an ontological statement with potentially far-reaching doctrinal repercussions on company law theory.48
Nonetheless, English company law, is firmly rooted in enlightened shareholder primacy. This model is captured in the codification of the fiduciary duty under 172(1) CA 2006, whereby shareholders are depicted as the primary beneficiaries of corporate success, with other corporate constituencies bearing secondary relevance. The traditional understanding is that, as a matter of principle, company interests are equated with shareholder interests, an admission adopted by Sequana itself.49 To argue, then, that, in certain circumstances, company interests are equivalent to creditor interests, is not only inconsistent with the shareholder primacy model in place, but also introduces confusion as to the ontological foundations of a company under English law.50 Thus, this statement is counterintuitive;51 if anything, thorough argumentation would be needed to back it up. Since argumentation in favour of the ontological equivalence of company interests with creditor interests, under certain conditions, is nowhere to be found in the ruling, the equation proposition is unpersuasive. What the ontological perspective requires is thoughtfulness when introducing ontological claims, alongside specific care in smoothly incorporating them into the existing theoretical framework. Yet, the modifying rule, to the extent that it views members as substituted by creditors, as the beneficiaries of corporate success, is incongruent with corporate law theory, ontologically unjustified and, thus, questionable. The interpretation of the rule in West Mercia as a modifying rule which substitutes shareholders with creditors as the primary beneficiaries of corporate success, is unfit to guide directorial decision-making, when viewed from a textualist, purposive, and ontological/theoretical company law perspective. Nevertheless, the substitution function could be argued to be fit, on a different ground, than the shift in the relative economic interest, which is the primary rationale put forth by Sequana. An alternative justification for it could be the conception of limited liability as a privilege, ‘which carries with it an obligation to have regard to the propensity for the directors’ decision-making to damage the interests of creditors as the company nears insolvency’.52 Countering this rationale as unpersuasive, Lord Briggs argued that limited liability is a necessary element of the commercial landscape, responsible for encouraging entrepreneurial risk-taking and, thus, for the success of modern business in the Western world.53 Indeed, it is principally erroneous to view limited liability as something that creditors shall be compensated for, given its proven capacity to boost entrepreneurial and commercial growth. Limited liability is part and parcel of the corporate law framework and should not be viewed as coming with strings attached.
Therefore, this section established that the substitution function of the modifying rule, as presented in Sequana, is unjustified. It may be the case, however, that there is another viable way for creditor interest paramountcy to be reflected in distressed management. Such a way would have to acknowledge the dominance of the enlightened shareholder primacy model and find a doctrinally legitimate way to deviate from it in order to prioritise creditor interests.
The Balancing of Interests and its Complexities
The Sliding Scale Paradigm as an Oversimplification
Beyond the phase where either shareholders’ or creditors’ interests are paramount, lies the stage marked by the simultaneous relevance of both in directorial decision-making. The relevance of their interests depends on their relative economic stake in corporate affairs, which derives from the allocation of risk among the two groups during that time. The mechanics of such balancing are not straightforward to make sense of. This section articulates two lines of criticism aimed at the balancing exercise, underlying the complexities inherent in it and questioning Sequana’s success in granting the much-sought clarity and accessibility to directorial standards.
In Sequana, Lord Reed utilises a sliding scale scheme to guide the balancing task performed by directors: ‘the more parlous the state of the company, the more the interests of the creditors will predominate’.54 This conception assumes that the more the financial position of the company deteriorates, the more the shareholders’ interests decrease and the creditors’ interests increase in how much weight they are to be given in the balancing exercise. This general rule governing the balancing of interests of the two groups broadly follows from the distribution of risk arising from directorial decision-making between them.55 As corporate insolvency approaches, the general rule is that it is creditors’ funds that are at risk and not shareholders’, meaning that the conflict between their interests becomes more pronounced.56 As Bowen put it, echoing the sliding scale idea, ‘as insolvency becomes imminent the directors […] should come under an increasing duty to act more conservatively’.57
Nevertheless, the sliding scale conception of the balancing of competing shareholder-creditor interests is characterised by an artificial type of simplicity and is partially resisted by Lady Arden in Sequana on this ground. The path towards corporate insolvency may not be linear, but may rather arise due to external factors that abruptly affect the company’s financial state.58 In other words, insolvency may arise without a predictable transition or a gradual build-up; for example, because of the default of a commercial partner. The sliding scale standard, then, falls short of encapsulating the complexities inherent in real-world corporate scenarios. This is to say that the absolute application of a standard for balancing shareholder-creditor interests is misguided; instead, the sliding scale concept shall go hand in hand with an ad hoc, fact-specific, and realistic appreciation of who has more economic interest in corporate affairs every time.
The Two Masters’ Criticism
Having critically examined the sliding scale example and pointed to its over-simplified nature vis-à-vis a complex corporate landscape, this note moves on to present the two masters’ criticism of the creditor-regarding duty and the balancing exercise that the duty commands.
The creditor-regarding duty does not operate in a vacuum. Already from times of financial health, directors are bound by their fiduciary duty to the company, conceived primarily as the totality of its members and, secondarily, as the remaining corporate constituencies.59 This duty operates in full force and regulates its internal dynamics. Creditors may already be part of such corporate constituencies; for example, as employees, suppliers, and customers. When the creditor-regarding duty arises, directors are not merely obligated to address creditor concerns as a secondary aspect of section 172(1) CA 2006. Instead, they are expected to give heightened attention to creditor interests, effectively shifting from a primarily shareholder-centric perspective to a dual focus on both shareholders and creditors. In particular, they shall detect the points where creditor and shareholder interests may conflict and balance them out. The two separate obligations are merged into one single fiduciary duty, pursuant to the (disputed) modifying rule. Although said duty is owed to the company itself, it subjects directors to the interests of two masters.60 Thus, the latter may find themselves answerable as to how they considered the interests of both creditors and shareholders and managed them in accordance with the fiduciary duty.
The question that arises is whether it is principally viable and practically possible to serve the interests of two distinct interest groups within the context of directorial decision-making.61 Brundey’s perspective, while originally focused on the conflict between stockholders’ and bondholders’ interests, suggests that such a conflict prevents management from serving two competing parties in a way that aligns with fiduciary principles.62 Expanding on this notion, it proves inherently improbable, if not impossible, for a director to be committed to the advancement of the interests of two potentially rival groups. To serve the interests of the one is to potentially undermine the interests of the other and vice versa. In the words of Sykes, which Lady Arden adopts without a qualification: ‘[a] regime in which directors found themselves owing different duties to several different ‘masters’, some with interests conflicting with those of others, would make it extremely difficult for directors to decide what weight to give to each of the duties concerned.’63
It becomes apparent, then, that the balancing task places directors in a conflicted situation, which makes it impossible by default to serve shareholders and creditors at the same time. Other than the definitional and objective impossibility of serving two masters, entrusting directors with such an idealistic endeavour sets them on a course destined for failure from the outset. Directors are placed in a predicament: even the most well-intended, thought-out, and balanced (whatever that may mean) decision puts them in a no-win situation, whereby both groups may feel disadvantaged in their pursuits. The ambiguity of directorial duties as part of the balancing process makes it difficult for directors to know what is expected of them.64 This inaccessibility of directorial duties may generate uncertainty in the profession and even give rise to directorial liability for breach in unexpected ways. Hence, balancing the interests of the two ‘masters’ creates the two masters’ problem, which enormously compromises the operability of the creditor-regarding duty as involving a balancing exercise.
Conclusion
In conclusion, Sequana marks a milestone, as the first UKSC ruling affirming and justifying the creditor-regarding duty. The ‘relative economic interest’ concept successfully captures where the necessity for such a duty originates from. Yet, anything past this point is nebulous. When either creditors’ or shareholders’ interests are predominant, the substitution function of the modifying rule is shown to be a problematic mechanism, via which prioritisation of the interests of one or the other group is facilitated. Not only is it inconsistent with the textual and purposive interpretation of the CA 2006, but also it is awkwardly posited ontologically, in the context of the enlightened shareholder primacy of English company law.
Leaving paramountcy aside, the balancing of interests was introduced to address fluctuations of the primary economic stake in the company. While theoretically allowing directors flexibility in decision-making, depending on whose money is at risk every time, it faces problems. The sliding scale scheme proved unsuitable due to its inability to account for a non-linear decline in the company’s financial state. Finally, the two masters’ criticism highlighted the inherent impossibility of committing directors to serve the interests of two potentially conflicting groups.
The above, this note argues, illustrates how the current formulation and mechanics of the creditor-regarding duty, including the substitution element and the balancing exercise, is unfit for the purpose of guiding directorial decision-making in distress. The notion of balancing interests fails to shed light on what is expected of directors while the modifying rule has resulted in the oddity that, under certain circumstances, company interests fully coincide with creditor interests. Hence, after Sequana, the creditor-regarding duty continues to hold an elusive place within English corporate law.
[1] BTI 2014 LLC v Sequana SA [2022] UKSC 25.
[2] Sequana (n 1) [8] (Lord Reed), [112] (Lord Briggs).
[3] Sequana (n 1) [112] (Lord Briggs).
[4] West Mercia Safetywear Ltd v. Dodd [1988] BCLC 250.
[5] Kinsela v. Russell Kinsela Pty Ltd [1986] 4 NSWLR 712, 722.
[6] West Mercia (n 4); Costantino Grasso, ‘Corporate duty to creditors: The UK Supreme Court’s lost opportunity to adopt a more stakeholder-oriented perspective.’ (The Corporate Social Responsibility and Business Ethics Blog, 9 November 2022) <https://corporatesocialresponsibilityblog.com/2022/11/09/creditor-duty-sequana> accessed 20 September 2023.
[7] West Mercia (n 4).
[8] Sequana (n 1) [115] (Lord Briggs).
[9] Sequana (n 1) [350] (Lady Arden).
[10] Sequana (n 1) [115] (Lord Briggs).
[11] Sequana (n 1) [115] (Lord Briggs).
[12] Sequana (n 1) [115] (Lord Briggs).
[13] Sequana (n 1) [115], [178] (Lord Briggs).
[14] Sequana (n 1) [350] (Lady Arden).
[15] Sequana (n 1) [351] (Lady Arden); Stefan Lo, ‘Corporate Governance in the Context of Insolvent Companies’ (2023) 10 Journal of International and Comparative Law 113, 120 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4522268 accessed 19 September 2023.
[16] Sequana (n 1) [115] (Lord Briggs).
[17] Morgan Bowen, ‘BTI 2014 LLC v Sequana SA and Others [2022] UKSC 25’ [2023] 32 International Insolvency Review 1 https://doi.org/10.1002/iir.1488 accessed 20 September 2023.
[18] Sequana (n 1) [10] (Lord Reed).
[19] Sequana (n 1) [56]-[59] (Lord Reed), [147] (Lord Briggs), [245] (Lord Hodge), [256]-[258] (Lady Arden).
[20] Lo (n 15) 121.
[21] The relative economic interest concept does not refer to a proprietary or quasi-proprietary interest in the company assets. Under English law, neither shareholders nor creditors have such an interest; they only have an entitlement to share in the proceeds of the realisation of assets. Thus, said interest is an ‘economic’ one; Sequana (n 1) [44] (Lord Reed).
[22] Lo (n 15) 120-121; Jonathan C. Lipson, ‘The Expressive Function of Directors’ Duties to Creditors’ (2007) 12 Stanford Journal of Law, Business and Finance 224, 225-226.
[23] Sequana (n 1) [59] (Lord Reed).
[24] Vanessa Finch and David Milman, Corporate Insolvency Law: Perspectives and Principles (3rd edn, Cambridge University Press 2017) ch 16; Laura Lin, ‘Shift of Fiduciary Duty Upon Corporate Insolvency: Proper Scope of Directors’ Duty to Creditors’ (1993) 46 Vanderbilt Law Review 1485, 1490.
[25] John Quinn and Philip Gavin, ‘The Creditor Duty Post Sequana: Lessons for Legislative Reform’ [2023] The Journal of Corporate Law Studies 1, 5 https://doi.org/10.1080/14735970.2023.2226802 accessed 19 September 2023.
[26] Lin (n 24) 1491.
[27] Bowen (n 17).
[28] Finch and Milman (n 24) 635.
[29] In De Carvalho’ and Reddy’s words: ‘A creditor-oriented duty-shifting rule would prevent companies from externalising the costs of their debts by deploying the company’s assets in high-risk endeavours when insolvency was approaching’; Schilling De Carvalho and Bobby Reddy, ‘Credit Where Credit’s Due: The Supreme Court Take on Directors’ Duties and Creditors’ Interests’ (2023) 82 Cambridge Law Journal 17, 18.
[30] Sequana (n 1) [176] (Lord Briggs).
[31] Companies Act 2006, s 172(1).
[32] Sequana (n 1) [176]; Andrew Keay, ‘Formulating a Framework for Directors’ Duties to Creditors: An Entity Maximisation Approach’ (2005) 64 Cambridge Law Journal 614, 621-622; Lin (n 24) 1488.
[33] Sequana (n 1) [77] (Lord Reed), [205] (Lord Briggs), [230] (Lord Hodge).
[34] Lord Briggs (with whom Lord Kitchin agreed) wrote the majority judgment, with Lord Hodge writing a concurring judgment. Lord Reed and Lady Arden wrote separate judgments. All judges agreed that the formulation contended for by BTI was not correct and that the appeal should accordingly be dismissed. However, the judges were divided as to the content of the creditor-regarding duty (and as to when it arises).
[35] Sequana (n 1) [11] (Lord Reed).
[36] Sequana (n 1) [1] (Lord Reed).
[37] Sequana (n 1) [2], [11], [79] (Lord Reed).
[38] Sequana (n 1) [1] (Lord Reed).
[39] Sequana (n 1) [12] (Lord Reed).
[40] Sequana (n 1) [344] (Lady Arden); Quinn and Gavin (n 25) 12.
[41] Sequana (n 1) [2] (Lord Reed).
[42] Sequana (n 1) [262] (Lady Arden).
[43] ibid.
[44] Sequana (n 1) [263] (Lady Arden).
[45] ibid.
[46] Sequana (n 1) [264] (Lady Arden).
[47] The term ‘entity’ derives from the Ancient Greek ‘τό ὄν’, meaning ‘the being’. Ontology, then, is the branch of philosophy which occupies itself with ‘τά ὄντα’, that is ‘the entities’. The company is an ‘ὄν’ or an ‘entity’, at least when viewed from a legal perspective, as it possesses legal personality. Then, as an ‘ὄν’, the company is, by definition, an object of ontological analysis.
[48] The introduction of a major shift in the definition of the company (like the one envisioned by Sequana) will most likely yield reflexive implications on the whole spectrum of matters pertaining to company law.
[49] Sequana (n 1) [1] (Lord Reed).
[50] Sequana (n 1) [265] (Lady Arden).
[51] This idea has been voiced, in a different context, by Hu and Westbrook: ‘[I]f triggered, duty shifting requires corporations to act in the interests of creditors while the key mechanisms of the underlying governance system continue to direct managers to act instead in the interests of shareholders’; Henry Hu and Jay Lawrence Westbrook, ‘Abolition of the Corporate Duty to Creditors’ (2007) 107 Colum L Rev 1321, 1349.
[52] Sequana (n 1) [127] (Lord Briggs).
[53] Sequana (n 1) [132] (Lord Briggs).
[54] Sequana (n 1) [81].
[55] Ross Grantham, ‘The Judicial Extension of Directors’ Duties to Creditors’ [1991] Journal of Business Law 1, 15; Quinn and Gavin (n 25).
[56] De Carvalho & Reddy (n 29) 18; Lin (n 24) 1489.
[57] Bowen (n 17) 10.
[58] Sequana (n 1) [303] (Lady Arden).
[59] Companies Act 2006, s 172(1).
[60] Thomas Hurst and Larry McGuinness, ‘The Corporation, the Bondholder and Fiduciary Duties’ (1991) 10 The Journal of Law and Commerce 187, 205.
[61] Sequana (n 1) [177] (Lord Briggs).
[62] Victor Brundey, ‘Corporate Bondholders and Debtor Opportunism: In Bad Times and Good’ (1992) 105 Harvard Law Review 1821, 1837.
[63] Quote by Richard Sykes QC in unidentified source, referenced Sequana (n 1) [266] (Lady Arden).
[64] Keay (n 32) 626.