Chris Howard and Simone Benton authored an article on the possible impact of the UK Supreme Court’s decision in Sequana for Global Turnaround magazine. The article develops a point they made in Restructuring Law & Practice (3rd edition Howard, Warner and Beatty), published earlier this year, that directors were being given too much latitude to preside over creditors interests without any accountability and that the door was being opened in the UK to a “Delaware style” business judgement rule. They also argue that the decision gives directors more latitude to act in times of distress, before an insolvent liquidation or administration is imminent, unavoidable or inevitable, because at that point they are only required to give “appropriate weight” to creditors’ interests. However, as the decision leaves directors’ actions and their assessment of the company’s financial situation open to subjective and objective analysis, it may also give them the means to hurt their own case.
“Whether this will give directors confidence to aggressively walk the tightrope or promote a more cautious approach is a question that only time will tell,” they wrote.
Read the article “Sequana – Have directors in the UK been given the chance to score an own goal?”