Corporate duty to creditors: the UK Supreme Court’s lost opportunity to adopt a more stakeholder-oriented perspective

Grasso, Costantino ORCID: https://orcid.org/0000-0003-0180-0416 (2022) 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.

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Abstract

This article offers a brief commentary on the October 2022 UK Supreme Court decision BTI 2014 LLC v Sequana SA [2022] UKSC 25 that focused on corporate directors’ duties to creditors. The article argues that the judiciary has lost a golden opportunity to be innovative and interpret the law adopting a more stakeholder-oriented perspective leading directors toward more responsible behavior. In particular, the Supreme Court affirmed that the interests of creditors acquire autonomous relevance and require separate consideration only when the company’s insolvency is “imminent” or its insolvent liquidation or administration becomes “probable.” As a result, the Court has excluded the relevance of any other situation that may otherwise indicate a “risk of insolvency”. This approach appears to be reactionary in that it is merely based on the traditional assumption that company law has to encourage high-risk investments that otherwise would never be made. Such a decision appears worrisome in that it does not try to foster a more responsible approach to risk and corporate behavior disregarding the lessons learned and the burning issues that emerged from the countless corporate collapses we have experienced in the last two decades as well as the financial crisis of 2008.