Corporate Viability and the Duty to Consider the Interests of Creditors in the United Kingdom and the European Union

Abstract

This article contrasts the recent UK Supreme Court case of BTI 2014 LLC v Sequana and the EU Preventive Restructuring Directive, which both examine the duty of directors to consider the interests of the company’s creditors once the company entersfinancial distress. This article firstly contrasts how the two frameworks trigger creditor consideration and what they require of directors. Then it explores how both frameworks utilise the concept of corporate viability either as a framing device for creditor paramountcy or as an independent guide for directorial judgment. The article details how deference towards directorial judgment is facilitated in either framework, particularly in relying on the commercial nature of corporate viability as distinguished from legal insolvency. It also explores how corporate viability positions the interests of different interest holders, namely in how it affects the balance between the interests of shareholders and creditors. The article furthermore explores the extent to which the consideration of broader stakeholders is facilitated by allowing directors to emphasise the importance of corporate viability. Finally, the article explores the broader implications of corporate viability and the creditor duty from the perspective of entity-based theories of corporate form and entity maximisation approaches towards the company’s interests.