BTI 2014 LLC v Sequana SA — The Creditor Duty, Seen from Switzerland
[2022] UKSC 25 — the UK Supreme Court formally recognises a directors' duty to consider creditors' interests as insolvency approaches. A Swiss board reads the same facts through a different lens and arrives at a more demanding answer.
Comparative-piece note
This commentary transposes a foreign decision to the Swiss-law frame. Both sides of the comparison deserve the author’s substantive verification: the summary of the UK position is a first-pass reading of the UKSC judgment, and the Swiss transposition argument — particularly on the reach of the Art. 717 OR reserve duty compared to the UK creditor-duty trigger — reflects the author’s practice judgment and should be refined before public release.
On 5 October 2022, the UK Supreme Court handed down what is, in its field, the most significant English corporate-law decision in a generation. BTI 2014 LLC v Sequana SA formally recognises that directors owe a duty to consider the interests of creditors, and locates the moment at which that duty engages: when the company is actually insolvent, on the verge of insolvency, or when insolvent liquidation or administration is probable. It matters to Swiss boards for two reasons. First, Swiss corporate groups frequently sit above English subsidiaries whose directors now operate under this explicit framework. Second, the question the Court answered — at what moment do creditors' interests come to be reflected in the company’s interest the directors must protect — is one Swiss law answers through a different route, and the contrast illuminates both systems. In particular, it clarifies where Swiss directors face liability earlier than their English counterparts, not later.
The case
The claim arose out of a group-restructuring dividend paid by AWA (Arjo Wiggins Appleton Limited) to its parent Sequana SA in 2009. AWA carried a substantial contingent liability — legacy environmental remediation obligations arising from paper-sludge contamination of rivers in the United States — whose eventual quantum was uncertain and whose crystallisation was years away. The dividend was formally lawful under the then-applicable distributable-reserves tests. Some nine years later, in 2018, AWA entered insolvent administration. BTI 2014 LLC, as assignee of claims from the insolvent estate, alleged that the 2009 dividend had been paid in breach of the directors' duties — specifically, that the directors should have considered the interests of creditors (whose ultimate loss was now crystallised) before making the distribution.
The facts produce a recurring pattern that Swiss readers will recognise immediately: a formally lawful distribution made while a large contingent liability was known; the later crystallisation of that liability into insolvency; and a creditor seeking to recover via a claim against directors for a distribution made years earlier.
The holding
The Supreme Court was unanimous on the existence of a creditor-protective duty; the judgments diverge on its precise trigger. The core of the holding is that directors' duty to act in the company’s interest is not monolithic. In ordinary circumstances, the interest of the company is treated as largely coextensive with that of the shareholders as a body. But as a company approaches insolvency, that coextension breaks: creditors become the residual economic stakeholders, and the company’s interest — which the board must protect — comes to include theirs. The Court rejected the broader trigger that had been argued at lower instances, which would have engaged the duty at a “real and not remote risk of insolvency at some future point,” as too early and too vague. The duty engages when insolvency is actually present, on the verge of occurring, or when insolvent liquidation or administration is probable.
Having established the doctrine, the Court dismissed the appeal on the facts. At the moment of the 2009 dividend, AWA was solvent; its insolvent liquidation was neither imminent nor probable. The environmental liability, though known, had not crystallised and was not foreseeably going to. The creditor duty had not been engaged, and the distribution was not actionable.
That asymmetry — doctrinal plaintiff victory, factual defendant victory — is what makes the decision doctrinally clean. Future English directors now have a bright-ish line: consider creditors when insolvency is on the horizon, not sooner. Distributions made well outside that window are not caught, even if contingent liabilities eventually overwhelm the company years later.
How a Swiss court would decide the same facts
The Swiss corporate-governance framework reaches the same territory by a different route, and — at least on comparable facts — produces a more demanding standard for directors.
Three provisions do the work. First, Art. 717 OR imposes a general duty on directors to act with due diligence in the interest of the company. Swiss doctrine has long read the “interest of the company” to include the legitimate interests of creditors, especially when the company is not straightforwardly solvent or when its substance is being reduced by distributions. Second, Art. 725 ff. OR — substantially revised in the 2023 corporate-law reform — imposes graduated procedural duties tied to balance-sheet tests (capital loss, over-indebtedness, notification of the court). Third, Art. 754 OR provides the civil liability regime for breach of these duties.
Together, these produce a doctrine that differs from the UK’s in a critical respect: Swiss directors' duty to form reserves for foreseeable liabilities bites well before any insolvency-adjacent trigger. A distribution made while a substantial contingent liability is known and unreserved is not merely a matter for the Litigation Readiness discipline; it is a breach of the diligence owed under Art. 717 OR, actionable under Art. 754 OR when damage later crystallises. The insolvency-proximity test that defines UK doctrine is not the Swiss test. The Swiss test is earlier and more demanding: the duty engages when the liability is reasonably foreseeable, not when the company is near insolvency.
The Swiss Federal Supreme Court’s 2024 Papierschlamm decision — 4A_62/2024 (17 December 2024) — applied this logic to a pattern strikingly similar to AWA’s: a company with a known contingent environmental liability paid a distribution to its parent while failing to form reserves commensurate with the obligation. The Swiss court held the directors liable. The UK Supreme Court, applying its insolvency-trigger test to AWA’s 2009 dividend, did not.
The two cases are not perfectly comparable — the doctrinal frames differ, the contingent liability in AWA was arguably less foreseeably catastrophic than the Swiss environmental exposure, and the evidentiary records diverge. But the contrast is nonetheless instructive: Swiss law catches, through the reserve duty, directors whom UK law now formally releases through the insolvency-threshold rule.
Where the two systems converge, and where they do not
Convergence. Both jurisdictions now reject the broadest reading — that creditor interests must be weighed whenever any risk of future insolvency exists. The UK rejected this in Sequana; Swiss law has never adopted it. Both jurisdictions also now recognise that, at some point before formal insolvency, the board’s orientation must shift to take creditors seriously. Both jurisdictions expect directors to form reserves for material, reasonably foreseeable liabilities — though the UK treats this primarily as an accounting and distributable-reserves question, while Swiss law additionally tethers it to the director’s personal liability regime.
Divergence. The UK’s creditor duty engages at or near the verge of insolvency; Swiss director diligence duties under Art. 717 OR engage whenever material foreseeable liabilities warrant reserve-formation, which can be years before any insolvency trigger. A Swiss director is therefore exposed to liability in circumstances where a UK director — after Sequana — now is not. Cross-border groups should not assume symmetrical standards.
What boards should take from it
Three practical points follow for Swiss-governed boards, and for Swiss parents overseeing UK subsidiaries.
1. The UK now has a clear creditor-duty framework. For Swiss groups with UK subsidiaries, the subsidiary board operates under the Sequana rule: creditor interests come into focus as insolvency approaches, and the board’s conduct at that moment is measured against that obligation. This affects dividend policy, intra-group lending, guarantees, and decisions on when to continue trading. A Swiss parent that assumes UK subsidiary directors will behave as Swiss directors might act is misreading the framework.
2. Swiss directors cannot draw reassurance from Sequana's outcome. The Sequana defendants prevailed because insolvency was not proximate in 2009. On comparable Swiss facts, the directors would have been tested against the earlier and more demanding reserve duty under Art. 717 OR — which the Papierschlamm decision confirms operates whenever material contingent liabilities are foreseeable and left unreserved. The UK’s insolvency-proximity safe harbour does not exist in Swiss doctrine.
3. Cross-border group distributions are harder than they look. A distribution up the group from a UK subsidiary to a Swiss parent may now be scrutinised at both levels — UK directors under Sequana, Swiss parent directors under Art. 717 OR if the distribution affects the group’s ability to meet its own foreseeable obligations. The two duty frames can apply in sequence to the same transaction; the safer assumption is that the more demanding standard governs in practice.
Implications for the reference work
Director Duties under Swiss Law, at §5 (consequences of breach), will be updated to add comparative context on the UK creditor-duty framework and to distinguish the earlier engagement of the Swiss reserve duty. Litigation Readiness for Swiss Boards, at §2 (documents and records), will note the cross-border dimension when Swiss parents oversee UK subsidiaries whose directors operate under Sequana.
Primary sources
UK decision: BTI 2014 LLC v Sequana SA [2022] UKSC 25, delivered 5 October 2022. Judgment available from the UK Supreme Court. Key judgment by Lord Briggs; concurring judgments by Lords Reed, Hodge, Kitchin, and Lady Arden (with Lord Kitchin and Lady Arden articulating the trigger somewhat differently).
Swiss sources cited: Art. 717 OR (director duties), Art. 725 ff. OR (capital loss and over-indebtedness, 2023 reform), Art. 754 OR (liability action). Case cross-references are to opencaselaw.ch where the decisions are Swiss.