A shareholders’ ratification cannot operate so as to prejudice injured creditors, and Wednesday’s important Supreme Court judgment in BTI 2014 LLC v Sequana S.A. and others confirms that the point at which the duties of the directors to the company under section 172 CA 2006 become subordinate to the common law rule requiring them to consider or act in the interests of creditors of the company, is when the company is actually or imminently insolvent, or once insolvency was probable, but not merely when (as in this case) the risk of insolvency was real and not remote.
This does not alter best practice: in particular, if on analysis there is only dubious corporate benefit – say, for an upstream guarantee – and the financing cannot be restructured, then a lender should insist on full board minutes and solvency confirmations, and take a shareholders’ ratification, but never forget that no ratification by shareholders can fix a case where the interests of the creditors have been prejudiced under common law.
and then 