Company Law: BTI 2014 LLC and BAT INDUSTRIES PLC V SEQUANA SA 2016.
In the case, dividend payments were made by a subsidiary company to its parent company based on incorrect amounts. It was to the Court to determine whether this was in breach of the directors’ fiduciary duties to the company or were transactions defrauding the creditors. In addition, the decision to reduce the company’s share capital was also challenged.
Reduction of share capital
Section 642 Companies Act 2006 sets out the instances where a solvency statement must be made to support a reduction in capital.
A solvency statement is a statement written by all directors outlining the company’s situation at the time of writing. It includes the following:
That no grounds exist indicating that the company would not be able to pay or discharge its debts and:
Immediately following the statement, the company will be able to pay its debts as and when they are due up to the 12 months following the statement. In the event that a company intends to wind up within the 12 months, the statement will outline that the company will be able to pay or discharge its debts within 12 months of the commencement of winding up.
In forming their opinions, directors must take into account all of the company’s liabilities, including any contingent or prospective liabilities. If they make a solvency statement without reasonable grounds for the opinions expressed, a criminal offense has been committed. This offense is punishable by 12 months’ imprisonment, a fine or both. Click here for more details..
Contact Details:
Nath Solicitors Limited
4/4a Bloomsbury Square
London, WC1A 2RP
Tel: 02036705540
Email: shubha@nathsolicitors.co.uk
Web: https://www.nathsolicitors.co.uk/
In the case, dividend payments were made by a subsidiary company to its parent company based on incorrect amounts. It was to the Court to determine whether this was in breach of the directors’ fiduciary duties to the company or were transactions defrauding the creditors. In addition, the decision to reduce the company’s share capital was also challenged.
Reduction of share capital
Section 642 Companies Act 2006 sets out the instances where a solvency statement must be made to support a reduction in capital.
A solvency statement is a statement written by all directors outlining the company’s situation at the time of writing. It includes the following:
That no grounds exist indicating that the company would not be able to pay or discharge its debts and:
Immediately following the statement, the company will be able to pay its debts as and when they are due up to the 12 months following the statement. In the event that a company intends to wind up within the 12 months, the statement will outline that the company will be able to pay or discharge its debts within 12 months of the commencement of winding up.
In forming their opinions, directors must take into account all of the company’s liabilities, including any contingent or prospective liabilities. If they make a solvency statement without reasonable grounds for the opinions expressed, a criminal offense has been committed. This offense is punishable by 12 months’ imprisonment, a fine or both. Click here for more details..
Contact Details:
Nath Solicitors Limited
4/4a Bloomsbury Square
London, WC1A 2RP
Tel: 02036705540
Email: shubha@nathsolicitors.co.uk
Web: https://www.nathsolicitors.co.uk/
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