Ruling provides guidance on how close to insolvency a company needs to be before directors must consider creditors’ interests.

The UK Court of Appeal has ruled that the payment of a lawful dividend did not, on the facts, amount to a breach of the directors’ duty to have regard to creditors’ interests. The facts indicated that the company was not insolvent, or close enough to insolvency, for the “duty shift” from shareholders to creditors to be triggered. In so doing, the court concluded the duty is activated not just on insolvency but also when directors ought to know the company is or is likely to become insolvent, which carries with it a “probability” threshold.