Replacing distributable profits with a solvency test: dividends, capital reductions, buybacks and creditor protection

The UK Government is considering replacing the rule that a UK company may pay dividends only out of distributable profits with a solvency-based regime.  The company would state that the payment “will not affect the company’s ability to continue as a going concern”.[1]  This is a consultation proposal, open until 30 November 2026, and the test itself has not been drafted at time of writing.

Private companies in the UK can already release capital on a solvency basis.  Since 2008 they have been able to reduce capital by special resolution, backed by a directors’ solvency statement, and create distributable reserves without going to court.  That can create reserves for then paying dividends, but leaves the profits test in place for each distribution of dividends as income to the shareholders.  Not every company can use it.

Who will the consultation benefit?

What problem does the proposed reform solve, and for whom?  Principally:

• regular dividend payers;
• companies whose losses exceed anything a reduction of capital could release;
• public companies; and
• groups,

but much less a company wanting a one-off payment that already has capital to reduce.

A solvency test in outline, and little more

Under the Companies Act 2006, a company may distribute only its accumulated realised profits less its accumulated realised losses (i.e. ‘distributable reserves’), and ‘realised’ turns on accounting principles and detailed professional guidance.[2]  Public companies face a further restriction: a distribution must not take their net assets below called-up share capital plus undistributable reserves.[3]  The consultation does not say what would become of that test.

The Government calls the profits rules “complex [and] gameable”, i.e. open to manipulation, and says a solvency-based regime would remove the requirement for extensive calculations and guidance.  It adds that the change may address concerns, raised by some investors and others, that the current regime may incentivise financial engineering to inflate distributable reserves to then dividend out.[4]

Accounts show a company’s reserves but need not show how much of them can lawfully be distributed, and the Government views the earlier idea of requiring very large companies to disclose that figure as potentially very costly and no cure for the complexity.[5]  Banks and insurers are not carved out of the company-law change, but their separate prudential restrictions on dividends would be unaffected.[6]

A case for reform

There is a real case for reform.  A capital reduction can create distributable reserves, but every later dividend must still pass the profits test (by reference to the accounts and calculations that go with it).  A solvency test could spare regular dividend payers that recurring exercise, let companies with accumulated losses pay once they can afford to, and remove the preliminary restructuring now used to create reserves.  A well-designed forward-looking test could, perhaps, also protect creditors better than historic profits alone, because it asks whether the company can afford the payment rather than whether past profits cover it.

Change would have its own cost, of course: articles of association and equity investment documents that tie preference dividends or share redemptions to profits available for distribution would need revisiting.

Whether the change would save time and professional costs is less clear.  Where reserves are already ample, today’s check is light.  It becomes laborious where reserves are tight, which is where a solvency assessment would be hardest too: forecasts, a review of long-term and contingent liabilities, board papers that will be read closely after any failure and, in a group, the same work at each company up the chain.  Costs may move rather than disappear.

Beyond the one-sentence going-concern statement, the consultation does not describe the new test.  The accountancy bodies’ guidance on realised profits would go only if the profits test went for every purpose, including buybacks and redemptions, and the public-company net-assets test went with it; the new test would need guidance of its own.[7]

The capital-reduction route

A private company limited by shares can reduce its share capital, including share premium, by special resolution supported by a solvency statement.[8]  Each director must form the view that there is no ground on which the company could be found unable to pay its debts, and that it will be able to pay its debts as they fall due during the following year, taking account of contingent and prospective liabilities.  Making the statement without reasonable grounds is a criminal offence once it is delivered to the registrar.[9]  The reserve created is treated as a realised profit.[10]

What are reserves?

Reserves are the balances in shareholders’ equity other than share capital, such as share premium and retained profits.  Share premium can be reduced as described above, but some reserves, such as a merger reserve, cannot be reduced directly.  Where the articles of association allow, the company can first capitalise such a reserve, using it to pay up bonus shares allotted to its shareholders in the proportions in which they would share a dividend, and then cancel those shares by reducing capital in the same way.[11]

A reduction can also repay capital to shareholders directly once it takes effect.  That repayment is not a distribution, so the profits test does not apply to it.  Alternatively, the reserve a reduction creates can fund a buyback, discussed below.[12]

Worked example

Take, for example, a company with £4.2 million of share premium from its prior Series A financing and accumulated losses of £1.1 million.  It cannot pay a dividend.  Cancel the premium by special resolution supported by a solvency statement and the £4.2 million reserve absorbs the losses, leaving £3.1 million available for distribution.

What the new regime would add

If a board cannot responsibly sign a capital-reduction solvency statement under the existing regime, it is hard to see how it could responsibly sign a dividend statement of comparable rigour under the proposed new regime.  If it can, a reduction is already available to create the reserves.

A company whose accumulated losses exceed anything a reduction could release, and which has no suitable reserve to capitalise, cannot reduce its way to a dividend anyway.  It must wait until profits make good the losses, however solvent it is meanwhile.  Public companies cannot use the solvency-statement route and need the court’s confirmation, at which creditors can sometimes object.[13]

We have been here before

The Company Law Review, commissioned in 1998, looked at a solvency test for dividends, and the Companies Act 2006 kept the profits test.[14]  When an amendment in 2006 proposed a solvency test for private companies, the Government gave three reasons for not adopting it.[15]

• Respondents to the review doubted that an assurance of short-term solvency protected creditors.
• The review wanted private companies kept in line with public companies, whose distribution rules were fixed by the EU’s Second Company Law Directive.[16]
• A one-year test would let a company pay a dividend while long-term liabilities, such as pensions, exceeded its assets.

Directors’ general duties would still apply, the minister said, but there was “a real question as to whether this would be sufficient protection for long-term creditors”.[17]

Parliament chose solvency for capital, not dividends: the 2006 Act gave private companies the solvency-statement reduction.  The European constraint went with the UK’s departure from the EU.[18]  The long-term creditor problem did not.

The idea resurfaced in 2018.  Concerned by companies that had kept paying substantial dividends as they approached insolvency, the Government asked whether the distributable-profits test was still fit for purpose.  Respondents found the regime complex and backward-looking, and the Government undertook to consider whether a review should include the merits of a solvency-based system, while noting that the Second Directive made the profits test mandatory for public companies.[19]  The concern then was creditor protection; the 2026 case rests on complexity and the scope for financial engineering.

In 2021, the Government went the other way.  For listed and AIM companies, and possibly all public interest entities[20], it proposed adding a forward-looking safeguard to the profits test, with directors confirming that each dividend was lawful and would not be expected to jeopardise solvency over the next two years.  It dropped that solvency statement in 2022, after respondents pointed out that a two-year horizon would not match the going-concern period or the proposed resilience statement, would need reconciling with directors’ common-law duty to act prudently, and would need to fit with solvency-based regimes elsewhere to avoid difficulties for multinationals.[21]

Mismatched horizon objection

The first of those objections, the mismatched timing horizon, is a design risk for the 2026 proposal rather than a settled flaw: it names no period, and whatever period is chosen will need to fit with the going-concern assessment.  The 2026 consultation would not add a forward look to the profits test; it would replace the test altogether with a solvency test.

Buybacks: two solvency statements, two levels of protection

The profits test also governs share buybacks.  A company may fund a buyback from distributable profits or the proceeds of a fresh issue of shares made for the purpose of financing the purchase.  Private companies can also pay out of capital: under the full statutory procedure, under a simplified procedure for buybacks connected with employees’ share schemes or, where the articles allow, for small purchases up to the lower of £15,000 and the nominal value of 5% of fully paid share capital in a financial year.[22]

The consultation mentions buybacks only as an example of a distribution under the current rules, and its proposed statement concerns dividends.[23]  The table below compares both existing statements with the proposal.[24]

The statement closest to the Government’s going-concern language is the buyback one, and it carries the most protection.[25]  Yet a company can reach much the same result without it: reduce capital under the solvency-statement procedure, treat the reserve as realised profit and fund the buyback from that.  A buyback can be selective, paying out one shareholder rather than all of them, so the law restricts the selling shareholder’s participation in the resolutions that approve it.  That protects the other shareholders.  It does not explain why one route needs an auditor and a creditor challenge window and the other does not.

The reform, in our view, should not ignore buybacks because the profits that fund buybacks and redemptions are defined by reference to the profits test.[26]  The Government is, however, yet to say whether buybacks will move to the new test or keep the old one, and whether the safeguards for buybacks out of capital survive, spread to dividends or disappear.

What creditors would be relying on

The profits test is an accounting-based calculation, although accounting involves degrees of judgement: provisions for future liabilities, for example, are estimates.  The test limits what can be paid out; it does not guarantee that any particular sum remains for creditors.  But while past losses have eaten into capital, it stops distributions until the losses are made good or the capital is formally reduced.  The proposal would remove that limit and make the company’s ability to withstand the payment the central statutory question.

What the consultation leaves open

Whether the new test would protect creditors well depends on five points:

(i)       Horizon.  Today’s solvency statements, for capital reductions and buybacks out of capital, look one year ahead,[27] and the 2021 proposal looked two.  The consultation names no period, and pension, environmental and warranty liabilities can crystallise well beyond either.  Nor does the consultation say when the test would apply.  Today a distribution is made, and must be lawful, when the company becomes bound to pay it:[28] for a final dividend, generally on declaration; for an interim dividend, normally on payment, although it can be made binding earlier.  Creating the obligation and paying it are different moments in time, and a forecast that holds on one day may not hold on another.

(ii)       Liabilities.  The test could look only at the company’s ability to pay its debts as they fall due, or also at its assets against its liabilities, including long-term and contingent ones.  Accounting going-concern assessments look at least 12 months ahead and should take account of contingent liabilities,[29] but nobody should assume the statutory test would simply import that practice.

(iii)       Assumptions.  A forecast that depends on refinancing a facility or closing a funding round is only as good as that assumption, and such assumptions can be manipulated.

(iv)       Responsibility.  Today each director in default commits an offence if a solvency statement lacks reasonable grounds.[30]  The consultation would have the company make the statement.  The legislation may well put the opinion and the sanction on the directors personally, as the existing solvency statements do, but the consultation does not say so.

(v)       Consequences.  A shareholder must repay an unlawful distribution if it knew or had reasonable grounds to believe it was unlawful; however, this requirement does not apply to buyback payments.[31]  How readily a breach could be proved, and a payment recovered, would depend on the new test, its evidential requirements and its remedies.

Banks lend on covenants that restrict distributions and on information rights that let them test forecasts.  Trade creditors extend credit on standard terms and on what is public, and the consultation itself accepts that suppliers rely on accounts and are unlikely to obtain parent company guarantees.[32]

Without reserves disclosure, creditors forgo only an improvement never implemented; nobody loses access to a figure they have today.  Extending audit exemption to medium-sized companies, which the consultation is considering, is different: their accounts would still be filed, but with less assurance over them.[33]  Separately, from 1 April 2028 small companies and micro-entities must file a profit and loss account, which they can currently omit, but may keep it off the public register.  Where a company opts out, Companies House, HMRC and law enforcement will see figures its suppliers cannot.[34]  The dividend proposal itself gives creditors nothing new with which to test the forecasts on which it would rely.

Intra-group asset transfers and distributions in kind

In Aveling Barford Ltd v Perion Ltd [1989] BCLC 626, a company with no distributable profits sold property at a considerable undervalue to another company controlled by its ultimate shareholder, and the sale was held to be an unlawful distribution.[35]  The 2006 Act eased intra-group transfers: a transfer at or above book value now counts as a distribution of nil, but only if the company has profits available for distribution.[36]  The consultation does not mention this rule, and a solvency regime would have to say what replaces that condition.

Tax: HMRC’s parallel consultation

HMRC’s separate consultation on taxing returns of value, which closed on 14 September 2026, proposes that where a new holding company is inserted through a share-for-share exchange, the capital on its shares would be frozen, for tax purposes, at the amount originally subscribed for the old company’s shares, rather than reflecting their market value at the exchange.  That would reduce the room to take value out later as capital, taxed at capital gains rates, rather than as income.  It would also remove the capital-reduction route for demergers outside the statutory demerger rules.[37]

The consultation is aimed at individual and trust shareholders and leaves company law untouched, but anyone treating a capital reduction as the obvious way to return value should read the two consultations together.

Sequana: lawful is not the end of the story

In BTI 2014 LLC v Sequana SA the Supreme Court confirmed that a dividend paid in compliance with the statutory distribution rules can still be a breach of directors’ duties.[38]  The creditor duty is not owed to creditors.  It is part of the duty owed to the company, whose interests come to include those of creditors as a whole, and it is engaged when the company is insolvent or bordering on insolvency, or insolvent liquidation or administration is probable.  The majority also required that the directors know or ought to know this; Lord Reed and Lady Arden left that open.  A real and not remote risk of insolvency is not enough.[39]

In May 2009 AWA paid a €135 million dividend to its sole shareholder.  The dividend was lawful, and AWA was solvent on both balance-sheet and cash-flow measures.  But it carried long-term pollution-related liabilities of uncertain amount, which created a real risk of insolvency, though not a probable one.  AWA went into insolvent administration in 2018 and the claim against its directors failed.[40]

AWA had used the procedure discussed above for an earlier dividend.  In December 2008 it reduced its share capital from €318.6 million to €1 million and cancelled its share premium on its directors’ solvency statements, releasing €387.4 million.  A €443 million dividend followed two days later, paying out all of that and some existing reserves; none of the released capital formed part of the May dividend.[41]  The trial judge upheld the reduction: the directors had to take account of contingent and prospective liabilities but not assume the worst, and all four had formed the required opinion.[42]

The May dividend rested instead on AWA’s 2008 accounts, in which the provision for its pollution indemnity liabilities was eliminated on the view that they would not exceed the funds remaining in a policy set aside to meet them; the judge found those accounts properly prepared.[43]  Both dividends passed the existing distribution rules, and the money still left a company carrying long-term pollution liabilities.

The judge also held that a lack of reasonable grounds does not, by itself, invalidate an otherwise compliant solvency statement or capital reduction although it is an ingredient of the criminal offence.[44]

Dividend fell foul of the Insolvency Act 1986

The May 2009 dividend was, however, held to fall foul of the Insolvency Act 1986 provision on transactions defrauding creditors, although Sequana’s own insolvent liquidation meant that nothing was repaid.[45]  That provision is no general remedy for distributions that later harm creditors.  It requires a transaction at an undervalue entered into for the purpose of putting assets beyond the reach of a person with an actual or potential claim, or otherwise prejudicing that person’s interests, and the trial judge found that purpose here.[46]

The case shows the limits of the creditor duty, not an absence of remedies.  Whether a new test would have stopped AWA’s dividend depends on its design, including how directors would have to assess long-term contingent liabilities.  Nor should passing the new test be expected to protect directors from a Sequana claim; nothing in the consultation suggests a safe harbour.

What a statutory test would add is a compulsory forward look for every dividend, including the many cases in which the creditor duty is never engaged.

What reform would need to include

The gains from reform would be real but uneven.  They are least relevant to a company that already has capital or premium to reduce, and largest for those types of companies identified above.

For creditors, the proposal would remove an accounting-based limit on distributions and leave open what replaces its protection.  If reform goes ahead, the test should at least match the capital-reduction statement: a statement by each director, covering all liabilities including contingent and prospective ones, made on reasonable grounds and backed by sanctions.

AWA’s December 2008 reduction passed a statement of exactly that kind, and the capital it released was paid to its parent two days later, so matching it is not enough.  The new test also needs an express rule for long-term liabilities, a clear position on whether assets must exceed liabilities, and a civil consequence: a payment made on a statement without reasonable grounds should be unlawful and recoverable.  The buyback safeguards and the public-company net-assets test should be kept, extended or removed on a stated principle.

Question 16 of the consultation asks whether respondents support moving to a solvency model for determining the legality of dividends and, if they do, what key features it should have.  Responses are due by 30 November 2026.  The Government aims to publish an outcome within six months of the close, which is a response, not a commencement date.[47]  It has explained what the reform would make easier.  Respondents should press it to explain which creditor protections would change, and why.

What to do now

Dividends and upstreaming planned for the coming months must satisfy the current rules, including the net-assets test for public companies.  Boards should check the articles, any investor consent rights over distributions and any restrictions in facility agreements: a new statutory test would not override those, nor would it settle the tax treatment of a payment.  Where the company has a defined benefit pension scheme, boards should also consider whether the Pensions Regulator’s powers bear on the payment.[48]  Directors should also record the evidence behind each decision, including cash-flow forecasts where the company’s position is tight.

If you have questions or queries about the consultation, or regarding any of the matters referred to above, please do reach out to a member of the team at HLaw.

All the thoughts and commentary that HLaw publishes on this website, including those set out above, are subject to the terms and conditions of use of this website.  None of the above constitutes legal advice and is not to be relied upon.  Much of the above will no doubt fall out of date and conflict with future law and practice one day.  None of the above should be relied upon.  Always seek your own independent professional advice.

Humphreys Law

[1] Department for Business, Innovation, Science and Trade, Modernising Corporate Reporting, consultation published 7 September 2026, closing 30 November 2026, paras 109 to 115 and question 16.  Para 113 says that the Government “is considering moving from the current dividend regime to a solvency-based regime”; para 114 sets out the proposed statement.

[2] Companies Act 2006, ss 830 and 853; consultation, para 110, referring to the ICAEW and ICAS guidance TECH 02/17BL.

[3] Companies Act 2006, s 831(1).  Undistributable reserves are the share premium account, the capital redemption reserve, the excess of accumulated unrealised profits over accumulated unrealised losses, and any other reserve the company is prohibited from distributing by statute or its articles: s 831(4).

[4] Consultation, paras 61 and 114.

[5] Consultation, paras 111 and 112.

[6] Consultation, para 115.

[7] Consultation, para 114.  The current guidance is ICAEW and ICAS, TECH 02/17BL (April 2017).

[8] Companies Act 2006, ss 641 to 644, in force from 1 October 2008; s 610(4) applies the reduction provisions to share premium.  The statement must be made no more than 15 days before the resolution, and the reduction takes effect on registration: ss 642 and 644.  The capital redemption reserve and any redenomination reserve can be reduced in the same way: ss 733(6) and 628(3).  The procedure is not available if, after the reduction, no member would hold shares other than redeemable shares: s 641(2).

[9] Companies Act 2006, s 643(1), (2) and (4).  A different formulation applies where a winding up is intended within 12 months.  The statement must give its date and each director’s name (s 643(3)) and, in the prescribed form, be in writing and signed by each director: Companies (Reduction of Share Capital) Order 2008, SI 2008/1915, art 2.

[10] Companies (Reduction of Share Capital) Order 2008, SI 2008/1915, art 3(2).  This is subject to any contrary provision in the resolution for the reduction, any other relevant resolution or the company’s articles: art 3(4).

[11] For companies on the model articles for private companies, art 36 allows the directors, if authorised by ordinary resolution, to capitalise profits (whether or not available for distribution), share premium or the capital redemption reserve, and to apply the sum in paying up new shares allotted as fully paid to the persons who would have been entitled to it as a dividend, in the same proportions.  A merger reserve is not expressly listed.  Companies Act 2006, s 641(3) allows a reduction to be made in any way, and the reserve arising from the reduction is treated as a realised profit: SI 2008/1915, art 3(2).  Whether a particular reserve can be capitalised depends on its nature and the articles.

[12] Companies Act 2006, s 641(4)(b)(ii).  The repayment is not a distribution: s 829(2)(b)(ii).  The reduction takes effect when the documents are registered: s 644(4).

[13] Companies Act 2006, ss 641(1)(b), 645 and 646.  Creditors are entitled to object where the reduction involves a payment to a shareholder of paid-up capital or reduces liability for unpaid capital (unless the court directs otherwise), and in any other case where the court so directs: s 645(2) and (4).  An objecting creditor must show a real likelihood that the reduction would leave the company unable to discharge its debt or claim when it fell due: s 646(1).

[14] Companies Act 2006, Explanatory Notes, para 4 (Review commissioned in March 1998); HL Deb 20 March 2006, vol 680, col GC47 (Review considered a solvency test among its capital maintenance options).

[15] HL Deb 20 March 2006, vol 680, cols GC46 to GC48: Grand Committee on the Company Law Reform Bill, Lord Sainsbury of Turville replying for the Government to an amendment moved by Baroness Goudie.

[16] Second Council Directive 77/91/EEC of 13 December 1976 (OJ L 26, 31.1.1977, p 1), art 15.

[17] HL Deb 20 March 2006, vol 680, col GC48 (Lord Sainsbury of Turville).

[18] European Union (Withdrawal) Act 2018, s 1.  By then the distribution rules for public companies were in Directive (EU) 2017/1132 (see art 56), which codified the Second Directive as recast by Directive 2012/30/EU.

[19] Department for Business, Energy and Industrial Strategy, Insolvency and Corporate Governance: Government Response (26 August 2018), paras 1.29, 1.32 to 1.33, 1.37 and 1.47 to 1.48.

[20] Currently, issuers whose transferable securities are admitted to trading on a UK regulated market, and certain banks and insurers: Companies Act 2006, s 494A.

[21] Restoring trust in audit and corporate governance: government response (May 2022), para 2.2.2 (the 2021 proposals) and para 2.2.29 (decision not to proceed with the two-year statement).  See also paras 2.2.3 (whether to apply the measures to listed and AIM companies only or to all public interest entities) and 2.2.28 (difficulties with the solvency statement raised in consultation responses).

[22] Companies Act 2006, s 692(2) and (1ZA); Part 18, Chapter 5, including ss 720A and 720B.  The de minimis limit applies to the aggregate purchase price in a financial year, with share capital measured at the start of that year: s 692(1ZA).

[23] Consultation, paras 61, 110 and 114.

[24] Companies Act 2006, s 643 (capital reduction) and ss 714 to 723 (buyback out of capital), including the offences in ss 643(4) and 715; the timing and liabilities rows reflect ss 643(1)(a) and (2), 714(3)(a) and (4).  Proposal: consultation, para 114.  Both statements must be signed by every director: SI 2008/1915, art 2; Companies (Shares and Share Capital) Order 2009, SI 2009/388, art 5.

[25] Companies Act 2006, ss 714 to 723; ss 695 and 717 restrict the selling shareholder’s participation in the resolutions authorising the purchase contract and any payment out of capital.  Contract approval is needed for any off-market purchase (one made otherwise than on a recognised investment exchange), however the buyback is funded, unless the employees’ share scheme authority in s 693A is used: ss 693 and 694.

[26] Companies Act 2006, s 736, which defines distributable profits for buybacks and redemptions as profits out of which the company could lawfully make a distribution equal in value to the payment; see also ss 687(2) and 692(2).

[27] Companies Act 2006, ss 643(1)(b) and 714(3)(b).

[28] Global Corporate Ltd v Hale [2018] EWCA Civ 2618 at [23]; ICAEW and ICAS, TECH 02/17BL (April 2017), paras 2.2 and 2.10 (para 2.10 covers when final and interim dividends become binding).  Para 2.10 notes that steps may be taken to make an interim dividend binding before payment (see paras 9.6 to 9.18).

[29] FRC, Guidance on the Going Concern Basis of Accounting and Related Reporting (February 2025), paras 3.14 to 3.18 and 5.29.  The guidance is not mandatory, and small companies and micro-entities are outside its scope.

[30] Companies Act 2006, ss 643(1) and (4), 714 and 715.  For a capital reduction, the offence also requires the statement to be delivered to the registrar: s 643(4).

[31] Companies Act 2006, s 847(2) and (4)(b).  Section 847(3) preserves any other obligation to repay.

[32] Consultation, paras 102 and 108, in the context of the subsidiary audit exemption.

[33] Consultation, paras 45 and 90.

[34] Companies House announcement, 9 June 2026; Companies House accounts guidance, s 10.5.

[35] The case is summarised in the Companies Act 2006, Explanatory Notes, paras 1151 to 1153.

[36] Companies Act 2006, s 845(1)(a) and (2)(a).

[37] HMRC, Modernising the taxation of distributions and repayments of capital from companies (23 June 2026), chapters 2 and 3.  Chapter 3 states that the chapter 2 proposal would remove the capital-reduction route used for non-statutory demergers.

[38] BTI 2014 LLC v Sequana SA [2022] UKSC 25, decided 5 October 2022, at [110] and [160] to [162].  Part 23 is without prejudice to any rule of law restricting distributions: Companies Act 2006, s 851(1).

[39] Sequana at [11] to [14], [81] to [83] and [88]; on knowledge, [90], [203], [231], [238] and [281].

[40] Sequana at [9] and [115]; press summary, pp 1 to 2.

[41] BTI 2014 LLC v Sequana SA [2019] EWCA Civ 112 at [16] and [18]; the reduction used the procedure in Companies Act 2006, s 641(1)(a).  All of the released capital was paid out in the December dividend: [2016] EWHC 1686 (Ch) at [335].

[42] BTI 2014 LLC v Sequana SA [2016] EWHC 1686 (Ch) at [327], [330] and [364].

[43] BTI 2014 LLC v Sequana SA [2016] EWHC 1686 (Ch) at [15], [401], [422] and [454].

[44] BTI 2014 LLC v Sequana SA [2016] EWHC 1686 (Ch) at [322] and [332] to [333].  There was no appeal on the reduction: [2019] EWCA Civ 112 at [4] and [24].

[45] Insolvency Act 1986, s 423; Sequana at [115] to [116]; see also [60].

[46] Insolvency Act 1986, s 423(1) and (3); Sequana at [116]; BTI 2014 LLC v Sequana SA [2017] EWHC 211 (Ch).

[47] Consultation, question 16 (after para 115) and General information, p 10.

[48] The Pensions Regulator may issue a contribution notice where a person was party to an act or deliberate failure to act that meets one of the statutory tests, including the material detriment test, and it is reasonable to do so: Pensions Act 2004, s 38.  Its guidance, Material detriment, employer insolvency and employer resources (November 2021), gives the payment of an unusual dividend to a parent company as an illustrative example.