Monday 21 September 2026
Your weekly SQE Prep Quiz has arrived
Dear Subscriber,
Hope you had a great weekend. Please see below for the question, the answer to the previous question and associated resources. This is the web version of this newsletter.
OCTOBER SUPER SESSION: Following the success of our Contract Law event, I will be holding another live FLK Business Law & Tax SQE Super Session on 21 October. 30 Places available upon application. If you would like to join, email me on events@glintiss.co.uk . Further info on events.dryannis.co.uk
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This Week’s Question: A woman executes a valid will leaving her residuary estate equally between her two children, with no express survivorship requirement. She separately leaves £60,000 to her brother, with the remainder of her estate passing under the residuary clause. One child dies before her, leaving two children who survive the woman. Her brother also dies before her, leaving a daughter. The will contains no substitute beneficiaries and no provision excluding the statutory anti-lapse rules. Which of the following best describes how the estate should be distributed?
A. The surviving child receives the entire residuary estate, and the brother’s daughter receives the £60,000 legacy under the statutory anti-lapse provisions.
B. The deceased child’s children share their parent’s half of the residuary estate, while the brother’s £60,000 legacy lapses and falls into the residue.
C. The deceased child’s estate receives half the residue, while the brother’s £60,000 legacy passes to his daughter under the intestacy rules.
D. The surviving child and both grandchildren share the residue equally, while the brother’s legacy passes to his daughter by representation.
E. Both the deceased child’s share and the brother’s legacy lapse, leaving the surviving child entitled to the entire estate under the residuary clause.
Dig Deeper: Want to revise Wills and Estates? Watch https://youtu.be/yFhJ4uWLI_c and read https://dryannissqe.substack.com/p/flk-wills-and-estates-for-sqe1
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Last Week’s Question: A private company has suffered heavy losses and is struggling to pay suppliers as debts fall due. The directors believe there is still a realistic possibility that a major new contract could rescue the business, but the contract has not yet been signed. One director proposes that the company should repay in full a £60,000 loan owed to a company owned by that director’s spouse, while delaying payment to other unsecured creditors. The board approves the repayment. Which of the following best describes the directors’ duties at this stage?
A. The directors may continue to prioritise the interests of the shareholders until the company is formally placed into liquidation or administration.
B. The directors must treat all creditors equally as soon as the company has any difficulty paying debts, so the proposed repayment is automatically unlawful.
C. The directors must consider creditors’ interests where the company is insolvent or bordering on insolvency, and those interests become increasingly important as the prospect of insolvent liquidation or administration becomes more probable.
D. The directors owe direct fiduciary duties to each individual creditor once the company cannot pay every debt immediately when it falls due.
E. The directors are free to make the repayment because a director’s general duties under the Companies Act 2006 cease to apply once insolvency becomes a possibility.
Correct answer: C. The directors must consider creditors’ interests where the company is insolvent or bordering on insolvency, and those interests become increasingly important as the prospect of insolvent liquidation or administration becomes more probable. Under section 172 Companies Act 2006, directors normally promote the success of the company for the benefit of members. However, section 172(3) preserves the rule that, when a company is insolvent, bordering on insolvency, or insolvent liquidation or administration is probable, directors must increasingly take account of creditors’ interests. This was confirmed by the Supreme Court in BTI 2014 LLC v Sequana SA [2022] UKSC 25. As the company’s financial position worsens, creditors’ interests carry greater weight. If insolvent liquidation or administration becomes inevitable, creditors’ interests become paramount. The Insolvency Act 1986 reinforces this shift:
Section 214 — wrongful trading: once directors know or ought to know there is no reasonable prospect of avoiding insolvent liquidation, they must take every appropriate step to minimise losses to creditors, or risk a personal contribution order.
Section 239 — preferences: paying one creditor in a way that puts that creditor in a better position than others may later be challenged, especially where the creditor is connected with a director.
Section 238 — transactions at an undervalue: directors must also avoid disposing of company assets for significantly less than their proper value.
So, in this scenario, the directors should not simply prioritise shareholders or connected creditors. They must assess the company’s insolvency position and make decisions with the interests of creditors increasingly in mind.
the other answers are wrong:
A is wrong because creditor interests can become relevant before formal insolvency.
B is wrong because there is no immediate rule requiring equal payment of all creditors.
D is wrong because the duty is owed to the company, not directly to each creditor individually.
E is wrong because Companies Act duties continue to apply alongside insolvency law.
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All the best
Dr Ioannis (Yannis) Glinavos
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