A recent overruling by the Supreme Court has revoked the priority status of pension schemes issued with a Financial Support Direction (FSD) or Contribution Notice (CN) by the Pensions Regulator, following an insolvency event. Whilst the decision largely affects companies operating within England and Wales, Scottish Courts are expected to be guided by the ruling.
The 2011 decision
Bankruptcy Code § 1129(a)(10) provides that in order for a plan proponent to “cram down” - i.e., force acceptance of - a plan of reorganization on a dissenting class of creditors, at least one impaired class of creditors must vote in favor of the plan. Because a plan is often not accepted by all classes entitled to vote, the ability to procure at least one impaired, accepting class in order to cram down a dissenting class is essential in achieving plan confirmation.
OSCR report issued following investigation of benefits to employee on wind-up
Lazari GP Ltd v Jervis
When a company goes into administration, it benefits from a "moratorium" that prevents creditors taking legal and other proceedings against the company or its assets. The main purpose of the moratorium is to free an administrator's rescue attempts from the distractions of legal action from creditors.
In what it described as “an easy decision,” the U.S. Supreme Court issued its eagerly anticipated decision in RadLAX Gateway Hotel, LLC et al. v. Amalgamated Bank1 on May 29, 2012.
Technological innovation has changed the landscape of domestic natural gas production from shortage to surplus. The result: a glut of natural gas and historically low prices. While many producers have successfully hedged against this risk to date, as older hedges roll off, many companies are unable to obtain replacement hedges at attractive prices. Some have even resorted to monetizing their in-the-money hedges to raise capital today (and borrowing against the future).
The recent flurry of news reports regarding the administration of high street retail chains and the subsequent sale of parts of their businesses is perhaps an opportune time to flag up the renewed importance that the hypothec plays in Scottish property law.
By virtue of the hypothec, in insolvency, a landlord automatically obtains a fixed charge ranking on the proceeds of sale of the moveable goods of the tenant that are on the premises as at the point of insolvency, up to the value of any arrears of rent.
Agreements with administrators often contain provisions to the effect that any claim against the company in administration will rank only as an unsecured claim and not as an expense of the administration. Although such provisions are common, there has always been some doubt as to their efficacy.
Rejection of a contract in bankruptcy may not always accomplish a debtor’s goal to shed ongoing contractual obligations and liabilities, especially when dealing with employee benefit plans. On October 13, 2011, the Fifth Circuit Court of Appeals highlighted this issue in its opinion in Evans v. Sterling Chemicals, Inc.1 regarding the treatment of a pre-bankruptcy asset purchase agreement which contained a provision addressing the debtor-acquiror’s post-closing ERISA retiree benefit plan obligations to its new employees resulting from the transaction.
Recently, the Court of Appeal upheld the High Court's decision in the Nortel Networks and Lehman Brothers disputes. The judgment confirms that liabilities under Financial Support Directions (FSDs) and Contribution Notices (CNs), which are issued by the Pensions Regulator, will rank ahead of almost all other claims when a company becomes insolvent. The discussions in the case focused on whether FSDs and CNs are classed as 'provable debts', expenses of the insolvency or, indeed, neither.