The Court of Appeal has set aside a freezing order obtained by a provisional liquidator within winding up proceedings, on the basis that the cross-undertaking in damages given by him was inadequate because it was limited to the amount recovered for the estate. The liquidator had not discharged the burden of showing good reason to depart from the “default position” that a cross-undertaking should be unlimited in amount: Hunt v Ubhi [2023] EWCA Civ 417.

The Court of Appeal has held that a settlement agreement between a bank and a group of companies which included releases of the parties’ affiliates prevented the companies from later pursuing claims against their own affiliates. Those affiliates were held to include former administrators appointed by the bank and the administrators’ solicitors: Schofield v Smith [2022] EWCA Civ 824.

The Pensions Regulator has issued a statement setting out its approach to Financial Support Directions in insolvency situations.  It follows the Court of Appeal's decision in Bloom v The Pensions Regulator (Nortel) in October 2011 that a liability arising from a Financial Support Direction (FSD), or a contribution notice (CN), issued to a company in administration or liquidation will, except in very limited circumstances, amount to an expense of that administration or liquidation.  As such, it will rank very highly in the payment priority order, in particular rank

The story of the restructuring of carpet-maker, Brintons has featured in the press recently, with emphasis on the role of Carlyle, one of the world's biggest private equity firms. The facts are similar to the Silentnight pre-pack which we featured in a previous bulletin. In each case, the Pensions Regulator is said to be considering using its anti-avoidance powers under the Pensions Act 2004 to compel senior debt holders to pay towards the deficit of the defined benefit pension scheme operated by the company.

The Pensions Regulator announced this week that it will not  pursue action to impose a Financial Support Direction against US company, Chemtura Corporation and members of its group after a funding settlement, involving the payment of expedited contributions to the pension scheme of its UK subsidiary, was reached with the scheme's trustees.

The story of the Silentnight restructuring has featured in the press today. There have been calls for the Pensions Regulator to use its anti-avoidance powers under the Pensions Act 2004 to compel HIG Europe to pay more towards the considerable deficit of the Silentnight Pension Scheme, following the purchase of Silentnight out of administration by the private equity firm last Saturday. Earlier this year, Silentnight had failed to obtain the PPF's approval to a Creditors Voluntary Arrangement aimed at addressing its historic debt, including a pensions deficit of around £100m.

A claim by trustees against an insolvent participating employer (who has ceased to participate in the pension scheme) for its share of the scheme deficit is a contingent obligation at the date of winding up and is admissible in the winding-up. This follows the decision by the Outer House of the Court of Session in Scotland in Burton, Re Direction of Assets [2010] CSOH 174.

The Federal Labour Court has ruled on the fundamental issue of who will be entitled to the rights under a life insurance policy concluded by the employer in the employee’s favour in the event that an employment relationship comes to an end in the course of the employer’s insolvency proceeding.

On 17 September, the Pension Regulator's Determinations Panel announced that it had issued a determination that six companies within the Lehman Brothers group (including the group's main operating companies in the UK as well as the US parent Lehman Brothers Holding Inc.) should provide financial support to the Lehman Brothers Pension Scheme. This followed a hearing on 8-9 September 2010.

It is likely that changes to the employer debt regulations (the so-called "section 75 debt" regime) will come into force on 6 April. These will prevent a debt from arising on certain internal group restructurings where there is no weakening of the employer covenant. However, the regulations are highly prescriptive and are, therefore, less attractive as a means of dealing with section 75 debts when compared to apportionment or withdrawal arrangements.