The Pensions Regulator (TPR) recently issued its draft guidance on its approach to investigating and prosecuting the new criminal offences under the Pension Schemes Act 2021. In this blog post, we share our thoughts on the level of comfort that might be gleaned in relation to criminal risk if the draft guidance were finalised in its current form, focusing on the particular concerns that would remain for restructuring activity.

Background

One difficulty encountered by creditors and trustees in bankruptcy is the use of one or more aliases by a bankrupt. Whether it is an innocent use of a nickname or an attempt to conceal one's identity, the use of an alias can often create problems for creditors seeking to pursue debts and for trustees seeking to recover assets held by a bankrupt.

How does it happen?

The Corporate Insolvency and Governance Act 2020 (the Act) introduced significant changes to insolvency law, including permitting companies to propose a “restructuring plan”. The restructuring plan offers a flexible option for companies that sponsor defined benefit pension schemes to compromise their obligations to creditors and, potentially, to the pension scheme itself.

The Pension Schemes Act 2021 (‘the Act’) has received Royal Assent, with the UK government indicating that key provisions will come into force by autumn 2021.

The Act includes a number of provisions that will significantly impact restructuring activity involving financially distressed groups with a UK defined-benefit (DB) pension scheme.

What will change under the Act?

Below are some of the most significant changes being introduced by the Act.

We reported in our previous blog published on 15 June 2020 (“The Corporate Insolvency and Governance Bill – a pensions perspective”) that a number of pensions concerns had been raised about the Corporate Insolvency and Governance Bill (the Bill). As a result, the Bill was subject to significant amendment and debate from a pensions perspective in the House of Lords.

As concerns about illegal phoenix activity continue to mount, it is worth remembering that the Corporations Act gives liquidators and provisional liquidators a powerful remedy to search and seize property or books of the company if it appears to the Court that the conduct of the liquidation is being prevented or delayed.

When a person is declared a bankrupt, certain liberties are taken away from that person. One restriction includes a prohibition against travelling overseas unless the approval has been given by the bankrupt's trustee in bankruptcy. This issue was recently considered by the Federal Court in Moltoni v Macks as Trustee of the Bankrupt Estate of Moltoni (No 2) [2020] FCA 792, which involved the Federal Court's review of the trustee's initial refusal of an application by a bankrupt, Mr Moltoni, to travel to and reside in the United Kingdom.

The new Corporate Insolvency and Governance Bill (the Bill) has been introduced into the UK Parliament and proposes significant changes to insolvency law, including:

What makes a contract an unprofitable contract which can be disclaimed by a trustee in bankruptcy without the leave of the Court under section 133(5A) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act)? Can a litigation funding agreement be considered an unprofitable contract when the agreement provides for a significant funder's premium or charge of 80% (85% in the case of an appeal)?

In a recent decision, the Federal Court of Australia declined to annul a bankruptcy in circumstances where the bankrupt claimed the proceedings should have been adjourned given his incarceration and solvency at the time the order was made: Mehajer v Weston in his Capacity as Trustee of the Bankrupt Estate of Salim Mehajer [2019] FCA 1713. The judgment is useful in reiterating what factors the Court will consider when deciding whether to order an annulment under section 153B(1) of the Bankruptcy Act 1966 (Cth) (the Act).