In this Update we take a look at key legal developments for trustees of occupational pension schemes over the past quarter. These include some important cases such as the decision in Virgin Media Limited v NTL Pension Trustees II Limited regarding the consequences of failing to obtain a section 37 certificate, and the decision in British Broadcasting Corporation v BBC Pension Trust Limited regarding whether a reference to members' "interests" in a scheme amendment power included the right to continue to accrue future service benefits.

In BRASS Trustees Ltd v Goldstone the High Court has approved a decision by a scheme trustee to issue winding up petitions against the pension scheme's sponsoring employers. The trustee sought the court's approval under rules which allow a trustee to seek the court's approval where the decision a trustee is about to make is "particularly momentous".

WELCOME TO OUR LATEST EDITION OF OUR TRUSTEE QUARTERLY UPDATE!

LEGISLATION

CORPORATE INSOLVENCY AND GOVERNANCE ACT RECEIVES ROYAL ASSENT 

The Corporate Insolvency and Governance Act 2020 received Royal Assent on 25 June 2020. As reported in our last Update, the Act brings in some major changes to the insolvency regime which are potentially relevant to scheme trustees seeking to enforce their rights against sponsoring employers, in particular:  

In Shameeka Ien v. TransCare Corp., et al. (In re TransCareCorp.), Case No. 16-10407, Adv. P. No. 16-01033 (Bankr. S.D.N.Y. May 7, 2020) [D.I. 157], the Bankruptcy Court for the Southern District of New York recently refused to dismiss WARN Act claims against Patriarch Partners, LLC, private equity firm (“PE Firm“), and its owner, Lynn Tilton (“PE Owner“), resulting from the staggered chapter 7 bankruptcies of several portfolio companies, TransCare Corporation and its affiliates (collectively, the “Debtors“).

Joining three other bankruptcy courts, Judge Thuma of the District of New Mexico recently held that the rules issued by the Small Business Administration (“SBA“) that restrict bankrupt entities from participating in the Paycheck Protection Program (“PPP“) violated the Coronavirus Aid, Relief, and Economic Security Act, H.R. 748, P.L. 115-136 (the “CARES Act”), as well as section 525(a) of the Bankruptcy Code.

The Southern District of New York recently reminded us in In re Firestar Diamond, Inc., et al., Case No. 18-10509 (Bankr. S.D.N.Y. April 22, 2019) (SHL) [Dkt. No. 1482] that equitable principles in bankruptcy often do not match those outside of bankruptcy. Indeed, bankruptcy decisions often place emphasis on equality of treatment amongst all creditors and are less concerned with inequities to individual creditors.

Introduction

In Wells Fargo Bank, N.A., f/b/o Jerome Guyant, IRA v. Highland Construction Management Services, L.P. et al., Nos. 18-2450-52 (4th Cir. March 17, 2020), the Fourth Circuit Court of Appeals recently upheld that a borrower’s indirect economic interests in a limited liability company (LLC) were not assigned to a lender under a conveyance in a security agreement assigning mere membership interests, pursuant to Virginia state law.

Facts

Setoff is a right that allows a creditor to offset a prepetition debt owed to a debtor with its prepetition claim against the debtor.  See In re Luongo, 259 F.3d 323, 334 (5th Cir.

Setoff is a right that allows a creditor to offset a prepetition debt owed to a debtor with its prepetition claim against the debtor. See In re Luongo, 259 F.3d 323, 334 (5th Cir. 2001). This remedy is aimed at preventing the inequitable and inefficient result that occurs when a creditor is forced to pay a 100% of its prepetition debt owed to a debtor, without resolving its prepetition claim. In such circumstances, the creditor is often forced to later prosecute its unresolved claim against the debtor and is commonly only awarded a fraction of the value of its claim.