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Pension challenges in bankruptcy and restructuring processes

This is an extract from Financier Worldwide's August online publication entitled "Pension challenges in bankruptcy and restructuring processes."

REFLECTING ON THE LAST FEW YEARS, HOW WOULD YOU DESCRIBE OVERALL PENSION CHALLENGES ARISING FOR COMPANIES FACING BANKRUPTCY / INSOLVENCY AND RESTRUCTURING PROCESS? WHAT MAJOR TRENDS HAVE DEFINED THIS SPACE?

United Kingdom, Employee Benefits & Pensions, Insolvency & Restructuring, Macfarlanes LLP, Defined benefit pension plan, The Pensions Regulator (UK), Pension Protection Fund
Pensions regulator statement: FSDs and insolvency

The Pensions Regulator (the “Regulator”) has published a statement setting out its approach to the issuing of financial support directions (“FSDs”) in insolvency situations. The statement is designed to calm fears following the decision in the joined Nortel and Lehman cases that the “super priority” of FSDs could have a negative impact on the corporate rescue and lending industries.

Background

United Kingdom, Employee Benefits & Pensions, Insolvency & Restructuring, Litigation, Mayer Brown, Defined benefit pension plan, The Pensions Regulator (UK), Lehman Brothers
Court of Appeal confirms financial support directionsissued in insolvency have super priority

The Court of Appeal has confirmed that the costs of complying with Financial Support Directions (“FSDs”) proposed to be issued to certain Nortel and Lehman companies by the Pensions Regulator (“TPR”) qualify as “super priority” administration expenses, payable in priority to unsecured creditors, floating charge holders and the administrators’ own fees.

The question

USA, Insolvency & Restructuring, Litigation, Mayer Brown, Unsecured debt, Debt, Liquidation, Precondition, Defined benefit pension plan, Sponsor (commercial), The Pensions Regulator (UK), Trustee, Court of Appeal of England & Wales
Further changes to employer debt legislation

Following consultation last autumn, the Government is once again changing the Regulations under s75 Pensions Act 1995.

The changes1 take effect on 6 April 2010. They are intended to facilitate corporate restructurings. They also address some minor technical issues. The Government has postponed any more fundamental rewriting of the Regulations, saying that “this is a complex area that deserves closer consideration”.

Restructurings

United Kingdom, Employee Benefits & Pensions, Insolvency & Restructuring, Mayer Brown, Tax exemption, Consideration, Debt, Liability (financial accounting), Joint and several liability, Easement, Defined benefit pension plan, Pensions Act 1995 (UK), Trustee
The DWP proposes further changes to the “employer debt” legislation

Following an informal consultation in late 2008, the DWP is now consulting formally about changes to the Employer Debt Regulations made under s75 Pensions Act 1995. The consultation document can be found at www.dwp.gov.uk/consultations/2009.

The main proposed changes are intended to facilitate corporate restructurings, but other changes are designed to address some technical problems with the Regulations.

Corporate restructurings

United Kingdom, Employee Benefits & Pensions, Insolvency & Restructuring, Mayer Brown, Share (finance), Public consultations, Debt, Liability (financial accounting), Liquidation, Easement, Defined benefit pension plan, Department for Work and Pensions (UK), Pensions Act 1995 (UK)