The recent decision of the New South Wales Supreme Court in Independent Contractor Services (Aust) Pty Limited ACN 119 186 971 (in liquidation) (no 2) [2016] NSWSC 106 found that the statutory scheme of priority does not apply to realisations from circulating trust assets. This decision has potentially profound impacts for both employees and secured creditors in the context of both liquidations and receiverships.

A summary of the case

BACKGROUND

The statutory order of priority as it relates to a superannuation guarantee charge liability was considered in the New South Wales Supreme Court proceeding In the matter of Independent Contractor Services (Aust) Pty Limited ACN 119 186 971 (in liquidation) (No 2)[2016] NSWSC 106.

On 8 July, the Pensions Regulator’s Determinations Panel published a determination to issue a financial support direction against 25 companies in the Nortel group in Canada, the US, Europe and Africa.

On 17 September the DWP published a consultation paper (attaching draft regulations) in which it proposes that certain corporate restructurings will not trigger an employer debt under section 75 of the Pensions Act 1995. Following on from amendments introduced by regulations in 2008, the draft regulations also make some technical amendments to the employer debt regime, which are intended to ease its operation in practice.

Section 75: a reminder

The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 (Regulations) to amend the structure of UK annual reports have been published and laid before Parliament.

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

This is the twenty-ninth in our series of General Counsel Updates which aim to summarise major developments in key areas.

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.