Summary
Eastman Kodak Corporation (Kodak US), the US parent of the Kodak group, filed for chapter 11 protection in the US on 19 January 2012. It successfully emerged from bankruptcy on 3 September 2013 as a new restructured technology company focused on imaging for businesses. Many other Kodak companies throughout the world were able to avoid following in their parent’s footsteps and were maintained as going concern businesses while the US bankruptcy process was ongoing.
Changes are afoot to the statutory regime governing special administrations for regulated water companies (the SAR) following the publication of a suite of new legislation.
Impact of the changes on pension trustees
New guidance from the Pension Protection Fund (PPF) regarding pre-packaged administrations (pre-packs) outlines their approach to pre-packs when the same insolvency practitioner (IP) proposes to continue as office holder in any subsequent liquidation or company voluntary arrangement (CVA).
The UK’s Pension Protection Fund (PPF) is about to publish new guidelines to reflect their increased focus on the approval of Insolvency Practitioner’s (IPs) fees. The guidelines require IPs to provide more regular detail of accruing and anticipated costs to the PPF when they are appointed over employers where Defined Benefit (Final Salary) pension schemes are significant creditors. More specifically IPs will now be required to provide a more detailed explanation of how their proposed remuneration reflects the value provided to creditors.
In the United Kingdom, the Pension Protection Fund (“PPF”) is the safety net for the employee members of a defined benefit pension plan or scheme. The PPF compensates members when an employer has not and cannot put sufficient assets in the pension scheme to meet its obligations to member employees and the employer has suffered a “qualifying insolvency event”.
Carrington Wire Defined Benefit Pension Scheme was set up for the benefit of the employees of Carrington Wire Limited; a Yorkshire based company engaged in the sale and supply of steel and wire products. Carrington, which started to wind down its business at the end of 2009, was at that time owned by Severstal, a Russian based international steel company. The scheme’s liabilities were guaranteed by Severstal’s parent company.
Two documents on winding up procedures have recently been released for consultation. The first is a joint statement by the Pensions Regulator, the Pension Protection Fund and the DWP in respect of the Financial Assistance Scheme on the regulation of schemes in wind up and in a PPF assessment period. The second is a set of good practice guidelines from the Pensions Regulator on avoiding delays in the winding up of schemes.
A landmark ruling has paved the way for companies to restructure without necessarily making their pension scheme ineligible for the Pension Protection Fund (PPF). Trustees in the case of L v M sought the court’s support (and that of the Pensions Regulator) for a plan to prevent the insolvency of the sponsoring employer which would result in an apportionment of the debt due to the scheme from the employers, the winding up of the scheme and would take the scheme into the PPF.
The UK Pension Protection Fund (PPF) is reviewing its insolvency risk model with Experian. The proposals being considered are particularly relevant to the financial services and charity sectors. They would be introduced from 2018/2019 (and will not be part of the draft levy rules and levy estimate for 2017/18, which we expect will contain few changes).
In summary, the PPF is considering:
Earlier this year it was announced that the UK’s Financial Assistance Scheme (“FAS”) would close to applications from 1 September 2016.
This does not affect pension plans that are currently progressing through the notification and qualification process or pension plans that have already qualified for assistance. However, any qualifying pension plans that have not yet started the process need to move quickly as they now have less than a month to make a notification to the FAS.