Summary

On 24 July 2013, the Supreme Court handed down its long-awaited judgment in the Nortel/Lehman case: Re Nortel Companies [2013] UKSC 52. The Court looked at the position where a contribution notice (CN) or financial support direction (FSD) was issued by the Pensions Regulator (TPR) on a company that is already in insolvency proceedings in England (eg administration). How does the relevant obligation rank in the order of priority of payment?

Snapshot

The Supreme Court handed down its long-awaited judgment today in the Nortel/Lehman case on where a contribution notice (CN) or financial support direction (FSD) issued by the Pensions Regulator (TPR) on a company that is already in insolvency proceedings (eg administration) ranks in the order of priority of payment.

On 26 July, the Pensions Regulator (TPR) published a statment on financial support directions (FSDs) and insolvency, with the aim of helping 'the pensions and insolvency industries understand TPR's approach in relation to financial suppirt directions in insolvency situations.'

The Court of Appeal decision in the Nortel case upheld the High Court ruling that FSD/CN liability is an expense of the administration and therefore ranks ahead of administrators' remuneration, floating charges and unsecured creditors. Much of the press coverage which has followed in the immediate aftermath seems to have assumed that the decision is a victory for "good" pensioners over the "bad" banks.

The Pensions Regulator (TPR) has announced that it has withdrawn moral hazard proceedings against Chemtura Manufacturing UK Limited and its US parent, Chemtura Corporation. This follows an agreement being reached by Chemtura with the trustees of the Great Lakes UK Limited Pension Plan (the Plan) over its funding package.

Third parties associated with an employer may find themselves liable to contribute to the employer's occupational pension scheme.

If an employer is affected by an insolvency event the insolvency practitioner or official receiver is obliged to notify the trustees of the employer’s pension scheme, the Pensions Regulator, and the Pension Protection Fund of the fact of the insolvency event. Here, we provide an overview of the pensions issues arising from employer insolvency.

What role does The Pensions Regulator have when pension schemes need protecting? In episode seven of Pensions in 30 Podcasts, we look further into contribution notices and financial support directions and when they can be brought into play.

Click here to listen to the podcast.

Key Points

The credit crunch is biting ... your scheme's sponsoring employer is facing insolvency ... what can the trustees and advisors do before the insolvency to lay the foundations for a smooth Pension Protection Fund (PPF) assessment period?

What is a PPF assessment period?

Summary

The Pensions Regulator intends to issue its first financial support direction (FSD) against the Bermudan-based Sea Containers Limited (SCL), which is currently restructuring under the US Chapter 11 bankruptcy process.