A Supreme Court ruling on 24 July in relation to the Lehman and Nortel groups is being welcomed by the pensions industry. More to follow, but in brief; the Supreme Court has confirmed that FSDs issued after the companies had entered insolvent administration were "provable debts", and so rank equally with unsecured creditors.
This is a welcome decision; previous decisions of the High Court and Court of Appeal had held FSDs issued after the employer had entered insolvent administration to be "expenses of the administration" which gave them priority over unsecured and preferred creditors in the insolvency. As this distinguished FSDs issued before and after the insolvency, and as a move away from the pension scheme ranking as an unsecured creditor in all cases, the earlier decision had been subject to much criticism and concern in the context of corporate rescues. The Supreme Court decision provides much reassurance in this context.
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