A recent overruling by the Supreme Court has revoked the
priority status of pension schemes issued with a Financial Support
Direction (FSD) or Contribution Notice (CN) by the Pensions
Regulator, following an insolvency event. Whilst the decision
largely affects companies operating within England and Wales,
Scottish Courts are expected to be guided by the ruling.
Previous decisions of both the High Court and Court of Appeal
afforded a special 'super priority' status to pension
schemes that were the subject of an FSD or CN. This 'super
priority' status granted preferential creditor status (and
protection) to pension schemes during the insolvency process
– a position that would normally only be assigned to
administrators for their fees.
The new ruling
Following the Supreme Court's ruling, FSDs and CNs will no
longer be treated as a priority. Instead they will be
reclassified as 'provable debt' – and will rank
alongside general unsecured claims during insolvency
The Supreme Court has stated that much of the reasoning behind
its decision lies within specific provisions, relating to
'provable debt', within the Insolvency Rules
1986. In Scotland, however, companies are governed by
the provisions of the Insolvency (Scotland) Rules 1986
and, although expected to be directed by this ruling, can proceed
upon a very different basis.
The material contained in this article is of the nature of
general comment only and does not give advice on any particular
matter. Recipients should not act on the basis of the information
in this e-update without taking appropriate professional advice
upon their own particular circumstances.
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This note is relevant to liquidators, trustees in bankruptcy and
administrators ("office holders") who have, or may have,
claims which, prior to April 2015, they ought – or wish
– to bring against any third party on behalf of the company
or bankrupt individual to recover money or property for the benefit
The consultation on the new powers introduced by the Enterprise and Regulatory Reform Act 2013 to help ensure the continuity of certain essential IT supplies to insolvent business closed today, 8 October.
As readers may be aware, general changes to the ability to recover litigation funding under certain mechanisms came into general effect in 2013 pursuant to the Legal Aid, Sentencing and Punishment of Offenders Act 2012.
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