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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In the case of Hunt v Hosking  EWCA Civ 1408 the Court of Appeal held that a payment of company money made by a trustee to a third party, without the company’s participation, could not be a transaction at an undervalue under section 238 of the Insolvency Act 1986, because it was not a transaction "entered into" by the company.
In England and Scotland respectively, the Administrators of a tenant company are bound to account to the landlord of premises for rent due in relation to the period during which those premises are being used in connection with the administration, and the rent is to be paid as an expense of the administration.
On 18 December 2013 the Treasury published its response to its consultation on reforms to the legislation relating to IPSs.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”