First Contribution Notice issued by The Pensions Regulator in the Context of a Pre-Pack Administration

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The Pensions Regulator ("TPR") has for the first time issued a contribution notice of £5 million, ordering a Belgian company, Michel Van De Wiele, ("VDW") to make good a gap in the pension scheme of its UK subsidiary, Bonas UK Limited ("Bonas"), which it claimed had been placed into administration to avoid maintaining the fund. The contribution notice was issued on 29 June 2010.
UK Insolvency/Bankruptcy/Re-Structuring
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Originally published 5 July 2010

Keywords: The Pensions Regulator, pre-pack administration, Michel Van De Wiele, Bonas UK Limited, pension fund, contribution notice, underfunding, restructuring,

The Pensions Regulator ("TPR") has for the first time issued a contribution notice of £5 million, ordering a Belgian company, Michel Van De Wiele, ("VDW") to make good a gap in the pension scheme of its UK subsidiary, Bonas UK Limited ("Bonas"), which it claimed had been placed into administration to avoid maintaining the fund. The contribution notice was issued on 29 June 2010.

Since April 2005, TPR has had the ability to issue a contribution notice. Under a contribution notice, a person can (in broad terms) be made personally liable for a pension scheme's underfunding if they have been a party to an act/omission designed to avoid a pension scheme's liabilities. In the five years since being established TPR has not issued a contribution notice, although there have been reportedly occasions on which it has threatened to do so.

Notwithstanding that it was accepted that Bonas had been loss making since it had been acquired by VDW, which had injected funds to support it, TPR issued a contribution notice. This was because it found that VDW, a weaving machine maker, had retained the business while avoiding the attaching pension liability by placing Bonas into a "pre-pack" administration in December 2006. In addition, it had failed to negotiate with TPR and the scheme trustees. The Determination Notice states that "the basis upon which the Contribution Notice has been issued was that the 'act' in question was the concealment by VDW from the Trustees of the imminent administration of Bonas". Furthermore, the Determination Notice indicates that there was enough evidence to show that VDW had discussed and considered the pensions liability at length and had considered placing Bonas into administration for months before doing so. VDW had been advised that as a consequence of its intentions to restructure there was a significant risk of TPR taking such an action but it took a calculated risk nevertheless.

TPR sought a payment from VDW of £23 million to cover all of the benefits in full. However, the Panel substantially reduced the amount to be contributed to £5 million, to cover a shortfall in benefits guaranteed by the Pension Protection Fund. This was considered a reasonable figure as it was the value today of what the Trustees may well have agreed to accept as annual contributions.

The Panel did not, however, impose a contribution notice against the managing director of Bonas and Chairman of VDW ("Mr Beauduin"). The Panel took into consideration Mr Beauduin's uncontested evidence that he was personally concerned with ensuring the continuation of employment of Bonas' staff and decided that in all the circumstances it would not be reasonable to impose a contribution notice.

The contribution notice is subject to appeal and it is understood that VDW will contest the ruling.

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