Pension schemes with FSDs rank as unsecured creditors: Nortel and Lehmans

Financial support directions (FSDs) are orders from the Pensions Regulator to other members of a corporate group to stand behind the obligations of a service company or under-resourced employer and provide financial support to an underfunded defined-benefit scheme. The Pensions Regulator issues a formal warning notice to the companies it considers in scope, and a determinations panel of the regulator then issues a determination to issue an FSD. The actual FSD can only be issued once all appeal processes have been exhausted.

In the case of the Nortel group and the Lehman Brothers group, determinations were not made until after the majority of the companies targeted had entered insolvency proceedings.

In the joined case of Nortel and Lehman Brothers, the Supreme Court allowed these post-insolvency determinations to render the subsequent FSDs provable debts in the administration and overruled both the Court of Appeal and the High Court. Both lower courts had concluded that the determinations had been issued too late for an FSD to count as a debt. Rather than let the liability fall away entirely, the lower courts had found an alternative way to give effect to the order by treating the FSD as an expense of the administration. This gave trustees ‘super priority’ status, with the FSD payable in priority over all creditors except those with fixed charge security over assets…

If you are registered and logged in to the site, click on the link below to read the rest of the Allen & Overy briefing. If not, please register or sign in with your details below.

Sign in or Register to continue reading this article

Sign in

Register

It's quick, easy and free!

It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.

Register now

Why register to The Lawyer

 

Industry insight

In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.

 

Market intelligence

Identify the major players and business opportunities within a particular region through our series of free, special reports.

 

Email newsletters

Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.

More relevant to you

To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.

Analysis from The Lawyer

  • Panel reviews

    Panel reviews 2014: The chosen ones

    Which firms are cutting it in this era of slimline rosters, and who are the GC new brooms making clean sweeps? The Lawyer can reveal all

  • training

    Accutrainee: Revolution postponed

    At the time of its launch Accutrainee was described as a revolutionary change to the training model. Has it proved to be so? Not really.

View more analysis from The Lawyer

Overview

One Bishops Square
London
E1 6AD
UK
http://www.allenovery.com

Turnover (£m): 1,234.30
No. of lawyers: 2,194 (UK 200)
Jurisdiction: UK
No. of offices: 11
No. of qualified lawyers: 273 (International 50)