Nortel and Lehman Brothers case on FSDs decided — a workable way forward

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By Heather Chandler

The case involved two groups (the Nortel group and the Lehman group) each of which contained occupational pension schemes with substantial funding deficits.

The Pensions Regulator (PR) had issued financial support directions (FSDs) to the group companies, in both cases following the placement of the group into administration. An FSD is a direction from the PR where the employer supporting a scheme is either a service company or insufficiently resourced, requiring another person(s) to connect with that employer to make financial arrangements to support the scheme.

The question to the court was whether the costs of complying with the FSDs (and any subsequent contribution notice) constitute a provable debt or an expense of the insolvency, or are not recoverable at all. Where an FSD is issued before insolvency, it was common ground the liabilities under it would constitute a provable debt in the recipient’s subsequent insolvency…

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