Lehmans—financial support directions and contribution notices [Archived]
Lehmans—financial support directions and contribution notices [Archived]

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Lehmans—financial support directions and contribution notices [Archived]
  • How the issue arose
  • Powers of Pensions Regulator to issue FSDs and CNs
  • Request for directions from the court
  • Contribution notices against multiple targets

How the issue arose

One of the many issues adding to the complexity of the Lehmans failure is dispute over financial support directions (FSDs) and contribution notices (CNs) in relation to a substantial occupational pension shortfall (the debt arising under the Pensions Act 2004, s 75—the 's 75 debt') and whether they rank in the waterfall of distributions as:

  1. an expense of the administration/liquidation (ie high ranking), or

  2. a provable debt (ie unsecured claim), or

  3. neither, so only recoverable if there's a surplus after paying all creditors in full

The Nortel/Lehman case was appealed all the way up to the Supreme Court.

Powers of Pensions Regulator to issue FSDs and CNs

The Pensions Regulator is a government body created by the Pensions Act 2004 to protect the benefits under defined benefit pension schemes and also to discourage companies from passing on the risk of shortfalls to the Pension Protection Fund (PPF). The Pensions Regulator has various powers, including the power to issue the following:

  1. a FSD—requiring members of a group in certain circumstances to put in place financial support for the benefit of the pension scheme within the group. Note that it doesn't specify a specific sum, so a proof of debt cannot be filed

  2. a CN—in various circumstances, including where no acceptable financial support is provided after a FSD is served, the Pensions Regulator may issue a

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