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Significant Changes in PPF Drop-Ins and Clearance Practices: Key Considerations

This presentation explores the substantial changes in the practices surrounding PPF drop-ins and clearance. It discusses the implications of the Bonas case, the evolving stance of the Regulator on clearance and moral hazard, and major concerns on compliance. Key topics include the requirements for issuing a contribution notice, the reasonableness test, the voluntary nature of clearance, and innovative approaches acceptable to the Regulator. Finally, it addresses the need for independent advice and the risks associated with pre-packs in the context of the Regulator's approach.

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Significant Changes in PPF Drop-Ins and Clearance Practices: Key Considerations

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Presentation Transcript

  1. PPF drop ins and clearance – significant changes Clive Pugh Richard Pettit 5 October 2010

  2. Introduction • Bonas – the implications for clearance • PPF drop-ins – Significant issues in practice • The changing attitude of the Regulator to clearance and moral hazard • Major concerns for the Regulator • Conclusions • Questions

  3. Bonas - background • The facts of the case • What are the basic elements that must be satisfied for a contribution notice to be issued? • Is the judgment robust?

  4. Bonas – Grounds of criticism (I) • The “reasonableness test” • Did the target receive any benefit? • Follow the money/benefit in the relationship • Was the pre-pack itself materially detrimental? • Failure to raise this argument in time

  5. Bonas – Grounds of criticism (II) • The nature of voluntary support • Why should this impose an obligation to pay the debts of another? • The “cost of clearance” • Voluntary nature of clearance • Conclusions from Bonus and the appeal

  6. PPF drop-ins – Significant issues in practice • The stages in the process • The different approaches of the Regulator and the PPF • Imminent insolvency? • Previous employers • Triggering a cessation event under Regulation 9(4) • Protecting the parties without compromising a debt

  7. Some of the steps in the process…

  8. Some of the steps in the process…

  9. The changing attitude of the Regulator to clearance and moral hazard • Aligning the interests of the employer, members and the trustees • The differing interests of the Regulator • Have the trustees taken independent advice? • What innovative approaches may be acceptable to the Regulator?

  10. Major concerns for the Regulator • Trustee and advisor conflicts • ERI • Full, independent advice, from advisors with expertise in the area • Priority drift and the long term future of the scheme

  11. Conclusions • Bonas • Risk for pre-packs • Is there an increased risk of moral hazard actions by the Regulator • Consider PPF drop-ins • Changing approach of the Regulator

  12. Questions

  13. This presentation gives general information only and is not intended to be an exhaustive statement of the law. Although we have taken care over the information, you should not rely on it as legal advice. We do not accept any liability to anyone who does rely on its content.

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