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PPF drop ins and clearance – significant changes . Clive Pugh Richard Pettit 5 October 2010. Introduction. Bonas – the implications for clearance PPF drop-ins – Significant issues in practice The changing attitude of the Regulator to clearance and moral hazard

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Ppf drop ins and clearance significant changes

PPF drop ins and clearance – significant changes

Clive Pugh

Richard Pettit

5 October 2010


Introduction
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


Bonas background
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?


Bonas grounds of criticism i
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


Bonas grounds of criticism ii
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


Ppf drop ins significant issues in practice
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




The changing attitude of the regulator to clearance and moral hazard
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?


Major concerns for the regulator
Major concerns for the Regulator moral hazard

  • 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


Conclusions
Conclusions moral hazard

  • 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


Questions
Questions moral hazard


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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