The recent decision in Nortel Networks and Lehman Brothers means that any financial support directions issued by the Pension Protection Fund (PPF) once a company is in administration will rank as an expense of the administration, and not as a provable debt. The effect of this decision is to give the PPF super-priority as a creditor ranking above all other creditors. In all likelihood this case will go to appeal, and if that is unsuccessful then hopefully the Insolvency Service will provide a quick legislative fix, just as they did when the Paramount Airways decision on employee’s rights threatened the “old” administration regime.
However, until the decision is either overturned or a legislative fix is provided then its effect is to mean that the Administrator’s remuneration ranks behind the PPF’s financial support directions such that an Administration does not become an attractive proposition for an IP to recommend. Consequently it makes it imperative to check for the existence of a company pension and to ascertain its financial position prior to considering Administration as the best option and to take legal advice on how to proceed.
