C7Part 1The Pensions Regulator
Contribution notices where avoidance of employer debt
C2C1C3C4C5C638C2Contribution notices where avoidance of employer debt
1
This section applies in relation to an occupational pension scheme other than—
I2a
a money purchase scheme, or
I1b
a prescribed scheme or a scheme of a prescribed description.
I22
The Regulator may issue a notice to a person stating that the person is under a liability to pay the sum specified in the notice (a “contribution notice”)—
a
to the trustees or managers of the scheme, or
b
where the Board of the Pension Protection Fund has assumed responsibility for the scheme in accordance with Chapter 3 of Part 2 (pension protection), to the Board.
I23
The Regulator may issue a contribution notice to a person only if—
a
the Regulator is of the opinion that the person was a party to an act or a deliberate failure to act which falls within subsection (5),
b
the person was at any time in the relevant period—
i
the employer in relation to the scheme, or
ii
a person connected with, or an associate of, the employer,
c
the Regulator is of the opinion that the person, in being a party to the act or failure, was not acting in accordance with his functions as an insolvency practitioner in relation to another person, and
F2d
the Regulator is of the opinion that it is reasonable to impose liability on the person to pay the sum specified in the notice, having regard to—
i
the extent to which, in all the circumstances of the case, it was reasonable for the person to act, or fail to act, in the way that the person did, and
ii
such other matters as the Regulator considers relevant, including (where relevant) the matters falling within subsection (7).
4
But the Regulator may not issue a contribution notice, in such circumstances as may be prescribed, to a person of a prescribed description.
I25
An act or a failure to act falls within this subsection if—
a
the Regulator is of the opinion that F5the material detriment test F13, the employer insolvency test or the employer resources test is met in relation to the act or failure (see F14sections 38A, 38C and 38E) or that the main purpose or one of the main purposes of the act or failure was—
i
to prevent the recovery of the whole or any part of a debt which was, or might become, due from the employer in relation to the scheme under section 75 of the Pensions Act 1995 (c. 26) (deficiencies in the scheme assets), or
ii
F7... to prevent such a debt becoming due, to compromise or otherwise settle such a debt, or to reduce the amount of such a debt which would otherwise become due,
b
it is an act which occurred, or a failure to act which first occurred—
i
on or after 27th April 2004, and
ii
before any assumption of responsibility for the scheme by the Board in accordance with Chapter 3 of Part 2, and
c
it is either—
i
an act which occurred during the period of six years ending with the F9giving of a warning notice in respect of the contribution notice in question, or
ii
a failure which first occurred during, or continued for the whole or part of, that period.
I26
For the purposes of subsection (3)—
a
the parties to an act or a deliberate failure include those persons who knowingly assist in the act or failure, and
b
“the relevant period” means the period which—
i
begins with the time when the act falling within subsection (5) occurs or the failure to act falling within that subsection first occurs, and
ii
ends with the F10giving of a warning notice in respect of the contribution notice in question.
7
F3The matters within this subsection are—
I2a
the degree of involvement of the person in the act or failure to act which falls within subsection (5),
I2b
the relationship which the person has or has had with the employer (including, where the employer is a company within the meaning of subsection (11) of section 435 of the Insolvency Act 1986 (c. 45), whether the person has or has had control of the employer within the meaning of subsection (10) of that section),
I2c
any connection or involvement which the person has or has had with the scheme,
I2d
if the act or failure to act was a notifiable event for the purposes of section 69 (duty to notify the Regulator of certain events), any failure by the person to comply with any obligation imposed on the person by subsection (1) of that section to give the Regulator notice of the event,
I2e
all the purposes of the act or failure to act (including whether a purpose of the act or failure was to prevent or limit loss of employment),
F4ea
the value of any benefits which directly or indirectly the person receives, or is entitled to receive, from the employer or under the scheme;
eb
the likelihood of relevant creditors being paid and the extent to which they are likely to be paid;
F15ec
the effect of the act or failure to act on the value of the assets or liabilities of the scheme or any relevant transferee scheme,
I2f
the financial circumstances of the person, and
g
such other matters as may be prescribed.
F17A
In subsection (7)(eb) “relevant creditors” means—
a
creditors of the employer, and
b
creditors of any other person who has incurred a liability or other obligation (including one that is contingent or otherwise might fall due) to make a payment, or transfer an asset, to the scheme.
F127B
In subsection (7)(ec) “relevant transferee scheme” and the reference to the assets or liabilities of any relevant transferee scheme have the same meaning as in section 38A.
I28
For the purposes of this section references to a debt due under section 75 of the Pensions Act 1995 (c. 26) include a contingent debt under that section.
I29
Accordingly, in the case of such a contingent debt, the reference in subsection (5)(a)(ii) to preventing a debt becoming due is to be read as including a reference to preventing the occurrence of any of the events specified in section 75(4C)(a) or (b) of that Act upon which the debt is contingent.
I210
For the purposes of this section—
a
section 249 of the Insolvency Act 1986 (connected persons) applies as it applies for the purposes of any provision of the first Group of Parts of that Act,
b
section 435 of that Act (associated persons) applies as it applies for the purposes of that Act, and
c
section F11229 of the Bankruptcy (Scotland) Act 2016 (associated persons) applies as it applies for the purposes of that Act.
I211
For the purposes of this section “insolvency practitioner”, in relation to a person, means—
a
a person acting as an insolvency practitioner, in relation to that person, in accordance with section 388 of the Insolvency Act 1986, or
b
an insolvency practitioner within the meaning of section 121(9)(b) (persons of a prescribed description).
F612
Subsection (13) applies if the Regulator is of the opinion that—
a
a person was a party to a series of acts or failures to act,
b
each of the acts or failures in the series falls within subsection (5)(b) and (c), and
c
the material detriment test F16, the employer insolvency test or the employer resources test is met in relation to the series, or the main purpose or one of the main purposes of the series was as mentioned in subsection (5)(a)(i) or (ii).
13
The series of acts or failures to act is to be regarded as an act or failure to act falling within subsection (5) (and, accordingly, the reference in subsection (6)(b)(i) to the act or failure to act falling with subsection (5) is to the first of the acts or failures to act in the series).
F814
In this section “a warning notice” means a notice given as mentioned in section 96(2)(a).
Pt. 1 applied in part (with modifications) (20.7.2005 for specified purposes, 1.9.2005 for specified purposes, 5.12.2005 for specified purposes) by The Financial Assistance Scheme Regulations 2005 (S.I. 2005/1986), regs. 1(1), 4, Sch. 1 Pt. 1 (as amended (17.7.2008) by The Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2008 (S.I. 2008/1903), regs. 1, 5(2), 13; (10.7.2009) by The Financial Assistance Scheme (Miscellaneous Provisions) Regulations 2009 (S.I. 2009/1851), regs. 1, 5, 18; (2.4.2010) by The Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010 (S.I. 2010/1149), regs. 1, 5, 15)