Bankrupt companies must fill their pension gaps before paying other unsecured debts, the UK Court of Appeal has ruled. The court upheld an earlier ruling against the administrators of Lehman Brothers and Nortel Networks that pension funds were an expense and must be paid out before debts to administrators.

The ruling prompted warnings that it could make administrators reluctant to take on cases. The Pensions Regulator, the UK public body charged with protecting pension schemes, ordered Lehman and Nortel to support their underfunded pension schemes through so-called "contribution notices" after they filed for bankruptcy. The schemes had deficits of £148m and £2.1bn respectively.


Lord Justice Lloyd said that "despite the oddities, anomalies and inconveniences" of the High Court decision, it was right not least because the only alternative would be that the pension scheme liabilities would "go into a black hole". "The only alternative to...Read more HERE