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New law: Directors and others face new prohibitions to stop them doing anything ‘detrimental’ to defined benefit pension schemes

Author: Atom Content Marketing

Published: 01 Mar 2021

Directors and others, including pension trustees, lenders and finance providers, investors, buyers and sellers of company shares, and professional advisers are checking whether they are affected by important new pension laws affecting defined benefit pension schemes, due later in 2021.

The new rules prohibit them from behaving in a way which they know, or should have known, would detrimentally affect benefits under a defined benefit pension scheme in a material way, unless they have a reasonable excuse for doing so.

This could create a problem in transactions like company acquisitions, mergers, re-organisations, re-structuring of companies (or groups of companies) - particularly, where a company with financial problems is looking for fresh investment or considering additional borrowing or other debt - and payment of dividends where a company is in financial difficulty.

Penalties include a civil penalty of up to £1m, and criminal penalties of up to seven years in prison.

The new law is to be introduced after mid-2021 – the date is not yet fixed, as the Pensions Regulator needs to consult first. It will not apply retrospectively, but it would be prudent for directors and others to start considering now whether and which of their current projects or future plans and proposals could affect a defined benefit scheme.

Operative date

  • Mid-2021

Recommendation

  • Directors, pension trustees, lenders and finance-providers, investor, buyers and sellers of company shares, and professional advisers should consider whether they could be affected by important new pension laws affecting defined benefit pension schemes due later in 2021.
Disclaimer

This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.