Scharf AG, a German mining equipment business, has received a notice from TPR to contribute just over £2m to the pension scheme of its former subsidiary.

This blog post will be relevant if you are considering corporate transactions and operate a DB pension scheme in the UK. This case shows the importance of taking specialist advice on TPR’s wide powers to protect pension savers.

Background

In 2013, Scharf sold a UK subsidiary business (the Dosco Group, which was a manufacturer and supplier of mining and tunnelling equipment) to a shell acquisition company that was set up by management for an MBO (management buy-out).

Two companies in the Dosco Group were employers in a UK defined benefit occupational pension scheme that had approx. £53m assets and a s75 debt at the time of acquisition of £38.8m. The purchase price was put together with loans from the two employer entities (which TPR states was an extraction of cash) and, per TPR, the transaction deprived the scheme of parental support. It was progressed with “complete disregard for the interests of the scheme” and with “no investment or realistic prospect of future financial support”. A key individual also received a cash payment the day after the transaction completed and TPR argued that he had personally benefitted from the arrangements. A cash settlement for £130,000 was reached with this individual.

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