Commentary on Sections Transactions at an undervalue Section 52: Restoration orders where transactions at an undervalue
200.The purpose of this section is to ensure that, when an employer has been subject to a “relevant event”, if the assets of the scheme have been reduced by virtue of a transaction at an undervalue involving assets of the scheme, the Regulator may make a restoration order to put the position back to what it would have been had the transaction not occurred.
201.Subsection (1) provides that the provision only applies in relation to an occupational pension scheme which is not a money purchase scheme or a prescribed scheme or a scheme of a prescribed description. Subsection (2) provides that the Regulator may only make an order in certain circumstances where a “relevant event” has occurred and where the transaction was entered into on or after 27th April 2004 and not more than 2 years before the occurrence of the “relevant event”.
202.Subsection (3) describes the purpose of a restoration order – to restore the position to what it would have been had the transaction not been entered into. Subsection (4) defines a ”relevant event” as an insolvency event in relation to the employer, or an application to or notification from the Board of the Pension Protection Fund under section 129, which occurs on or after the “appointed day”.
203.Subsection (5) defines the meaning of “appointed day” and provides that the meaning of insolvency event under section 121 applies when deciding if and when such an event has occurred in relation to the employer.
204.Subsection (6) defines a ‘transaction at an undervalue’ as a transaction which is entered into by the trustees or managers or an appropriate person with a person where no consideration is to be provided towards the scheme or where the consideration is significantly less than the value of the consideration provided by or on behalf of the trustees or managers. An ‘appropriate person’ is defined in subsection (7) as a person of a prescribed description who is entitled to exercise powers in relation to the scheme. Subsection (8) provides that references to “assets” in this section and section 53 include future assets and that references to “transaction” include a gift, agreement or arrangement. Subsection (9) provides that this section does not prejudice the use of any other remedy in respect of the action (e.g. a claim for breach of trust).