DETERMINATION NOTICE under section 96(2)(d) of the Pensions Act 2004 ( the Act )

Transcription

1 DETERMINATION NOTICE under section 96(2)(d) of the Pensions Act 2004 ( the Act ) The Pensions Regulator case ref: 1773/05 To: Scheme: EBC Asset Management Pension and Life Assurance Trust Mr Vipul Malde Of: To: Of: To: Of: To: Of: XXXXXXXXXXXX XXXXX XXXXXXXXXXX Mr Rainer Christian Kahrmann EBC Asset Management Limited East India House Middlesex Street London E1 7JF Mr Paul Rudolph Bastin EBC Asset Management Limited East India House Middlesex Street London E1 7JF Thomas Eggar Trust Corporation Limited Belmont House Station Way Crawley West Sussex RH10 1JA Date: 25 April 2006 TAKE NOTICE that the Pensions Regulator of Napier House, Trafalgar Place, Brighton BN1 4DW ( The Regulator ) has made a determination on 19 April Determination 1.1 The Pensions Regulator is to determine whether an independent trustee should be appointed to this scheme to secure the proper use or application of the assets of the scheme. 1.2 The application was granted. 1

2 2. Procedure Followed: Standard 2.1 By its Warning Notice dated 4 April 2006 ( the Warning Notice ) the Pensions Regulator gave notice that it proposed to take the above action pursuant to the application of the Regulator. 2.2 The Regulator determined that the following parties are directly affected by this determination: 1. Mr Vipul Malde In his role as a trustee of the EBC Asset Management Pension and Life Assurance Trust 2. Mr Rainer Christian Kahrmann 3. Mr Paul Rudolph Bastin In his role as a trustee of the EBC Asset Management Pension and Life Assurance Trust and sole direction of EBC Asset Management Limited, the principal employer of the scheme In his role as a trustee of the RBC Asset Management Pension and Life Assurance Trust (collectively referred to as the directly affected parties ) These directly affected parties were entitled to make representations to the Pensions Regulator about the determination. 2.3 Following the issue of the Warning Notice WgS Solicitors, on behalf of the trustees exercised their right to make representations to the Pensions Regulator. 2.4 The Pensions Regulator has taken those representations into account and has considered those materials carefully but has nevertheless determined to take the action as detailed in 6 below for the reasons set out below: 3 Relevant Statutory Provisions/Legislation Section 7(3)(c) of the Pensions Act 1995 Appointment of trustees 7(3)(c) The Authority may by order appoint a trustee of a trust scheme where they are satisfied that it is necessary to do so in orderto secure the proper use or application of the assets of the scheme. 8 Appointment of trustees: consequences (1) An order under section 7 appointing a trustee may provide for any fees and expenses of trustees appointed under the order to be paid- (a) by the employer, (b) out of the resources of the scheme, or (c) partly by the employer and partly out of those resources. 2

3 (2) Such an order may also provide that an amount equal to the amount (if any) paid out of the resources of the scheme by virtue of subsection (1)(b) or (c) is to be treated for all purposes as a debt due from the employer to the trustees of the scheme. (3) Such an order may make provision- (a) For restricting the powers or duties of a trustee so appointed, (b) For powers or duties to be exercisable by a trustee so appointed to the exclusion of other trustees. Section Duty to have regard to interests of members etc (1) The Regulator must have regard to the matters mentioned in subsection (2) (a) when determining whether to exercise a regulatory function (i) in a case where the requirements of the standard or special procedure apply, or (ii) on a review under section 99, and (b) when exercising the regulatory function in question. (2) Those matters are (a) the interests of the generality of the members of the scheme to which the exercise of the function relates, and (b) the interests of such persons as appear to the Regulator to be directly affected by the exercise. 4. Relevant Guidance Power to be used The Regulator may appoint an independent trustee to the scheme under section 7(3)(c) of the Pensions Act 1995 where they are satisfied that it is necessary to do so in order to secure the proper use or application of the scheme assets of the scheme. An order under section 7 appointing a trustee may provide that any fees or expenses of the trustees appointed under the order are to be paid (a) by the employer, (b) out of resources of the scheme and (c) partly by the employer and partly out of those resources, it may also provide that an amount which has been paid out of the resources of the scheme can be treated as a debt on the employer. Further, the order can provide that the powers or duties of the appointed trustee are to be exercisable by that trustee to the exclusion of other trustees. 5. Background to the Application 1. The EBC Asset Management Pension and Life Assurance Trust was established on 1 June 1990 by way of an interim trust deed. 2. As at 4 April 2006 there were three scheme trustees all holding senior positions in the employer company. They were: 3

4 Mr Rainer Christian Kahrmann, Chairman and sole director of EBC Asset Management Limited Mr Paul Bastin, Chief Executive of EBC Asset Management Limited Mr Vipul Malde, Chief Accountant, Company Secretary and Personnel Manager of EBC Asset Management Limited 3. Mr Karhrmann is the largest single beneficiary of the scheme. He is also the majority shareholder of the employer company (51%). 4. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX. 5. On 4 July 2005 Mr Vipul Malde, trustee of the scheme, wrote to the Pensions Regulator stating that under the schedule of contributions in respect of the scheme year to 31 May 2005, EBC Asset Management Limited (EBC), was required to pay 108,000 to the Scheme and EBC but had not paid the full amount required and that 78,000 remained outstanding as at 31 May ( 30,000 was in fact repaid to the scheme by EBC on 20 June 2005.) 6. Mr Malde explained in this letter that on 20 June 2005, Mr Kahrmann in his capacity as the Director of the principal employer had affirmed that EBC would make good the shortfall in 3 instalments: 25,000 by 30 June 2005; 25,000 by mid July and the balance of 28,000 by end July These payments were not made. 7. Mr Malde was advised by the scheme actuary that the non payment of these contributions was not reportable until they had been outstanding for 90 days after the due date (29 August 2005) unless Mr Malde believed that the non payment was symptomatic of a more serious or widespread problem relating to the company, for instance if the employer was delaying payment to alleviate cash flow problems. 8. Under the heading EBC s recent position Mr Malde, in the same letter, stated in my opinion the non-payment is symptomatic of a wider problem and gave a history of EBC s financial circumstances and highlighted financial problems within the company. 9. On 22 August 2005 Mr Malde informed the Pensions Regulator that the: i. principal employer had paid a further 7,500 to the Scheme on 12 July 2005, leaving a shortfall of 70,500 outstanding in respect of year ended 31 May 2005; ii. total assets of the Scheme stood at 2,939,000 and that the Scheme actuary as at 1 March 2005 had calculated that the approximate buyout costs of securing all members benefits was 5,376,000, based on a wind up position should the employer cease to sponsor the scheme, giving an estimated deficit on buy out basis of 2,437,000; iii. a transfer value for Mr XXXXXXXX had been quoted and the member had accepted the quotation on 17 August The amount of the transfer value was 486,937 and represented approximately 16% of the scheme assets. The guarantee date was 17 May 2005 and payment was due to 4

5 made by 17 November On 7 October 2005 Mr Malde stated to the Regulator by telephone that he was no longer attending work as he had not been paid his full wages for 2 months. 10. On 10 October 2005 the Pensions Regulator wrote to Mr Malde as representatives of the trustees stating that in light of the principal employer s financial position; the outstanding contributions due to the Scheme and the deficit within the Scheme, the Pensions Regulator did not feel that it would be in all the members best interests to allow the full transfer value of 486, to be paid out. The Pensions Regulator was of the opinion that to pay out 16% of the total scheme assets to one member when the financial position of the principal employer was in doubt could be detrimental to the remaining members and that the trustees should consider applying to the Regulator for an extension of time, permitted for payment of the cash equivalent transfer value, whilst investigations took place into EBC s financial position. 11. On 11 October 2005 Mr Malde telephoned the Regulator stating that Mr Kahrmann was issuing post dated cheques for national insurance due from EBC and that wages were not being paid in full. 12. On 14 December 2005 a letter was issued to Mr Kahrmann at EBC from the Regulator, requesting confirmation of when outstanding contributions to the scheme would be paid; what action was being taken to deal with his conflict of interests as trustee of the Scheme and director of EBC in light of the money owed to the Scheme; details of EBC s financial position and what action was being taken by EBC to meaningfully support the Scheme going forward. A deadline of 29 December 2005 was set for a response to be received. No response was received by that date. 13. On 3 January 2006 a reminder was sent to Mr Kahrmann requesting a response to the Pension Regulator s letter of 14 December On 5 January 2006 Mr Kahrmann wrote to the Pensions Regulator stating that EBC owes 72,560 to the Scheme and that a sale of an EBC asset had fallen through but that he was confident that the money could be found within the next 21 days and requested an extension until 27 January 2006 to respond to the Pensions Regulator s letter dated 14 December On 16 January 2006, the Pensions Regulator wrote to Mr Karhmann stating that a full response would be required no later than 31 January 2006 or further action might be considered. 16. On 30 January 2006 Mr Kahrmann responded to the Pensions Regulator and confirmed that the outstanding contributions of 72,560 would be paid to the scheme on 31 January On 6 March 2006 the Pensions Regulator made enquiries with the trustee of the scheme Mr V Malde to confirm that the outstanding contributions had been received into the scheme. Mr Malde confirmed that the outstanding contributions had not been received into the scheme on 31 January 2006 and that as far as he was aware they remained outstanding as at 6 March

6 18. On 10 April 2006 a letter was received from WgS Solicitors in response to the Warning Notice issued stating that they are acting on behalf of the Trust and requesting an extension to the response deadline to 19 April The letter stated that they were aware that the matter related to a potential deficit at the Trust which they anticipated being able to demonstrate would be rectified promptly. 19. On 11 April 2006 an was sent to WgS Solicitors stating that no extension to 19 April 2006 would be given for further comment as the Panel was due to meet on that date and needed time to consider the facts of the case and any responses. It was explained that the Pensions Regulator felt that it would be detrimental to the scheme to delay matters any further and that it was essential that the case was heard on the 19 th April. It was explained that matters regarding the deficit and it being rectified promptly would not materially affect the facts of the case as there were other issues that the Panel were being asked to consider and the Pensions Regulator would not consider withdrawing the application if it could be demonstrated that the deficit could be cleared promptly. These issues supported the decision not to allow an extension to the 19 th April requested by WgS Solicitors. The Solicitor was advised of the opportunity to make a reference to the Pensions Regulator s Tribunal should the decision taken by the Panel not be agreed with. 20. On 11 April 2006 a fax was received from Vipal Malde on behalf of the trustees of the scheme confirming that a sum of 72,560 had been received into the scheme with 11 April 2006 value date. 21. On 11 April 2006, the Pensions Regulator agreed to allow WgS solicitors until Tuesday 18 April to provide further comments to the Warning Notice. 22. A response was received from WgS Solicitors on the afternoon of Tuesday 18 April and this was duly considered by the Determinations Panel. 6. Facts and Matters Relied Upon A preliminary point was addressed in relation to the comment from WgS that the time limit imposed by the Regulator for a response to the Warning Notice was unreasonable. The panel considered that there had been no failure by the Regulator to comply with either statutory timescale requirements or any set down in their own procedures and that given the additional time allowed to the solicitors for a response, the requirement was not unreasonable. 6.1 All 3 trustees hold senior positions within EBC and they therefore suffer from a potential conflict of interests. In particular, Mr Kahrmann is trustee of the scheme, sole director of EBC and owns 51% of the shares of EBC. He is the sole revenue generator for EBC and has sole discretion over how such revenues are applied. 6.2 The panel considered that, on the evidence, the employer s covenant was weak, particularly taking into account the information given by one of the trustees Mr V Malde. If the employer covenant is weak and its ability to 6

7 support the scheme is in doubt, then consideration needed to be given as to whether it is in the interests of the generality of the members to wind up the scheme to ensure the fairest division of assets. 6.3 The Panel did not consider that the response from WgS had provided sufficient detailed and specific evidence to satisfy them that the company covenant would improve. 6.4 An independent trustee would be better able to assess the financial position of EBC and the future of the scheme, whether it ought to be wound up and how that might be achieved, and in order to pursue the outstanding contributions currently owed to the scheme by EBC. 7. Conclusion: Details of Determination 1. Thomas Eggar Trust Corporation Limited of Belmont House, Station Way, Crawley, West Sussex RH10 1JA is hereby appointed as trustee of the EBC Asset Management Pension and Life Assurance Trust with effect on and from 19 April This order is made because the Pensions Regulator is satisfied that it is necessary to do so in order to secure the proper use or application of the assets of the scheme pursuant to section 7(3)(c) of the Pensions Act The powers and duties exercisable by Thomas Eggar Trust Corporation Limited shall be to the exclusion of all other trustees of the scheme pursuant to section 8(4)(b) of the Pensions Act The appointed trustee s fees and expenses shall be paid by the employer pursuant to section 8(1)(a) of the Pensions Act 1995 as amended by section 35 of the Pensions Act 2004, and those fees and expenses shall be deemed to be a debt due from the employer to the trustee pursuant to sections 8(1)(b) and 8(2) of the Pensions Act 1995 as amended by section 35 of the Pensions Act This order: a. will take immediate effect on the date of this order b. may be terminated at the expiration of 28 days notice from the Pensions Regulator to the trustees, pursuant to section 7(5)(c) of the Pensions Act Decision Maker The determination which gave rise to the obligation to give this Determination Notice was made by the Determinations Panel. 9. Scheme details Name of scheme Type of scheme Status of scheme EBC Asset Management Pension and Life Assurance Trust Defined benefit Open 7

8 9. Scheme details Membership 8 active members Size of fund 2,939,00 as at 1 March 2005 Contracted in/out Contracted out 10. Scheme trustees Name Period of office Status of trustee 1. Vipul Malde present date individual 2. Rainer Christian Kahrmann present date individual 3. Paul Rudolph Bastin present date individual 11. Scheme advisers Type Name Period of office Company 1. Scheme actuary David Watson unknown Scottish Widows plc 12. Employer details Name Address EBC Asset Management Limited East India House Middlesex Street London E1 7JF Nature of business Financial Number of employees 6 Company Registered Number Current Status If dissolved enter date of dissolution active Not applicable 13. Important Notices This Determination Notice is given to you under sections 96(2)(d) of the Act. The following statutory rights are important. 14. Referral to the Pensions Regulator Tribunal 14.1 You have the right to refer the matter to which this Determination Notice relates to the Pensions Regulator Tribunal ( the Tribunal ). Under section 103(1)(b) of the Act you have 28 days from the date this Determination Notice is sent to you to refer the matter to the Tribunal or such other period as specified in the Tribunal rules or as the Tribunal may allow. A reference to the Tribunal is made by way of a written notice signed by you and filed with a copy of this Determination Notice. 8

9 The Tribunal s address is: Bedford Avenue, London WC1B 3AS (tel: ). The detailed procedures for making a reference to the Tribunal are contained in section 103 of the Act and the Tribunal Rules You should note that the Tribunal rules provide that at the same time as filing a reference notice with the Tribunal, you must send a copy of the reference notice to The Pensions Regulator. Any copy reference notice should be sent to Determinations Support at The Pensions Regulator, Napier House, Trafalgar Place, Brighton BN1 4DW. Signed: John Scampion... Chairman: John Scampion... Date: 25 April