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Asset Sales Notes

LPC Law Notes > Private Acquisitions Notes

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A more recent version of these Asset Sales notes – written by Cambridge And Oxilp And College Of Law students – is available here.

The following is a more accessble plain text extract of the PDF sample above, taken from our Private Acquisitions Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Asset Sales
= in its most basic form, a pension is simply a pot of money saved up over an e'ees working life, into which the e'ee and/or the e'er make contributions to provide the e'ee (or their estate if they die) w/income during retirement Why use a pension to save?

- tax efficient way of saving, good for e'ee because sum invested is 'gross' amount (this is become money is not taxed on its way into the pot)
- contributions from both e'er and e'ee
- investment gains
- tax-free lump sum in the end
- annuity (or income drawdown)

(1) Personal (contract between individual and pension scheme) =
Types of pension -> Always money purchase (basically a pot of money) eg. stakeholder scheme (just a tightly regulated money pension scheme) [see below]
(2) Occupational (ie. thr/ your job and set up by e'er - may be for a group of cos or for a single e'ee scheme)=
-> money purchase scheme (pot of money - you can get lump sum and annuities)
-> final salary pension scheme (you get a percentage of your final salary)
[see below]
Money purchase

Final Salary Schemes

- known as a defined contribution scheme
- here, defined from eyes of e'er
- from e'er's point of view, their liability is fixed
- e'er agrees in advance what level of contribution it is prepare to make on behalf of e'ees that join the scheme and liability is fixed to this amount
- on retirement, the post isn't just handed over to e'ee as lump sum
- instead, the money is used to buy retirement benefits - usually in the form of a financial product called an annuity
- annuity = an insurance product that provides e'ee w/income till death
- GR - e'ers prefer money purchase because their liability is certain
- also known as defined benefit scheme
- here, defined means from eyes of e'ee
- a good scheme will provide 1/60th of e'ees final salary for each yr of e'ent
- this is great for e'ees but terrible for e'ers because liability is not fixed as e'er has no idea how long e'ee will be w/company and how high their salary will be in final yr of employmeny
- consequently, due to loads of co's not having enough in their pension pot to pay these out as a result of recession these don't really exist anymore apart from for execs/fat cats
- an old school corporate scheme which is not popular w/e'ers

Group schemes vs single e'er schemes E'ers obligations

s.75 PA liability nb. doesn't apply to money purchase schemes

- this will be done on whichever is more tax beneficial for the specific co

Pensions Act ('PA') 2006 introduced new obligations on e'ee to provide access to, and contribute towards, pensions for their e'ees. Therefore, contemporary and important issue Share sale - under s.75 PA the co ceasing to participate in a group co occupational scheme will be liable for their proportion of any deficit concern for B. If a co participates in a single e'er occupational then liability remains w/T. There are particular issues w/final salary schemes (or other defined benefit schemes) because if the scheme is in deficit time of sale then "e'er cessation event" [aka leaving the scheme] makes the co liable for a huge "e'er" debt to the S group Therefore for both sales it is essential that during DD full deets of pension schemes obtained. Nb. a Asset sale - concern for S because they keep liability of any occupational pension scheme. Nb. s75 liab could also arise if selling co participated in a group final salary scheme and all of its e'ees passed to B and therefore S co is ceasing to participate in scheme. Here though, liability would remain w/selling co and wouldn't pass to B

Personal and Occupational pension schemes obligations on asset sale What transfers under TUPE?

Reg 10 transfers
- rights in relation to personal pension schemes
- NOT occupational pension rights
.... but Pensions Act 2004 and Transfer of E'ent (Protection Regs) 2005:
... where S provides occupational pension scheme, B must make some but not the same contributions to:
- a final salary scheme; or
- a money pension scheme; or
- a stakeholder scheme (nb. a B doesn't even need to set up occupational pension scheme particularly, just any pension scheme so not too onerous)

E'ees/TUPE TUPE = Transfer of Undertakings (Protection of E'ent) Regulations 2006. For purpose of PA module, business sale as a going concern will always constitute a 'relevant transfer' for purposes of TUPE

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