An FSD is one of the powers available to TPR to prevent corporate entities from avoiding their pension liabilities and requires approved support to be put in place for under-funded pension schemes. This follows TPR's flurry of activity this summer, which resulted in a contribution notice (another 'anti-avoidance' power) against the Bonas Group and a series of FSDs against members of the Nortel Networks Group.

TPR initially sought 44 FSDs against subsidiaries of Lehman Brothers but only six were upheld by the DP; these were against three main UK operating companies, two intermediate UK holding companies, and Lehman Brothers Holdings Incorporated (LBHI), the ultimate group parent in the US.

The DP was satisfied that, although Lehman Brothers Ltd (LBL) was the principal employer of the Scheme, the contributions came from LBHI as group treasurer and LBL was a service company. Some of LBL's responsibilities were covered directly under various secondment agreements and general recharging arrangements, and LBHI had entered into a guarantee with the trustees of the Scheme for LBL's scheme liabilities.

The DP also opined that the six recipients of the FSDs satisfied the 'connected or associated' test and received benefits from LBL because of: the secondment of LBL employees and provision of 'back-office services' which benefited the group (but not necessarily LBL directly); the holding by LBL of assets for the operating companies in order to reduce their capital requirements; and allowing inter-company balances to remain outstanding.

Ongoing insolvency issues have cast doubt on the enforceability of the FSDs as Lehmans has joined with Nortel Networks in arguing that a creditor can prove for a debt on the insolvency of a company only if that debt existed at the date of commencement of the insolvency procedure. If an FSD is not a provable debt, then it may fall to be treated as an 'expense', which could have far-reaching consequences, as an expense will outrank unsecured creditors in the insolvency process. The case is expected before the High Court in November.