There are some major changes proposed here but it is doubtful whether any of them would have prevented the recent failures of BHS and Carillion. However, the consultation offers scant detail, so it is difficult to comment at this stage in any depth.
The next Queen's Speech will be in 2020 and the fines and criminal proceedings changes will require primary legislation. Therefore, it may not be until late in that year that new legislation comes into force. Even the provisions that require clarifying regulations and TPR guidance are unlikely to be finalised in the near future.
Of particular concern are the proposals to make failure to report a notifiable event a criminal offence and the extension of the look-back period – is this to be retrospective? If so, current transactions could be under scrutiny before the final shape of the reforms is known.
The new notification requirements will require detailed guidance on what TPR requires, from whom and at what stage of the planned transaction. One of the new notifiable events that centres on a “significant restructuring of the employer’s board of directors and certain senior management appointments” will need clear guidance on the test that should be applied when such new appointments are made.
If the new disclosure regime proves to be highly prescriptive, corporate restructures may become unattractive and corporate activity may be stifled. Key to the sanction proposals outIined in the consultation will be the interaction with the proposed revision of the DB funding regime and the question of whether dividend payments are to be included among the new notifiable events.
Further questions arise in relation to TPR’s resources and how this new regime is to be overseen. TPR’s annual report and accounts and its quarterly compliance reports indicate that a significant proportion of its current spending allocation is dedicated to ensuring compliance with the auto-enrolment regime. It is unclear whether TPR envisages increasing its staff and budget (and therefore potentially scheme levies?) to supervise the extended notification proposals and related new sanctions.
Our September 2018 client seminar will focus on the consultation and any further information issued by the DWP, and we look forward to discussing then the various issues arising from the DWP’s proposals.
View the consultation paper.