The Court of Appeal has upheld a High Court decision to allow four former directors of Granada Group to receive £40m pensions without shareholder approval.
Granada had hoped to remove an unfunded top-up pension promise - made under a secured unfunded retirement benefit scheme (SUURBS) - granted to directors including former boss Charles Allen.
The plan had been set up in 2000, with Law Debenture acting as a trustee with charge over the securities if Granada failed to pay the benefits.
In 2014, Granada began legal action to void the SUURBS, arguing shareholder approval was required - under section 320 of the Companies Act 1985 - but had not been obtained.
The legislation states shareholder approval must be acquired at a general meeting when a proposal is made to grant directors of a company - or a person connected to a director - a "non-cash asset" above £100,000.
Although an exemption applies for trustees of pension schemes, Granada argued it only applied to the acquisition of a non-cash asset, and not the directors' beneficial interests in the unfunded scheme.
It also said the directors had "rights over" gilts within the scheme, by being able to compel trustees to administer the trust.
However, on 16 December, Lord Justices Lewison, Christopher Clarke and Hamblen sided with the High Court's initial judgement, made in 2015, and said directors only had "rights against the trustee, not rights over the trust assets".
As a result, the directors had not obtained non-cash assets that would be contrary to the Companies Act.
They also dismissed Granada's argument that the exemption did not apply, arguing that interpretation could not have been the intention of Parliament when drafting the legislation.
In the written judgement, Lord Justice Lewison said the directors had not attained their entitlement via the company, but rather by entering into the SUURBS as a member.
"It is clear… that Parliament intended that a pension trustee should be outside the scope of section 320," he wrote. "[Granada's] interpretation would frustrate that intention.
"The right of a beneficiary to compel a trustee to perform the rights is a right which he has by virtue of his status as a beneficiary under the trust. In my judgement, that is not a right which the beneficiary acquired ‘from the company'. It is a right which he acquired from his admission as a member of the scheme."
Consequently, the judges dismissed the appeal.
Law Debenture was represented by Linklaters in the trial, with pensions dispute resolution partner Mark Blyth welcoming the outcome.
"We welcome this decision," he said. "It is plainly correct and gives final certainty over the validity of these types of arrangements without the need for shareholder approval."
Granada had not replied to a request for comment at the time of publication.
Tim Shepherd and Beth Brown look at the legal implications of working from home and how pension professionals can mitigate the risks.
The Pensions Regulator (TPR) has substantially increased the usage of its powers against trustees – posting a sharp rise in the use of formal information gathering powers and High Court production orders during the three months to the end of September....
The Pension Schemes Bill has completed its third reading, crossing its latest hurdle in the House of Commons.
An amendment to the Pensions Schemes Bill which would have seen people given a pre-booked Pension Wise appointment ahead of accessing their retirement savings has been defeated.
A proposal to ensure savers receive a Pension Wise appointment prior to accessing their retirement pot has received cross-party support in parliament, while Labour seeks net-zero pensions by 2050.