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When a museum came up short in its ability to fund a pension scheme deficit, the question of the status of the museum’s exhibits became of interest: if they belonged to the museum trust, they could be sold to fund the shortfall in the pension scheme.
The issue was particularly in point because the pension scheme deficit exceeded £130 million. The reason for the massive liability was that the museum was part of the Wedgwood Group and had become jointly liable for the group pension scheme deficit, which forced it into insolvency along with the rest of the group.
It is estimated that the exhibits in the museum would fetch in the region of £15 million if sold. The High Court ruled that because special charitable trusts were not set up in order to hold the exhibits, the collection was beneficially owned by the museum and therefore available to meet its liabilities.
Says DFA Law Partner Peter Critchell, “Cross-guarantees can lead to unexpected outcomes. In order to protect specific items of value, it is necessary to transfer them into a form of ownership which safeguards them and to do this when the transferring entity is solvent before and after the transfer.”
For advice on any asset protection matter, contact us.