Britain's Pensions Regulator on Wednesday formally began "enforcement action" against Philip Green, the former owner of BHS, to plug a hole in the collapsed department store's pension fund, saying the billionaire had failed to provide a credible offer.
Green, 64, owned BHS for 15 years before he sold the loss-making 180-store chain to Dominic Chappell, a serial bankrupt with no retail experience, for one pound last year.
BHS went into administration in April and the last of its stores closed in August. Some 11,000 jobs were lost.
Green, whose Arcadia group owns a string of fashion chains including Topshop, sold BHS with a hole in its pension fund which had ballooned to 571 million pounds ($702 million) by the time it went into administration. If not filled, this will leave 20,000 BHS pensioners facing significant cuts to their income.
Green told lawmakers in June he would resolve the pensions issue and in an interview with ITV News last month said there was some "light in the tunnel to a solution."
However, the Pensions Regulator's Chief Executive Lesley Titcomb said on Wednesday: "We are yet to receive a sufficiently credible and comprehensive offer in respect of the BHS schemes."
Green countered Titcomb's claim, saying he had made a decent offer.
"I have provided the regulator with what I believe to be a credible and substantial proposal, with evidence and bank confirmation of cash availability, which would prevent the scheme from entering the Pension Protection Fund," he said.
Green added he had also spoken to the chairman of the BHS pension trustees who was supportive of the proposal.
Following its investigation the regulator has now sent 'Warning Notices' - statements of its case - to Green, his holding companies, Taveta Investments Limited and Taveta Investments (No. 2) Limited, to Chappell and to his vehicle Retail Acquisitions Limited.
Each notice runs to more than 300 pages and sets out the arguments and evidence as to why the regulator believes the respondent should be liable to support the BHS pension schemes.
The notices set out evidence to support the use of both the regulator's Contribution Notice (CN) and Financial Support Direction (FSD) powers.
A CN demands a specified sum of money and an FSD requires respondents to put ongoing support in place for a pension scheme, which must first be agreed with the regulator.
"Our decision to launch enforcement action is an important milestone in our work to attain redress for the thousands of members of BHS schemes who have been placed in this position through no fault of their own," said Titcomb.
"If parties wish to approach us with settlement offers, that course remains open to them," she added.
The regulator's move will likely rekindle the debate over whether Green should retain his knighthood, awarded in 2006 for services to retail.
Lawmakers backed stripping Green of his title in a symbolic vote last month. (Editing by Gareth Jones and James Dalgleish)