Shareholders of Northern Rock proceed with legal action
The Government took Northern Rock into public ownership on February 22 and shareholders were believed not to be in favour of the nationalisation and have since been threatening legal action.
The UK Shareholder’s Association (UKSA) (acting on behalf of the Northern Rock’s shareholders) believes that the UK Government confiscated the shares even though there was a good private sector solution on the table which would have enabled Northern Rock to repay its contingency loans to the Bank of England, and continue as a viable company.
The UKSA is of the view that nationalising the crisis-torn bank was unnecessary. The organisation was also said to be angry about the meagre share price which the shareholders are expected to be offered.
Court action is expected to have been brought closer as a result of the Treasury’s rejection this week of investor’s formal application for fair compensation as a result of the bank’s nationalisation which has left their shares virtually worthless. The UKSA has now instructed its lawyers to pursue legal action.
SRM, together with RAB Capital, the bank’s two largest shareholders, face combined losses of approximately £170 million following the nationalisation. The two companies are also expected to commence legal action against the bank.
The crisis-torn bank was nationalised after the Government rejected takeover bids from the board of Northern Rock and a consortium led by Sir Richard Branson’s Virgin Group.
Former Lloyds of London boss, Ron Sandler, is currently in charge. Mr Sandler and the rest of the team are involved in a plan to revive the struggling bank.
Northern Rock is expected to axe 2,000 jobs in the next 3 months. It was initially believed that the cuts were to be over a three-year period.
The majority of the losses will be in the North-East of England where the bank is based.