Northern Rock shareholders commence legal proceedings
Shareholders of crisis-torn Northern Rock have commenced legal proceedings against the Government to claim compensation for nationalising the bank as they believed it was still a viable company.
The UK Shareholders Association (UKSA) has submitted an application for judicial review which questions the terms under which the bank was nationalised, which will leave its 15,000 private shareholders with almost nothing.
The UKSA is of the view that nationalising the Northern Rock was unnecessary. The organisation was also said to be angry about the meagre share price which the shareholders are expected to be offered.
Legal & General, which has a 5% stake in the bank, is also taking legal action against the Government to secure compensation for its losses.
SRM Global together with RAB Capital, the bank’s two largest shareholders, face combined losses of approximately £170 million following the nationalisation.
SRM has already filed an application while RAB is expected to follow suit.
If the applications for judicial review are accepted, then the case will go to a full hearing, which may not commence until later this year.
The 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.
Roger Lawson, Chairman of the Northern Rock Shareholders Action Group, said many smaller shareholders do not seem to have realised that the Government is intent on paying them nothing.
In addition, they are under the false impression that the shares will be returned to them after the period of temporary public ownership trumpeted by the Government, which is clearly not the case, said Mr Lawson.
I have had shareholders in tears to me on the telephone after I have explained to them the true situation and that their investment in the company is effectively lost. They simply do not understand why the Government would take away their shares, which were backed by substantial assets, and not pay fair compensation, concluded Mr Lawson.