Northern Rock shareholders edge closer to legal action

24 April 2008 / by Rachael Stiles
The shareholders of nationalised bank Northern Rock are edging closer towards what they hope will result in the Government getting it's comeuppance for taking the bank into public ownership without due cause.

The UK Shareholder's Association (UKSA) – on behalf of the bank'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 – the UK's fifth biggest mortgage lender until the collapse of the US sub prime mortgage market last summer – to repay its contingency loans to the Bank of England, and continue as a viable company.

UKSA is also angry about the meagre share price which the shareholders are expected to be offered, rumoured to be just five pence per share when in fact the true value could have been closer to £5, had the business been valued at the time of its acquisition by the Government.

Furthermore, UKSA is of the opinion that in nationalising Northern Rock unnecessarily, the Government was acting in violation of the shareholders' human rights under the Human Rights Act 1998 and the European Convention of Human Rights. For these reasons, UKSA maintains that "there are good grounds to pursue legal action to challenge many aspects of this process and the likely compensation that will 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.

Northern Rock's two biggest shareholders – SRM Global and RAB Capital – are also expected to follow suit after having similar 'letters before action' rejected by the Treasury.

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