Northern Rock investors set to sue government

Northern Rock shareholders are reportedly planning to sue the UK Government
over its plans to value shares in the newly nationalised lender.

The Northern Rock Compensation Scheme Order is expected in the House of
Commons early this week, and will set the wheels in motion for determining how
much the government should pay to shareholders following its decision last month
to take Northern Rock into public ownership.

Under the terms of the order, an independent valuer will be appointed to
decide on the appropriate level of compensation. However, the order says that
the valuation should be based on the assumption that without the Treasury’s
intervention, Northern Rock was unable to continue as a going concern, and was
in administration.

Shareholders argue the Government has no right to specify such terms, and
that in doing so, it is likely to render their shares worthless.

The Northern Rock Shareholder Action Group has urged shareholders to lobby
their MPs to push for an independent valuation panel that can determine its own

‘We consider it ethically and morally unjust for a government to contrive to
fix the terms of compensation. As a result any valuation process will not be
objective and independent,’ Roger Lawson, chairman of the action group, told
last week.

SRM Global, Northern Rock’s biggest shareholder, is likely to this week
launch legal action against the UK Government, in conjunction with smaller
shareholders and RAB Capital, Rock’s second-largest shareholder.

Related reading