Northern Rock Shareholder Action Group

Updated 8 May 2008 (Latest news is at the bottom of the page)

The UK Shareholders Association has been running a Shareholders Action Group to promote the interests of Northern Rock Shareholders since September 2007. We are now primarily campaigning for fair compensation for the confiscation of the shares (i.e. the shares you held in Northern Rock) and a summary of our case is given below.

If you wish to register your interest in our campaign and law suit please contact the following: Roger Lawson, Chairman, Northern Rock Shareholders Action Group, UKSA, email: uksa@uksa.org.uk, telephone: 020-8467-2686, PO Box 62, Chislehurst, BR7 5YB. Although none of the following is essential (other than a name) it would help to provide the following information: Name, Email address, Telephone number, Postal address and Number of shares held.  Any such information will be held in confidence by UKSA and will be used to communicate with you to provide further information as it becomes available.

The Basis of Our Case. In our view the UK Government have confiscated the shares even though there was a good private sector solution on the table that would have enabled the company to recover and to repay the debts it owed to the Bank of England.  

They have promised to pay some compensation but have rigged the basis of the valuation of the shares so that shareholders are likely to get very little or nothing (newspapers have been suggesting it could be as little as 5 pence per share and we also believe it will be a negligible figure).   

Why have they done this and how?  The reason they have done this is apparently because they have deduced that it offers “better value” to the Government to acquire the shares for a pittance, and then sell off the company after a period of “temporary public ownership” to the highest bidder. Note that there is no commitment to give back to former shareholders any interest in the company when it is subsequently sold, so you will not benefit from any recovery in the business. 

Rigging the Independent Valuation. How has the Government rigged the compensation terms? They have set the terms of reference for the independent valuation by specifying that the following assumptions (amongst others) should apply: 

a)     that the company is unable to continue as a going concern; and

b)     that the company is in administration. 

These “assumptions” clearly did not apply when the nationalisation took place. The company was not in administration, and was trading normally and as a going concern (as Ministers have repeatedly said in Parliament and elsewhere). Such terms of reference for the valuation of any company are likely to result in a negligible valuation. In addition the selection of the valuers is solely at the discretion of the Treasury and there is no guarantee that they will be unbiased and impartial. 

The Government Benefiting from its Own Actions. It is a general principle followed in commercial disputes that anyone who damages the value of a business should not benefit as a result in any subsequent valuation of that business. But here the Government and its agencies caused many of the problems that Northern Rock faced.  

A Legal Challenge is Justifiable. We consider the valuation approach to be unlawful, immoral and unethical and we believe that the Government should not gain by being able to purchase the company cheaply as a result of its own actions. We have taken legal advice on these issues and we believe there are good grounds to pursue legal action to challenge many aspects of this process and the likely compensation that will be offered. 

We believe that shareholders have a prima facie case that their human rights have been violated under the Human Rights Act 1998 and the European Convention on Human Rights. In particular, the Act and the Convention protect rights in property from the type of action which has been taken by the Government here.  

In our view a proper, independent valuation of this business when it was acquired by the Government might produce a figure of more like £5 than 5 pence per share, which gives you a measure of how much compensation we believe shareholders should be asking for as opposed to what the Government wishes to pay. However, please note that we do not wish to prejudge any valuation as not all the necessary financial information is available to us at this time – all we ask is that the valuation should be done on a normal commercial basis with shareholders and the Government being able to make submissions about the factors that might affect the conclusion.  But it is certainly not natural justice that a buyer of any business should dictate the terms of reference for the determination of the purchase price. 

Launch of Legal Action Fund. We estimate that there are over 150,000 private individuals who have been affected by this matter. We are therefore asking everyone who was a shareholder in Northern Rock to register their interest in this legal challenge and contribute a minimum of £25. Larger donations are invited from shareholders with more than 1,000 shares, in proportion to their holdings. Go to this page for more details of the appeal: Appeal or simply go here to donate: Donation

Please donate to this fund if you have not already done so. We really do need contributions from everyone if we are to obtain justice for shareholders.

The picture below is of shareholders at a meeting held by UKSA in Newcastle in November 2007 (for more photos of events organised by UKSA see Photos ).

Latest information (in chronological order from 17/2/2008 - latest at bottom). As the company has now been nationalised, making a lot of our past comments only of academic interest, we have moved them to a separate page which is here: NorthernRock_Past.

THE NATIONALISATION OF NORTHERN ROCK. (17/2/2008). UKSA has issued the following press release following the announcement by the Government that Northern Rock is to be nationalised: Press058_NRK_Nationalisation. Soon after we issued the following note: Update_24

FAIR COMPENSATION NOT BEING OFFERED. On 20/2/2008 we issued the following note (and later extended it on 24/2/2008) about the terms of the compensation to shareholders and our commitment to pursue legal action to obtain some redress: Update_25 . This note was issued on 2/3/2008 concerning various aspects of the current position: Update_26. The following note was issued on 7/3/2008 about the forthcoming debate in Parliament of the Compensation Order: Update_27 and this note was issued after those debates: Update_28

PRESS CONFERENCE TO ANNOUNCE NEWS ON LEGAL ACTION AND APPEAL LAUNCH. On the 19th March UKSA held a press conference in London and we subsequently issued the following note: Update_29. This gives more details of the basis of our legal challenge to the Compensation Order and how we intend to promote this campaign and raise funds to fight this issue. Some photographs taken at the press conference and of our activities in the North East are present at: Press_Conference . Update 30 covered the FSA review of its activities on Northern Rock and other news.

2007 RESULTS AND STATUS ON LEGAL ACTION. This note was issued following publication of the accounts for 2007: Update_31, and this note was issued on the 20th April to bring supporters up to date with the latest news: Update_32. Following rejection by the Government of our submission on the unfairness of the compensation terms, we issued the following press release confirming that legal action will be proceeded with: Press061. We also issued the following note concerning the recent funding of other banks: Press060 and sent a letter to Alistair Darling requesting an inquiry into the leak that prompted the run at Northern Rock: Darling_Letter_30042008. A summary of recent news was issued in Update_33. The following press release was issued on the 8th May when the application for a judicial review was filed: Press062 and Update_34 was issued to our supporters.