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01 May 2008 / Peter Ashford
Issue: 7319 / Categories: Features , Banking , Constitutional law , Commercial
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Valuing the Rock

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How will compensation for Northern Rock shareholders be assessed? Peter Ashford investigates

Northern Rock plc entered into public ownership on 22 February 2008 after failure to secure a takeover from the private sector. The mechanism of the nationalisation was to transfer all of the existing shares into the name of the Treasury Solicitor as nominee for the Treasury. No compensation was paid to the shareholders at the time of the transfer, but ever since there have been calls for greater clarity of how that compensation will be assessed and paid. Unusually, even the institutional investors, and in particular Legal & General, have made calls for this clarification.

In fact much of the detailed procedures for compensation are set out in the primary and secondary legislation authorising the privatisation.

The primary legislation is the Banking (Special Provisions) Act 2008 (B(SP)A 2008). B(SP)A 2008 permits, in effect, privatisation for the purposes of “maintaining the stability of the financial system” and “protecting the public interest”. Section 5

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