In a
trading statement published today, the board of
Northern Rock has indicated that legal action will not be taken against the company's former directors. To quote directly from the
statement:
A review of the conduct of the previous Board in respect of funding and liquidity has been undertaken with the assistance of external advisors, Freshfields and KPMG Forensic. The Board has concluded that there are insufficient grounds to proceed with any legal action for negligence against the former Directors, and has no intention of bringing any such action. The Board has also completed a similar review in respect of the Company’s auditors and has determined that no action is warranted".
1 comment:
It is very hard to reconcile the decision not to take any action agaisn the former Northern Rock board with the evidence presented before the Treasury Committee of the House of Commons in its Run on the Rock hearings and with developments in company law which call for a more objective approach to dealing with failings in duties of directors. At the very least there seems to have been negligence of some proportions if the Commons' Treasury Committee evideicne is to be believed. The 2006 Companies Act might suggest that a broader approach can be taken, especially when this law is read in the context of the well developed body of common law that has emerged elsewhere in the Commonwealth (based largely upon US decisions) as well as in some judgements that have emerged since the collapse of Barings. See further my discussion of these matters in most recent issues of the Company Lawyer ("Corporate rescue, governance and risk taking in Northern Rock." vol 29(10 and (11)) It is interesitng to note the different approach in the US; immediately after the collapse of Bear Stearns senior officers and traders of the company were arrested. Perhaps the response from the Northern Rock board shows that public action is required (as occurred in the US).
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