Contract law training: "Disregard" for shareholder rights identified

Proposed government plans to change the law to enable officials to step in and take over an apparently failing bank represent a disregard for basic shareholder rights and contract law, according to one commentator.

The Evening Standard's Anthony Hilton refers to this week's close of consultation on the creation of a Special Resolution Regime to deal with "the next Northern Rock".

Such a regime would "ride roughshod" over the rights of business owners, he suggests.

"Hence the concern, among others, of the Association of British Insurers (ABI), which speaks for £1,500 billion of policyholders' funds and which is frankly alarmed at the lack of respect the proposals show for basic shareholder rights and contract law."

In an observation underlining the pertinence of contract law training in staying abreast of said rights, Mr Hilton notes the ABI's preference for shareholders to be consulted, in the instance of a potential failure, for alternative solutions and/or the provision of more capital.

This, in the organisation's opinion, could prevent companies' most valued assets being sold on without stakeholder approval.

Undermining contract law by passing the proposed legislation could ultimately do "huge damage" to London's position as an international financial centre, Mr Hilton concludes.

If the new legislation gets the go-ahead, the government intends to draft it by February.