Northern Rock shareholders are to attend an Extraordinary General Meeting (EGM) tomorrow to discuss the bank's future.
The meeting has been called by hedge funds SRM and RAB Capital, key shareholders in the troubled bank, who have proposed restricting the powers of Northern Rock’s board to stop the company being sold too cheaply.
The hedge funds have called for the board to be limited to being able to issue or allot new shares only up to the value of £5m.
They have also asked shareholders to consider limiting the board’s ability to dispose of or acquire assets above a certain value and asked the bank to take action to prevent shareholders from disposing of their shares.
However, the board of Northern Rock has asked shareholders to reject the proposals, saying they would hamper the bank’s ability to act decisively in a difficult situation.
Bryan Sanderson, chairman of Northern Rock, says: "The resolutions proposed on behalf of two shareholders, SRM and RAB, in the view of the Board, restrict the ability of the Company to act in a timely and appropriate manner during a period when the Board is likely to need maximum flexibility.
“Whilst I recognise the positive motives of the two shareholders in question, the Board believes that we have a governance structure in place that protects the interests of shareholders and all other stakeholders and that the proposed resolutions place restrictions on the Company significantly in excess of the norm for other fully-listed UK public companies.”
Shareholders will also be asked to vote in favour of resolutions to appoint Sanderson’s choice of board members, following the resignation of several board members in October 2007.
Meanwhile, the Government is lining up a potential chairman for Northern Rock in the event that a suitable buyer cannot be found and the bank needs to be nationalised.
Ron Sandler, former chief executive of Lloyd’s of London and the man by the introduction of stakeholder products, would become executive chairman should the Treasury decide to take control of the bank.
Analysts say that if the shareholders side with the two hedge funds, the bank will be seen as ungovernable and nationalisation will be the best option for the firm.
The meeting is due to take place at 10am tomorrow at the Metro Radio Arena in Newcastle upon Tyne.
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