How long have banks been trading while insolvent - interesting angle

beaujolais-nouveau

http://news.bbc.co.uk/1/hi/scotland/7894088.stm

RBS is facing a legal challenge from Iain Hamilton QC, who claims it was insolvent when it sold him shares worth over £1,200. The QC is taking RBS to the small claims court.

http://www.insolvencyhelpline.co.uk/insolvency-act/index.php
Insolvency Act 1986

Banks have for some time been lending more than they had on deposit, in some instances 7 times more than they had on deposit. If anyone else did that, the auditor would want to know how the bank would repay unsecured its creditors. And "ask the Government for a bail-out" would have been the wrong answer.

Could be interesting.

chewmylegoff

beaujolais-nouveau wrote: »

http://news.bbc.co.uk/1/hi/scotland/7894088.stm

RBS is facing a legal challenge from Iain Hamilton QC, who claims it was insolvent when it sold him shares worth over £1,200. The QC is taking RBS to the small claims court.

http://www.insolvencyhelpline.co.uk/insolvency-act/index.php
Insolvency Act 1986

Banks have for some time been lending more than they had on deposit, in some instances 7 times more than they had on deposit. If anyone else did that, the auditor would want to know how the bank would repay unsecured its creditors. And "ask the Government for a bail-out" would have been the wrong answer.

Could be interesting.

boo hoo my shares are worthless it's not fair.

Alan_M_2

chewmylegoff wrote: »

boo hoo my shares are worthless it's not fair.

Did you actually listen to the link?

I think he is asking a wholly reasonable question.

It is illegal to trade whilst knowingly insolvent. The gentleman in the link , whilst clearly he holds little or no hope whatsoever of any financial recompense is asking that RBS be accountable in the same way that any individual or small business would be accountable if they found themselves in the same position.

His argument that RBS should be made to account for their actions is not unreasonable, they should be required to be accountable for their actions without being allowed to spend Millions of Pounds (ironically what will now be taxpayers money) on legal defense and drag the case into the courts knowing that any individual or business for that matter simply could not afford to lose or bankroll the required legal team.

It's interesting small acts like this that sometimes work, unexpectedly.

Radiantsoul

Alan_M wrote: »

Did you actually listen to the link?

I think he is asking a wholly reasonable question.

It is illegal to trade whilst knowingly insolvent. The gentleman in the link , whilst clearly he holds little or no hope whatsoever of any financial recompense is asking that RBS be accountable in the same way that any individual or small business would be accountable if they found themselves in the same position.

His argument that RBS should be made to account for their actions is not unreasonable, they should be required to be accountable for their actions without being allowed to spend Millions of Pounds (ironically what will now be taxpayers money) on legal defense and drag the case into the courts knowing that any individual or business for that matter simply could not afford to lose or bankroll the required legal team.

It's interesting small acts like this that sometimes work, unexpectedly.

This will cost little as it is going through the small claims court. I am not sure that he has much of a case as;
1. he didn't buy the shares directly from RBS. He acquired them from a third party.
2. RBS was at no stage insolvent. It was not insolvent when the government took shares(it net assets exceeded its net liabilities and it was able to pay liabilities as and when they fell due). It is certainly not insolvent now, there is no liquidator or administrator, it continues to operate and will presumably at some point pay a dividend.
3. The government did acquire shares, but if another individual or group had acquired shares he would not have been in a position to sue.
4. The legislation in the insolvency act seems designed to protector and not share holders. Shareholders are expected to take a risk, but creditors are expected to be paid and the shareholders funds act as a buffer to insure they are.