The Valuation Process
Q1: How much compensation did the Independent Valuer determine Affected Parties should receive from HM Treasury? Back to top
A: The Independent Valuer determined that no compensation was payable to former shareholders (and to those whose rights to receive shares had been extinguished).
Q2: How did the Independent Valuer reach his final determination? Back to top
A: The amount of any compensation payable by HM Treasury was based on the value of the shares (or the right to receive shares) immediately before the transfer of Northern Rock into temporary public ownership at the beginning of 22 February 2008. This point in time was referred to as the Valuation Date.
The Independent Valuer determined that there would be no surplus at the end of an assumed administration for distribution to shareholders. It therefore followed that there was no value in the shares (or the right to receive shares) as at the Valuation Date and that no compensation was payable to former shareholders or to those whose rights to receive shares were extinguished when Northern Rock was transferred into temporary public ownership.
Q3: Was the final value set by the Independent Valuer applicable to all classes of shareholders and Affected Parties? Back to top
A: The Independent Valuer’s final determination that no compensation was payable to former shareholders applied to all classes of shareholder.
Q4: What were the steps in the valuation process? Back to top
A: The Independent Valuer worked to conduct a fair, open and independent valuation under the Northern Rock plc Compensation Scheme Order 2008. The Independent Valuer’s letter of 13 November 2008 explained the steps involved in the valuation process. These steps were to:
• finalise the valuation procedure taking into consideration comments from Affected Parties;
• request and obtain information relevant to the valuation process;
• review and analyse the information obtained;
• prepare and issue the Consultation Document, outlining the method that the Independent Valuer proposes to use to determine the amount of any compensation payable by HM Treasury;
• review and analyse responses to the Consultation Document;
• issue assessment notices to Affected Parties and HM Treasury outlining the amount of any compensation determined by the Independent Valuer as being payable; and
• set a timeframe during which Affected Parties may seek reconsideration.
Q5: What was the purpose of the Assessment Notice? Back to top
A: The Assessment Notice set out the Independent Valuer’s final determination as to the amount of any compensation payable by HM Treasury to former shareholders of Northern Rock and to those whose rights to receive shares were extinguished when Northern Rock was transferred into temporary public ownership. The Assessment Notice is available for download from the Download section of this website.
Q6: What was the purpose of the Final Document? Back to top
A: The Independent Valuer invited representations on the Consultation Document, which was published in December 2009.
The Consultation Document set out his provisional views on the valuation and on the amount of any compensation payable by HM Treasury to parties affected by the transfer of Northern Rock into temporary public ownership.
The Consultation Document also explained the method that the Independent Valuer proposed to use to determine the amount of any compensation payable and the information that he had reviewed and considered.
Having carefully considered the representations he received, the Independent Valuer prepared the Final Document which set out:
• a summary of the substantive points arising from the representations he received;
• the effect of those representations on the provisional views set out in the Consultation Document; and
• his final determination as to the amount of any compensation payable by HM Treasury.
The Final Document is available for download from the Download section of this website.
Q7: What was the Independent Valuer's provisional view? Back to top
A: In December 2009, the Independent Valuer wrote to Affected Parties, setting out the approach he proposed to take to determine the amount of any compensation payable by HM Treasury and his provisional views on the valuation of Northern Rock and the amount of any compensation payable, based on that approach and the material he had reviewed and considered. The approach he proposed to take was to:
• determine the assets that would need to be realised immediately prior to the Valuation Date to raise sufficient funds to repay the Bank of England funding;
• on the basis that Northern Rock was unable to continue as a going concern and was in administration as at the Valuation Date, ascertain the amount of any surplus that would have been available for distribution to shareholders; and
• determine the amount of any compensation payable by HM Treasury to persons affected by the transfer of Northern Rock into temporary public ownership.
The Independent Valuer’s provisional view was that there would be no surplus of assets over liabilities available for distribution to shareholders at the end of the assumed administration. It therefore followed that there would be no value in the shares (or right to receive shares) in Northern Rock as at the Valuation Date and that no compensation would be due to former shareholders or those whose rights to receive shares were extinguished when Northern Rock was transferred into temporary public ownership.
Q8: What was the purpose of the Revised Assessment Notice? Back to top
A: Any person affected by the Independent Valuer’s final determination set out in the Assessment Notice had the opportunity to submit a request to the Independent Valuer to reconsider his determination.
The Revised Assessment Notice confirmed that, after carefully reviewing all of the requests for reconsideration received, the Independent Valuer remained of the view that the original determination was correct and should be upheld.
The Independent Valuer therefore confirmed that the amount of compensation payable by HM Treasury to former shareholders, or to those whose rights to receive shares have been extinguished, was nil.
Q9: What were the statutory assumptions that the Independent Valuer was required by law to apply? Back to top
A: When undertaking his valuation, the Independent Valuer was required to apply the statutory valuation assumptions set by the Banking (Special Provisions) Act 2008 and the Northern Rock plc Compensation Scheme Order 2008.
These statutory valuation assumptions were that:
• all financial assistance provided by the Bank of England or HM Treasury to Northern Rock had been withdrawn;
• no financial assistance would in future be provided by the Bank of England or HM Treasury to Northern Rock (apart from ordinary market assistance offered by the Bank of England subject to its usual terms);
• Northern Rock was unable to continue as a going concern; and
• Northern Rock was in administration.
Q10: Considering the parameters placed in the Independent Valuer by the Government, wasn't this outcome inevitable? Back to top
A: The legislation clearly states that the Independent Valuer is independent. It was for him – and not the Government – to determine the amount of any compensation payable under the Northern Rock plc Compensation Scheme.
When undertaking his valuation, the Independent Valuer was required by law to apply the statutory valuation assumptions set out in the Banking (Special Provisions) Act 2008 and the Northern Rock plc Compensation Scheme Order 2008.
Q11: How many parties responded to the Consultation Document? Back to top
A: The Independent Valuer invited written representations on the Consultation Document by 29 January 2010. He received approximately 2000 written communications.
Q12: Did the Independent Valuer make any changes to his approach as a result of these representations? Back to top
A: The Independent Valuer carefully considered and reviewed all representations received in response to the Consultation Document. In the Final Document the Independent Valuer sets out a summary of the substantive points arising from the representations he received, the effect of those representations on the provisional views set out in the Consultation Document and his final determination as to the amount of any compensation payable by HM Treasury.
Q13: The written submission that I made as part of the consultation process aren’t referenced in the Final Document, does that mean that it was ignored? Back to top
A: All written representations submitted to the Independent Valuer were carefully considered as part of the valuation process. The Final Document summarised the substantive points arising from the representations received and the Independent Valuer's comments in respect of them.
Q14: Can I see the responses that were submitted as part of the consultation process? Back to top
A: The Final Document summarised the substantive points arising from the representations the Independent Valuer received in response to the Consultation Document and the effect of those representations on his provisional views set out in the Consultation Document.
Q15: What was the point of a consultation process if the Independent Valuer wasn't going to change his provisional view? Back to top
A: The Independent Valuer carefully considered and reviewed all representations received in response to the Consultation Document. However, none of the representations caused the Independent Valuer to change his proposed approach to the valuation or his provisional views as to the amount of any compensation payable.
In the Final Document the Independent Valuer sets out a summary of the substantive points arising from the representations he received, the effect on those representations on the provisional views set out in the Consultation Document and his final determination as to the amount of any compensation payable by HM Treasury.
Q16: What if I wasn't able to submit my representations within the timeframe given? Back to top
A: It was in the interests of Affected Parties and the public interest generally that the Independent Valuer concluded the valuation process without unnecessary delay. The Independent Valuer has now made his final determination as to the amount of any compensation payable by HM Treasury.
Q17: Why did it take so long for the valuation to be reached? Back to top
A: The Independent Valuer identified, obtained and reviewed a significant amount of information during the valuation process. This was a comprehensive process, which included broad consultation to ensure the valuation was fair, transparent and open.
The Independent Valuer:
• communicated with over 200,000 Affected Parties;
• reviewed over 4000 written responses from interested parties including approximately 2000 written responses to the Consultation Document;
• met with all interested parties who requested a meeting with him; and
• met with approximately 70 other people for information gathering purposes.
The Independent Valuer also encountered some difficulties in obtaining relevant information during the information gathering process, largely where persons from whom he wished to gather information were bound by contractual confidentiality arrangements or where information was commercially sensitive. These difficulties significantly delayed progress, particularly in the six months following the Independent Valuer's appointment.
The Northern Rock plc Compensation Scheme Order 2008 was amended in late March 2009, following representations the Independent Valuer made to HM Treasury, to enable him to apply to the Court to compel people to provide him with information.
From this point onwards, access to relevant information was somewhat easier, although some of the information the Independent Valuer needed to finalise the Consultation Document was not made available until November 2009.
Q18: Was the outcome detailed in the Revised Assessment Notice applicable to all former shareholders and Affected Parties? Back to top
A:
The Independent Valuer’s determination that no compensation is payable to former shareholders applied to all classes of shareholder.Q19: What was the point of a reconsideration process if the Independent Valuer wasn’t going to change his view? Back to top
A: The Independent Valuer carefully considered and reviewed all submissions for reconsideration received. However, none of the representations caused the Independent Valuer to change his approach to the valuation or his Final Determination as to the amount of any compensation payable.
Q20: How many requests for reconsideration did the Independent Valuer receive? Back to top
A: The Independent Valuer received approximately 1,700 requests for reconsideration. The determination set out in the Revised Assessment Notice is applicable to all former shareholders and Affected Parties.
Q21: Were affected parties who were dissatisfied with the Independent Valuer’s determination able to appeal? Back to top
A: Yes, any affected party who was dissatisfied by the Independent Valuer’s determination could refer the matter to the Upper Tribunal for appeal.
On 6 October 2011, the Upper Tribunal delivered its ruling and concluded that the Independent Valuer was correct in his interpretation of the statutory provisions, that his application of them to the facts was reasonable and professional, and that the nil valuation should stand.
Q22: Were affected parties who were dissatisfied with the Upper Tribunal’s ruling able to appeal? Back to top
A: On 28 October 2011, the Upper Tribunal granted the former shareholders who had brought claims in the Upper Tribunal permission to appeal its ruling on the correct interpretation of the Withdrawal Assumption.
The Upper Tribunal refused permission to appeal in relation to any other issues. However, the Upper Tribunal's ruling dated 28 October 2011 notifies parties of the right to apply to the Court of Appeal for permission in relation to those issues.
A: Please visit the Court of Appeal's
website for more information.
This is not a Northern Rock website. Northern Rock plc is not responsible for nor has it approved the content of this website. This website is owned by BDO LLP. Its purpose is to provide information to former shareholders and other interested parties regarding the work of the independent valuer under the Northern Rock Compensation Scheme.