Investor Event

Hibu, a most peculiar EGM, and RBS

This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

In a previous blog post on the 28th Nov I discussed Royal Bank of Scotland (RBS) and the “unacceptable face of banking”. It mentioned the case of HIBU, where RBS was one of the lenders, which had just been put into administration thereby apparently thwarting the calling of a General Meeting (EGM) by shareholders and the appointment of new directors. This was similar to the case of Torex retail some years before.

In fact the HIBU EGM did actually take place but the company’s directors did not turn up with only the Administrator present to answer questions. Although the directors of a company in administration are still directors they have no executive capabilities and no legal obligation to attend general meetings but this is rather symptomatic of their treatment of shareholders in this company.

Most peculiar though is the fact that the Administrator explained that Hibu Plc, the parent company, was forced into administration because the subsidiaries (e.g. Hibu UK) had withdrawn their funding of the parent. The subsidiaries also controlled many of the assets. A lawyer for the Hibu Shareholders Group (there were about 60 shareholders present at the meeting) said it appeared that the subsidiaries had been outside the control of the parent since 2012 but this had not been disclosed to the stock market so trading in the shares had been on a false premise since then.

The message for shareholders is surely never get involved with companies where the bankers have the whip hand because they will manipulate the situation to their benefit and ignore the interests of shareholders.

There has also been more news from RBS since the 28th November. They have been fined £324m by the EU Commission for their involvement in Libor rigging, specifically conspiring to fix the Yen and Euribor rates. They had previously paid £390m to UK and US authorities over the same scandal and the latest figure is a “settlement” agreed because of their subsequent co-operation.

But for RBS’s retail customers this week proved even more painful when the banks card processing systems failed for several hours thus making it impossible for their customers to spend money on debit or credit cards, or withdraw cash. Some customers also alleged that their account balances were incorrect. This is of course not the first time RBS has suffered a major IT problem. In 2012 their systems collapsed for several days, but it seems they did not lose many customers as a result then.

It is surely the case that these problems are all symptomatic of the past mismanagement in the company when banks need to be boring but reliable institutions with a clear ethical commitment and intolerance of risk. That is certainly not what RBS became under the leadership of Fred Goodwin.

Roger Lawson

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