UK – Troubled assurance and fund management society Equitable Life is suing 15 former directors over its differential terminal bonus policy regarding guaranteed annuity rates. The net loss of the value to the society that Equitable is claiming is difficult to predict but the society says it could top £3bn (€5bn).
The directors concerned were previous board members that served between 1993, when the decision to bring in the policy was taken, and 2000, when the House of Lords, the UK parliament’s second chamber, ruled it unlawful.
Equitable argues that the directors in question failed to see whether the differential bonus policy was legally permissible. This led to a legal challenge during which the society claims the “directors failed to act appropriately on advice from their legal advisers” and that they didn’t make certain that adequate financial provision was made to cover the guaranteed annuities the House of Lords ruled the society had to honour.
Says Equitable chairman Vanni Treves: “starting legal proceedings against 15 former directors is an extremely serious decision to take. The actions or inactions of these former directors caused many policyholders substantial loss of benefits.”
According to an article in the Times newspaper, nine of the directors will be defended by London-based law firm, Allen & Overy, who said the claims are totally without merit.
The announcement follows the society’s recent decision to begin similar proceedings against its former auditors, Ernst & Young for up to £2. 6bn for the role it played in the same crisis.