The story so far: the Royal Bank of Scotland having run up
losses – £24,000 million at last count – the British government stepped in and
bought 84% of the shares.
In doing so, the government took over the bank’s obligations
as a going concern – including pension obligations.
It has finally occurred to someone that these include the
obligation to pay the generous pensions agreed with the senior executives who
mismanaged the bank in the first place.
Ministers are desperately trying to get out of that
obligation – even to the extent of suggesting a special Act of Parliament to
suspend the law of contract.
To do so would undermine the fragile confidence on which the
whole system depends. As Liberal spokesman Vince Cable pointed out, they really
have not thought this thing through.
For anyone who is willing to think, here is what we
should learn from this experience:
1 There are great
opportunities for entrepreneurs looking to pick up a failing business on the
cheap, but it might be better to wait for it to go bankrupt and cherry pick the
assets one really wants to buy, rather than buy the whole thing as a going concern
with all its obligations;
2 If one does buy a
going concern, the importance of due diligence cannot be stressed enough;
3 Governments cannot
run businesses – their incompetence in this matter proves nationalisation is
not the answer to anything; and
4 The whole
structure of commerce, not to mention the rule of law, depends on everyone
keeping their word, governments and entrepreneurs alike – which makes it doubly
important that everyone thinks carefully before giving their word in the first