Scottish foundation to sue Lloyds Group over covenant payments

Governance | Gareth Jones | 8 Sep 2010

The Lloyds TSB Foundation for Scotland has initiated legal proceedings against its benefactor the Lloyds Banking Group over an alleged breach of their covenant, after being given just £38,920 rather than the £3.5m it believes it is due.

The Foundation claims that under the agreement it is due a proportion of the Group’s pre-tax profits of £1.04bn, but that this year the Group based its calculation on post-tax losses of £6.2bn, meaning it only had to give the minimum payment.

It added that it had consulted “leading” QCs in England and Wales in considering the legal action.

Mary Craig OBE (pictured), chief executive of the Foundation, said the action was “a last resort”.

“In previous years, the amounts reached using the formula in the covenant have been agreed between us with little difficulty. Even last year, there was no disagreement when the Banking Group’s diminished profit levels meant we received a much reduced sum of money via the covenant.

“This year, however, the Group has come up with a new way of interpreting the calculation that is to their distinct advantage and our significant disadvantage.”

A spokesman for Lloyds Banking Group said the firm disagrees with the Foundation’s interpretation but that it would be inappropriate to comment further on the case.

He added: “We proposed a solution earlier this year which would have provided substantial funding and long-term support for Scotland’s charities at a time of great uncertainty for the third sector however this was rejected by the Lloyds TSB Foundation for Scotland.”

The legal action is the latest in the Scottish foundation’s long-running dispute over the amounts it is due from the Banking Group, which culminated in the latter initiating the nine-year notice period to terminate the agreement.

Directory: Lloyds TSB Foundation for England and Wales
Who's Who: Mary Craig

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