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BARCLAYS BANK PLC CHARGED OVER ITS QATAR FUNDRAISING

12 February 2018

The Serious Fraud Office (SFO) has charged Barclays Bank PLC with "unlawful financial assistance" relating to billions of pounds the bank raised in Qatar in 2008.

The same charges were bought against Barclays PLC in June last year. The SFO’s decision to charge Barclays Bank as well is a major one, as it is Barclays Bank that holds the banking licence which allows it to operate in different countries. If it was found guilty, it could possibly lose that licence.

All the charges stem from an arrangement where, to avoid a government bail-out, Barclays took a £12 billion loan from Qatar Holdings, which is owned by the state of Qatar. It then loaned £2.3bn back to Qatar Holdings.

The SFO claims that loan was used either directly, or indirectly, to buy shares in Barclays, which it believes is unlawful financial assistance.

The offence of unlawful financial assistance (UFA) is not a well-known offence. ‘Financial assistance’ refers to assistance given by a company for the purchase of its own shares or the shares of its holding companies. Where such unlawful assistance is given, it will render the relevant transaction void and may constitute a criminal offence.

The UK version of this offence was originally covered by Section 151 of the Companies Act 1985. This was repealed by the Companies Act 2006. However, the repeal is only effective (from 1/10/08) in relation to private companies only. As Barclays is a public limited company, it is still caught by the 1985 Act.

Section 678 of the 2006 Act provides that where a person is acquiring or proposing to acquire shares in a public company, it is ‘not lawful’ for that company, or a subsidiary of that company, to give financial assistance directly or indirectly for the purpose of the acquisition. Not only is it ‘not lawful’ – Section 680 makes it a criminal offence. This means that the company incurs criminal liability, as well as ‘every officer of the company who is in default’; under Section 680(1) (b).

Aziz Rahman, founder of Rahman Ravelli, said: “The change that came with the Companies Act regarding UFA, however, should not lead directors of private companies to think that they can be relaxed about financing deals as the law imposes no restrictions upon them.

“Directors of companies have a statutory duty to act in a way that they consider to be most likely to promote the success of their company. This success has to be for the benefit of its members as a whole, as opposed to a select few who may be enriched by a certain transaction that may not be in the general interests of the company.’’

Mr Rahman added: “While major companies, such as Rolls-Royce and Tesco, were able to negotiate to the point where they obtained a deferred prosecution agreement and avoided prosecution, this has not been possible with Barclays. As a result, it has been charged.

“It would be interesting to know whether Barclays not securing a DPA is because it refuses to admit it did anything wrong or because it did not do enough to prevent wrongdoing being carried out.’’

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