Analysis: In theory, they have a case but it’s a long process

Moving from the principle that directors are liable, to saying whether in the case of Royal Bank of Scotland this is true, is a different issue and is for a court to decide.

In theory, they do have a legitimate case. There has been a shareholders’ action group of mainly institutional investors who took action in New York City.

If you are a shareholder in a UK company, in legal terms, there is no doubt that the basic principle the shareholders are stating is correct. The more difficult thing to work out is whether they would win.

The basic information the courts need to work out is what the directors knew compared with what was included in the prospectus.

It is not rocket science in terms of legal principle – but neither is it likely to be simple in terms of evidence. To get to the bottom of it, there would need to be some forensic accounting of what was available to the directors at the time. There is a lot of financial information that they have to discover.

Last year, the Financial Services Authority (FSA) said it had found “no evidence” on which it could press charges or “take enforcement action”.

But I think the problem with the FSA was not access to information – they have got quite comprehensive information-gathering powers – but that they did not regard themselves as a forum for apportioning blame. I think it’s fair to say that the FSA faced potential litigation from the directors if they were to attempt to apportion blame and didn’t think they had sufficient evidence to do so.

In the case of the shareholders, there may be different information that comes up. Possibly the more important point is that the process is different. The shareholders’ case is about legal liability and the FSA’s was about adhering to FSA rules, which is not exactly the same. However, either way, this could be quite a lengthy process. It is never going to be resolved quickly.

• Iain MacNeil is chair of commercial law at Glasgow University