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9Apr 2010
Lloyds TSB Foundation hits back at bank
LLOYDS TSB Foundation for Scotland is to restart its grant-making programmes after the charity defied one of the country’s biggest banks and raised £2m through the sale of shares.
The news is a major victory for the funder which has been fighting for survival since Lloyds Banking Group tried to change its terms and conditions last year when the bank announced record losses.
The bank served nine years notice to cut all ties with the foundation earlier this year in response to the acrimonious row over the redrawing of a covenant that guarantees one per cent of the bank’s pre-tax profits to the foundation and sister organisations elsewhere in the UK.
After vowing to fight on, the foundation has sold one lot of shares that it bought as part of two rights issues held by the Lloyds Banking Group in 2009, despite the bank initially moving to block it.
The bank claimed the foundation was not allowed to take part in the rights issue or subsequent sale of shares.
But after concerted lobbying by supporters from across Scottish society, the banking group has relented and the foundation’s trustees have announced it re-opening its funding programme with proceeds of the sale.
Chief executive Mary Craig said: “After all our recent difficulties, we are delighted to get back to the job in hand – supporting Scotland’s hard-pressed charities.”
“In mid-April, we will be in a position to share details with them.
“But we expect to direct this £2m to those in most need, to the small and hard-to-reach groups and organisations that struggle to gets funds elsewhere.
?“Going forward, the foundation still holds additional shares from the Rights Issue and we intend to dispose of these in tranches to fund programmes for 2011 and beyond.”
Earlier this year, Craig called the bank’s decision to end the convenant with the foundation, following the legal nine years notice, “an act of determined vandalism”.
This was not the first time Lloyds Banking Group had attempted to influence the operation of the foundation, which was set up to be an entirely independent body.
As the row escalated, the bank was accused of bullying after it moved to install one of its executives on the foundation’s board which the charity said was designed to undermine its independence.
It also attempted to veto the reappointment of the chair of the board of trustees, Christine Lenihan.
However, after a comprehensive review in line with Scottish charity law the foundation has now rewritten its constitution to reinforce its independent status, removing the ability of what it calls “third parties” to play any role in relation to the board.
This has enabled the foundation to re-appointed Lenihan as chair.
With the bank’s announcement that it is returning to profit earlier than anticipated, monies due to the foundation will now begin to flow again earlier than expected.
It means that the foundation’s decision to reject the banking group’s proposal to give interim funding in return for an immediate halving of its entitlement will see it receive the original one per cent of pre-tax profits as contained in the covenant.
“With our return to grant-making, I feel the foundation has turned a corner and can now get on with helping charities at a very difficult time,” said Craig.
“It has also been a difficult time for everyone associated with the Foundation in recent months.
“But it’s safe to say that we now feel more secure as an independent organisation and, with funds in place, more confident that we will indeed be here for the next 25 years.”
A spokesman for Lloyds Banking Group said it would continue to work with the foundation.
“Under the terms of the current covenant, the Scottish foundation will continue to receive significant funding from the group over the next nine years, which will continue to benefit Scottish charities,” he said.
“We are fully committed to supporting communities throughout Scotland and our door remains open to the Scottish foundation.”
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