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MG Rover bosses face £40 million demand

MG Rover’s four directors look set to face twin legal challenges that could result in them having to pay back large parts of the £40 million they received in their five years heading the now-bust car maker.

Legal experts are reportedly advising the administrators PricewaterhouseCoopers that it has a number of different courses of action to recoup money from the Phoenix Four.

Meanwhile, the trustees of the car maker's pension funds are expected to press the four directors to make contributions to help cover a pensions shortfall at the collapsed business, which could be as high as £400 million.

If they do not pay up, the trustees could force the company they control, Phoenix Venture Holdings, into administration and then press the Pensions Regulator to force a payment from the four directors.

On top of that, the directors are also facing possible action by the Department of Trade and Industry, which will this week receive a report into the collapse of MG Rover prepared by Sir Bryan Nicholson, the chairman of the Financial Reporting Council.

The report, carried out by an FRC subsidiary called the Financial Reporting Review Panel, concludes that serious issues need further investigation.

These are thought to centre on why the profitable assets of the company were separated from the loss-making ones, along with some property transactions.

Sources at the DTI suggest an investigation in the management of MG Rover is likely.

A DTI source said: "I think, given the profile of all this, it would be worth having a further look. Officials in the department are already thinking about a further inquiry."

The DTI is likely to use the report, along with information from PwC, to launch legal actions to have the four disqualified as directors.

John Towers, Peter Beale, John Edwards and Nick Stephenson jointly bought MG Rover for £10 in 2000 from BMW, which lent the group £427 million in an interest-free loan.

The four created Phoenix Venture Holdings as the parent company and then put cash from BMW in a subsidiary, with MG Rover's operating companies in other subsidiaries.

During their five-year tenure the four directors received about £40 million in salaries, interest payments and contributions to their pension funds.

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