Shareholders in Irish Life & Permanent (IL&P) have rejected outright Government plans to pump billions into the company in a move that would have wiped out the value of their shares.
A group of dissident shareholders, led by Malta-based fund Scotchstone Capital, had headed up a campaign against the Government billion euro bailout which would put the company in State control.
Faced with nearly €4bn of a black hole, the company relies mainly on funding from the central bank.
IL&P's board has recommended investors agree to the government injecting €3.7bn into the group, wiping out their shareholding and leaving Dublin with over 99pc of the bank.
The issue will now be put in the hands of Finance Minister Michael Noonan who is expected to go the courts to trigger the recapitalisation – which is part of the EU/IMF loan agreement.
IL&P was once the only Irish bank to avoid a state bailout because it was not exposed to property developers but when the country’s lenders were locked out of debt markets it became reliant on the central bank.
The €4bn hole was discovered during bank stress tests carried out last March.
As part of plans to clean up the banks, the Government has offered to pump €2.7bn through buying up shares and guarantees before the end of July.
The group is also trying to sell its life business and burning junior bondholders in a bid to raise €1bn but if it fails the State will have to step in.