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Northern Rock shareholders are expected to file for up to £1.2 billion in compensation, according to the UK small shareholders' association.

Roger Lawson, head of the UK Shareholders' Association, said the group was representing small shareholders in the bank, which last year had to be bailed out by the bank of England with an emergency loan worth £20bn.

He said there could be about 150,000 private individual shareholders and said the government had "deliberately rigged" the terms of reference when the bank was nationalised, to ensure shareholders got nothing.

He said: "Our main interest is to get compensation for their shares from the government because it is very obvious that the government wishes to pay shareholders little or nothing. And it has deliberately rigged the terms of reference for the independent valuation to ensure that.

"We are asking for a fair and independent valuation process. A fair valuation in our view will be based on the minimum net asset value, which would be £3.20 a share, now that works out as about £1.2bn. We are not demanding a specific figure. We are asking for a fair and independent valuation. The government can argue it was worthless, but we do not think it is."

The association aims to file for a judicial review within the next three months, and if granted a hearing may take place as early as January.

Mr Lawson said he was communicating with shareholders through a number of avenues, including having meetings, preparing mailing lists to shareholders and raising money.

He said: "We have already raised about £60,000 and we are currently talking to about 8000 shareholders and we hope to increase that."