Investors in legal move at Mayflower

Shareholders in Mayflower, the bus group that collapsed earlier this month with a hole in its accounts, have asked lawyers to investigate whether they were misled by the company's former directors.

Law firm Edwin Coe is assessing if investors were sold shares in a £64m rights issue on a false prospectus. If it uncovers sufficient evidence, it plans to take legal action against Mayflower's former directors. One is John Major, the former Conservative prime minister, who was a non-executive director on the company's audit committee.

David Greene, a partner at Edwin Coe, said the hole in Mayflower's accounts had been there for years. "We need to see whether this also created a hole in the 2002 rights issue prospectus," he said.

Mr Greene is acting for the shareholders' action group created after the bus company was placed into administration.

The group is made up of private shareholders, but it is understood that some institutional investors, including Fidelity, with a 3.5 per cent stake, are keeping a close eye on the action.

Mayflower went into administration after it revealed a £17m hole in its accounts. Mr Greene said: "The days of the institutions sitting back and accepting it as a fact of life when they lose money are gone. I certainly expect institutional investors to become involved." He is also taking legal action for shareholders against former Transport Secretary Stephen Byers, over the collapse of Railtrack.

Meanwhile, administrator Deloitte has given bidders until Wednesday to submit offers for TransBus, the coachbuilder owned by Mayflower.