The British parliament has passed legislation to allow the country's government to nationalise Northern Rock.
The move comes five months after a run on the bank saw it become the first high-profile casualty of the global credit crunch.
The Banking (Special Provisions) Act allows orders to be issued for the transfer of all shares in Northern Rock to the government and for an independent auditor to calculate how much money shareholders should receive.
Britain's fifth-largest mortgage lender was rescued by loans of about £25 billion from the Bank of England in September and the government also stepped in to guarantee deposits.
British Prime Minister Gordon Brown's government said the collapse of Northern Rock would have posed risks to the wider financial system and that saving the bank was therefore essential.
The government initially sought a private buyer but rejected two offers last weekend and decided to nationalise the bank instead. The legislation was then pushed through parliament.
Mr Brown has been criticised by the opposition for the way his government has handled the issue.
Northern Rock's new management team, headed by financial troubleshooter Ron Sandler, will draw up a business plan for the bank with a view to selling it to a private sector bidder.
