The fallout over the £263m black hole in Tesco’s finances took a new twist today as Bentham Europe, a leading litigation funder, announced a fund had been set up to take legal action on behalf of shareholders.

Leading commercial litigation law firm Stewarts Law is set to take action in London’s courts which will seek to establish that shareholders are entitled to compensation for losses caused by Tesco’s alleged breaches of the Financial Services & Markets Act, arising from overstating its earnings.

Bentham Ventures a joint venture company involving IMF Bentham, is backing the action.

It said the action would claim Tesco had made misleading statements and omissions to the market in relation to its profits for recent financial periods.

All current and former shareholders who acquired at least 10,000 Tesco shares between 17 April 2013 and 22 October 2014 and who had not sold all of those shares prior to the market announcements made by Tesco on 29 August, 22 September or 23 October 2014, are eligible to participate in the proposed action.

“The overstatement of earnings has caused significant harm to Tesco’s shareholders who bought shares since 17 April 2013,” said Bentham Europe MD John Walker.

“Shareholders are justifiably concerned that Tesco has misrepresented its earnings resulting in material losses. We expect the legal claim to reveal the true extent of the problem and allow shareholders to seek compensation for harm suffered”.

He added: “Shareholders ought to be able to allocate capital on the London Stock Exchange assuming earnings are not being misstated. When there has been a material misallocation of capital due to misstated earnings, compensation ought to be paid. This is the biggest crisis in Tesco’s history and shareholders – who saw billions wiped off the value of the company within days – deserve more than just an explanation for what went wrong.”

Tesco declined to comment.