The government has decided to use legislation to take Northern Rock into public ownership if nationalisation of the bank goes ahead.
There is a strong belief the bank will now be nationalised
A short emergency bill would be used, rather than the government buying the company in a conventional way.
Legislation is also preferred to the bank entering administration and then its assets being acquired.
Government sources say nationalisation is now highly probable and a decision will be taken within days.
The legislative plans are a sign that most of the technical preparation for nationalisation is now complete.
Chancellor Alistair Darling and Prime Minister Gordon Brown have both said that taking the bank into public ownership is a possibility.
Earlier on Tuesday, Northern Rock fought off most of the plans of rebel shareholders, which it said could have limited management powers to find a rescue deal for the business.
Northern Rock's management had urged small shareholders to vote against the proposals, saying they could endanger any possible private sector solution and make nationalisation a more likely option.
The effect of the nationalisation bill would be to transfer ownership of Northern Rock from its current shareholders to the government.
There would be a preliminary Commons vote and parliamentary discussion of the bill would be limited to around two days to minimise uncertainty for bank depositors and employees.
As the BBC disclosed at the weekend, the former insurance executive Ron Sandler has been recruited to be executive chairman of a publicly owned Northern Rock.
Mr Sandler said he had now found a "world class" finance director to work with him.
All that remains is for the chancellor and the prime minister to make the momentous decision to nationalise.
They will make their choice on the basis of an evaluation of the costs to the taxpayer of nationalisation, versus the costs of the public subsidies that would have to be provided to any private-sector rescue of the bank.
Northern Rock hit difficulties in August when the jamming of world credit markets meant it was unable to borrow the money it needed, scuppering its business plan.
It approached the Bank of England, which to date has provided Treasury-backed loans to Northern Rock worth £26bn.
The full extent of taxpayer exposure - the sum of those Bank-of-England loans plus guarantees provided to other lenders to the Rock - is £55bn.
Two consortiums, Sir Richard Branson's Virgin Group and Olivant, have put forward proposals to take control of Northern Rock.
Northern Rock's share price has plunged since August.
However, the Treasury has recently concluded that all the supposedly commercial solutions to the Rock's problems would involve providing subsidies to the bank for five years, which is a couple of years longer than it originally hoped.
These possible subsidies would be needed for longer because of the parlous condition in the money markets.
Most financial institutions are finding it challenging to raise finance.
Goldman Sachs, the investment bank, has advised the Treasury that the optimal way for the Rock to repay any of the loans it has received from taxpayers would be to convert those loans into bonds for sale to international investors.
Those bonds, which would have a life of five years, could only be sold if the government paid substantial fees to financial institutions called reinsurers to guarantee the bonds against default.
The European Commission could decide that the government subsidy for these bonds was a breach of state-aid rules.
But if it did not, the Treasury would be using taxpayers' money to prop up the Rock until well after the next general election.
That is why colleagues of the chancellor and the prime minister say they may determine that it would be cleaner, simpler and ultimately cheaper to take Northern Rock into public ownership.