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TUPE Regulations when a Company is in Administration

25 Jun

The vexed question of TUPE and Companies in Administration

Paul McConville’s fantastic posts on the Rangers saga from the scotslawthoughts website can be viewed here. One of the more puzzling aspects of this entire story are the TUPE regulations and how they affect the Rangers players that want to leave oldco instead of transferring to Sevco.

Normally when a company purchases another company, TUPE regulations affect the employees to ensure the same contractual rights are established for employees moving from one company to another. If I am employed on 50K a year at Company A, then under TUPE when Company B buys Company A, I am generally speaking, ensured two things – a) my job, b) the same salary and other contractual rights.

For example, if I chose to stay on at Company B I would automatically transfer to the new company. There is no doubt about this.

However, Rangers situation is a bit different. It is in administration, each day closer to liquidation. Administration can be referred to sometimes as a Non-terminal proceeding. These are treated differently than other insolvency procedures. If the liquidators were selling my company to a new purchaser, my rights has an employee, if I choose, automatically transfer to the purchasing company.

In either scenario, I can “object” or “resign“. These words used in this context have specific legal meanings.  If I didn’t want to transfer, I can”object” to my transfer. My employment would be terminated without consequence, but I would not able to cash in on any rights or statutory protections.  It not treated as a dismissal in the sense of what you and I would call a normal dismissal, but there would never be any compensation.

Resigning is different from objecting. It may be in my interest to resign if there has been major and substantial changes to my contract terms at the purchasing company. I am able to claim statutory protections arguing unfair dismissal.

The Rangers story is a little different though. Rangers are still in administration, not liquidation. Yet. What happens when a company goes into administration? The company’s affairs are handed over to administrators. They run the day-to-day affairs of the business.  However, when a company goes into liquidation, liquidators sells a business or the assets or both.  In this scenario, neither the liquidator nor the purchaser need worry about employees transferring under TUPE because reg.8(7) dis-applies the relevant parts of the Regulations.

The contentious issue is whether or not a business sold by an administrator is also exempt in the same way. Existing case law had previously suggested that were the ultimate objective of the administrator to liquidate the business following a brief period of trading, TUPE would not apply because the administration was “analogous” to insolvency proceedings (Oakland v Wellswood (Yorkshire) Ltd). This has now been refuted by the Court of Appeal in Key2Law (Paul McConville writes extensively about this in his blog),which ruled that reg.8(7) of TUPE does apply in administration; therefore, employees will be transferred to the purchaser under TUPE when the seller is in administration if they choose to go.

In the present fiasco that is known as the Rangers Football Club, the first practical implication for Charles Green’s Sevco is this – The newco purchased the assets and business of RFC from the administrators, Duff & Phelps. Therefore, he should have been able to expect any employees that chose to move over to come with their terms and conditions of employment protected under TUPE. This point does not seem to be arguable. Therefore, players would have had the right to be consulted prior to the transfer and if this did not take place (this is the point that appears to be argued over) they will be able to claim protective awards after the fact. At least the position is certain, for the time being. It doesn’t in any way suggest that the players MUST go over.  They can either object or resign.

In the real world the problem is that purchases from administrators are often “shotgun fashion“, with the administrator anxious to achieve a quick sale and the purchaser just as eager to pick up a cheap asset.  In this case Charles Green picking up the players on the cheap. Normally when there is a slow process of sales, the purchaser and seller has time to undertake the usual TUPE consultations.

When Mr Green tried to do is pull a fast one on his players. When he says, “The transfer of contracts has already happened and the club’s clear legal advice is that players’ purported objection is ineffective. Rangers would like to make it abundantly clear to players, agents and the chairmen and managers of other football clubs that we will take whatever steps necessary to challenge what we regard as a breach of contract to protect the interests of our club.”

Yet in reality in a business sense, administrators are often “trigger happy” when it comes to dismissals. This is the purpose of TUPE. After all the objective of administrators is to shed liabilities and to sell any assets or business as quickly as possible, so the scope for claims of unfair dismissal for reasons connected with the transfer, and protective awards, is hugely enhanced. When a purchaser buys assets from administrators, the risk is very high and now even more so as a result administrators of the Key2Law decision as the previous “escape route” provided by Oakland is no longer available.

Thus with Rangers, the issues around transfer of players seems to revolve around whether or not D&P has sufficient time to consult all employees under TUPE. Short of going through the full and proper TUPE consultations, there is no remedy for this. The result is increased protection for employees and discouragement to buyers who will now be less willing to purchase assets from a company in administration.

For a business, the focus must be on carrying out the usual full TUPE consultations (if possible) when purchasing from an administrator. Outside of this Charles Green will have very little protection against what TUPE protects – the employee, unless it is possible for him to argue that TUPE does not apply on some other ground. He would have to successfully argue, that no actual undertaking has been transferred – obviously this is a fact sensitive defence and depends on analysis of what has actually transferred to Sevco Additionally, any redundancies for a reason connected with the transfer might also be justifiable if it can be shown they were made on economic, technical or organisational grounds entailing changes in the workforce. Not what Green is seeking to argue here at all.

Green could also look for indemnities from the administrator, but if Old Rangers are going into into liquidation, there will be no-one to enforce the indemnities against, so they will not be worth much.  The only other “protection” is to ensure that the assets are purchased as cheaply as possible so as to factor in the potential cost of any TUPE claims.

Following Key2Law and the recent decision in Spaceright Europe Limited v Baillavoine (that dismissals can be in connection with the transfer even where no prospective transferor has been identified), the Court of Appeal has confirmed that a dismissal can be automatically unfair under TUPE even if  the transfer itself is not in contemplation at the time that the dismissal is effected. In this case the administrators, who intended to sell the business as a going concern, dismissed a number of employees including the claimant. The business was subsequently purchased by Spaceright Europe Limited. The Court of Appeal found that the claimant’s dismissal was automatically unfair because he had been dismissed for “a reason connected with the transfer” and so was automatically unfair. The fact that the dismissal took place in order to achieve a sale at a future date was sufficient.

We can see that these cases deal with the rights of the employee to maintain their careers when the assets of the company are sold from administrators to a newco. These have nothing to do with the forced transfer of an employee to move over to a newco to whom an administrator has sold the assets. It only guarantees their contract if they choose to go over to the purchasing company.

What I dont see eye to eye with Mr McConville over is whether TUPE applies at all to employees that choose to move.  I would argue that players under contracts that choose not to go to a new company dont need to rely on TUPE for protection. Furthermore, there are statutory obligations that must occur when transferring employees.

The employee notification process is relatively simple. Under the Employment Act 2002 (Dispute Resolution) Regulations 2004 the transferor employer must provide the new employer with a specified set of information which will assist him to understand the rights, duties and obligations in relation to those employees who will be transferred. This is to ensure the arrival of the transferred employees is a smooth transition and the employees also gain because their new employer is made aware of his inherited obligations towards them. The information in question is:

– the identity of the employees who will transfer; – the age of those employees;

– information contained in the ‘statements of employment particulars’ for those employees;

– information relating to any collective agreements which apply to those employees;

– instances of any disciplinary action within the preceding two years taken by the transferor in respect of those employees in circumstances where the statutory dispute resolution procedures apply or from 6 April 2009 the ACAS Code of Practice on disciplinary and grievance procedures;

– instances of any grievances raised by those employees within the preceding two years in circumstances where the statutory dispute resolution procedures apply or from 6 April 2009 the Acas Code of Practice on disciplinary and grievance procedures; and

The information must be provided in writing or in other forms which are accessible to the new employer.

Mr Green should release this letter from D&P.

The Regulations place a duty on both the transferor employer and new employer to inform and consult representatives of their employees who may be affected by the transfer or measures taken in connection with the transfer. Those affected employees might include:

(a) those individuals who are to be transferred;

(b) their colleagues in the transferor employer who will not transfer but whose jobs might be affected by the transfer; or

(c) their new colleagues in employment with the new employer whose jobs might be affected by the transfer.

Long enough before a relevant transfer to enable the employer to consult with the employees’ representatives, the employer must inform the representatives:

• that the transfer is going to take place, approximately when, and why;

• the legal, economic and social implications of the transfer for the affected employees;

• whether the employer envisages taking any action (reorganisation for example) in connection with the transfer which will affect the employees, and if so, what action is envisaged;

• where the previous employer is required to give the information, he or she must disclose whether the prospective new employer envisages carrying out any action which will affect the employees, and if so, what. The new employer must give the previous employer the necessary information so that the previous employer is able to meet this requirement.

Mr Green should release the details of this notification to the players, and if the player is in the union, then their player representatives

When Mr Green has tried to do is pull a fast one. When he says, “The transfer of contracts has already happened and the club’s clear legal advice is that players’ purported objection is ineffective. Rangers would like to make it abundantly clear to players, agents and the chairmen and managers of other football clubs that we will take whatever steps necessary to challenge what we regard as a breach of contract to protect the interests of our club, ” he is saying he transferred the players over to a newco without notifying the players or the agents. As a Newco is, well,  a “newco”, then the players can choose to leave, and Sevco is without any legal authority to sue the players, the agents, or other clubs for remuneration. Those that do transfer over without notification may have a case against Green and Sevco if their contracts aren’t automatically honoured under the original terms for unfair dismissal.

In my humble opinion.

Web3dLaw

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Punishments to maintain Sporting Integrity

21 Jun

A certain Rangers “blogger’s” recent appearance on Newsnight was unmemorable except for the statement that “Rangers have been punished enough”. Of course, Scottish football message boards exploded with laughter at this comment, and looking at opinion polls from around the SPL, the rest of Scottish society find it even more hysterical.

Lets look at the facts. Firstly, “Old” Rangers were docked 10 points for entering administration. This is a consequence, not a punishment.

Secondly, as of today, the transfer ban that was imposed on “Old” Rangers has been overruled by Lord Glennie. Owner Charles Green is still unsure how to proceed, with some saying he is trying to accept the transfer ban in order to avoid more stiffer and severe punishments.

Thirdly, the fines charged by the SFA for bringing the game into disrepute have yet to be paid. Furthermore, liquidation is a financial consequence of coming out of administration, not a punishment. One is not “given” liquidation as a punishment. Liquidation, too, is a consequence of financial mismanagement.

The “Newco” problem for the SPL is labelled as a battle between the supposed financial necessity of having Rangers in the SPL and one of “sporting integrity”. Although much has been written about the “history” of Rangers being lost when it entered into liquidation, and even more has been written about the situation that engulfed Leeds, Middlesborough, and Fiorentina, this blog is not about sporting integrity as it relates to financial impropriety. This blog entry is about sporting integrity as it relates to cheating.

Is there any guidance from other sports on how governing bodies have dealt with sporting cheats? The Big Ten Basketball conference is one of US largest basketball conferences. In the US, where collegiate sports are cash-cows for American universities, the Big Ten has led the country in attendance every year since 1978. Its basketball rivalry is huge and within the conference is a “Big Three” rivalry which includes the University of Michigan. The Big Ten brings in hundreds of millions of dollars to the University of Michigan. The rivalries are huge and the team brings in the best players and recruits from all over the country.

In American collegiate sports, there is one rule considered sacrosanct – the absolute ban on the paying of players. Match fixing is criminal, of course, but the integrity of the game relies on the fact that the ten people on a basketball court at any given time are amateurs. In other words, they financial footing of every player at any given time is equal.

In the late 1990s, the University of Michigan was rocked by a scandal that had deep repercussions to the University and the Big Ten.

The case began when the investigation of an automobile accident during basketball player Mateen Cleaves’ 1996 recruiting trip revealed a curious relationship between a legitimate sports agent named “Martin” and the Wolverine basketball program dating back to the 1980s. A six year investigation resulted in several Michigan basketball players implicated over the next few years and by 1999 some were called before a US federal grand jury. Four eventual professional basketball players were discovered to have borrowed a total of $616,000 from Martin. During the investigation, Webber claimed not to have had any financial relationship with Martin, but eventually confessed to taking loans from Martin. He was both fined in the legal system and briefly suspended by the NBA after performing public service.

The university investigation looked at four players behaviour and came to the conclusion that they had briefly compromised their amateur status. In response, the University placed the basketball program on two years’ probation. The punishment was to withdrew from postseason consideration for the 2002–03 season, the program had to vacate all or part of five previous seasons and to remove the players’ names and achievements from its record book.

In all the punishments were as follows:

  • No postseason play in 2002–03, even though the players who took Martin’s money were no longer at the school.
  • The school vacated the entire 1992–93 season and every game it played from the 1995–96 season through the 1998–99 season. This included the 1997 National Invitation Tournament title and the 1998 Big Ten Tournament title. It also vacated its two Final Four games in 1992 and its entire NCAA tournament record in 1993, 1996, 1998 and 1999. There is a difference between forfeiting a game and vacating a game; a vacated game does not result in the other school being credited with a win.
  • Returning $450,000 received from the NCAA for postseason play in 1992, 1993, 1996, 1997, 1998 and 1999.
  • Banners commemorating the 1992 and 1993 Final Four runs, the 1997 NIT title and 1998 Big Ten Tournament title would be removed from the rafters.
  • Two years’ probation.

Of note, these punishments were self-imposed.

The governing body for mens basketball, the NCAA, accepted Michigan’s sanctions. It also imposed an additional two years’ probation and docked the school one scholarship a year from 2004–2005 until 2007–2008. The NCAA also barred Michigan from postseason play for the 2003–04 season. On appeal, the NCAA reversed its decision to add a second year of postseason ineligibility after hearing an appeal by the University.

Compare this to the present situation at Rangers. What we likely have here is a club and/or a business run by a group of men who knowingly and willingly paid their players through multiple contracts, likely failed to lodge them with the SPL, and didn’t pay their taxes along the way. They withheld £21 million in PAYE and VAT this season alone. They have failed to pay transfers fees owed to their contemporaries and they have failed to pay ticket sales to other member clubs. The EBT and double contract story likely extend to the best part of a decade. There is also reports about non-employees receiving funds from EBTs pre and post departure. The amount owed to the Revenue is upwards of £97M.

For an example of how the financial doping allegedly committed by Rangers, see my previous post on how EBTs hypothetically benefitted a club here.

It is a sad state of affairs in this country that a single director (let alone two directors/owners) of a company can get away with this level of corporate malfeasance. It is even sadder state of affairs that the sport’s governing body has allowed such a stranglehold by one of its members that it now claims it cannot manage to survive without it.

If Rangers were playing in America and did what they did here there, they would have been expelled. Without question. They would have been expelled, had their seasons vacated, titles removed, and fined. There would have been criminal charges brought against the directors and they would be sent to jail if convicted.

On the other hand, what do we do in Scotland? Here, our sport’s governing body asks its existing members to consider allowing a newer version of the former entity that screwed its creditors and competitors to the tune of £124 million by giving them a vote on whether its newer form can re-enter. The former company which doesn’t exist anymore gets to vote on this at the expense of another former member, Dunfermline Athletic, who too were an existing member of Club SPL screwed by the actions of the Old Rangers. There has not even been a punishment for the Lee Wallace fiasco – fielding a player bought from another member without payment. At a minimum, on this offence alone, those games in which Lee Wallace played, should be vacated. Period.

It is ludicrous. This is not a sleight of Rangers, this is my condemnation of our sports governing bodies and the UK’s corporate governance laws. In any other sporting context we would not even be having this conversation. We would be asking how long are they expelled for? Looking at American collegiate sports for guidance, the University of Michigan self-imposed the aforementioned punishments over $616K (£400 pounds) and four young men taking pay from an agent, while in Scotland, the SFA has done nothing. Even in the University of Michigan scenario, there was no suggestion that any of the basketball games played were compromised. The punishments were handed out for cheating, nothing more, nothing less.

Scottish Football is dead. This is why.

Rangers in Crisis: The Hunt for Whyte October and a Pretty “Poison Pill” Woman

18 May

WEB3dLAW is back with a significantly shorter blog post today.  I have been waxing lyrical lately about popular films. One of my favourite of all time is The Hunt for Red October – the film adaptation of the Tom Clancy novel about Cold War era submarine warfare between the Yanks and the Russians. In one of the latter scenes, former US senator Fred Thompson asks the protagonist Dr Ryan, played by Alex Baldwin, “What’s his plan?” To which Dr Ryan retorts, “His plan?”  The Captain points out that “a Russian submarine captain doesn’t take a dump without a plan”.

One of my partner’s favourite films is the Richard Gere/Julia Roberts RomCom, Pretty Woman.  Do you remember this scene from Pretty Woman when Gere takes Roberts to a dinner meeting with the father and son owners of one of Gere’s takeover targets?

http://www.youtube.com/watch?v=mkKviMfi24s

Gere wanted to buy a large family owned ship building business and in what is commonly referred to as a “hostile takeover”, the duo had come along to the meeting to persuade Gere’s character to end his bid for their family business.

I mention these because both films lead into my nice little transition into a discussion about the business concept called “poison pills”, something I mentioned yesterday.

Poison Pills” and “Shark Repellents” sound like they belong in a James Bond film, but they are actually generic terms for business strategies to repel or reduce the attractiveness of a business to hostile takeovers.  I often wonder, “What was Craig Whyte’s plan?” He doesn’t look like a man that takes a dump very often, or without a plan. I have been thinking about this for a long time. Something doesn’t sit right in this whole thing, so I will give this idea a whirl. It is an idea, but would love to hear your input on its feasibility or accuracy. If I have missed anything out, let me know.

A “poison pill” is a generic term used to describe shareholder rights plan, and is a type of defensive tactic used by a corporation’s board of directors against a takeover. Shareholder rights plans, or poison pills, are controversial because they hinder an active market for corporate control. They also devalue the company and benefit the directors.  A poison pill also has other meanings:

It is sometimes used more broadly to describe other types of takeover defences that involve the target taking some action. The broad category of takeover defences (more commonly known as “shark repellents”) includes the poison pill.

Other anti-takeover protections include:

  • The target business adds to its charter a provision which gives the current shareholders the right to sell their shares to the acquirer at an increased price (usually 100% above recent average share price), if the acquirer’s share of the company reaches a critical limit (usually one third).
  • The target takes on large debts in an effort to make the debt load too high to be attractive—the acquirer would eventually have to pay the debts.[1]

Let’s look at the facts.

  • CW bought Rangers from Sir David Murray’s company for £18,000,001.00. There was a £1 transaction between the two men.  Craig Whyte then paid off Lloyds TSB debt at HBOS by wiring £18,000,000 from Collyer Bristow to an account at Lloyds.
  • CW then had Lloyds assign all relevant securities over to him or his company Wavetower, now “Rangers Group FC”.  Although it is widely accepted that Craig Whyte used Ticketus money to fund the purchase, what is important to remember is that Craig Whyte and Sir David Murray valued the company at £18Million + £1 or £18,000,001.00.
  • Ticketus becomes an unsecured creditor after Rangers enters into administration and is owed £26.7 Million.
  • Rangers cannot raise money from season ticket holders for the next few seasons.
  • Charles Greene and his “20-man consortium” buy Rangers from CW for the nominal charge of £2.  There is no agreed £18M paid into a lawyers account to pay off a debt to HBOS this time. The £8.4M is set aside for the creditors’ pot IF a CVA can be agreed to.  If the CVA can’t be agreed to, is there any contractual obligation to put the £8.4M into the club’s coffers? NO.
  • A new only comes in and cancels the Ticketus deal altogether. They sue the old owner – Craig Whyte. The Ticketus deal is null and void, and CW only pledges his shares and debenture if a CVA goes through.
  • I may be wrong, but I have seen no-one from the MSM ask this question. If the CVA is not agreed, then what happens to the £8.4M held for the creditors? If the answer is nothing, and it doesn’t go into the CVA pot, then it means…

Charles Green bought the club, Ibrox, Murray Park, and the car parks for £2.00. If a CVA cannot be agreed to, and the club has been sold to a 20 man consortium in equal shares that RFC have been bought for 10p each share! Any new owner could come in and buy these shares in a newco company – a debt free football club playing in the SPL with a TV contract with Sky and ESPN. A rights issue WOULD make the original owners a tidy profit on the stock exchange. 

I want to be clear this is me hypothesising. However, it is very suspicious to me that a company that was sold a year ago for £18,000,001.00 has been sold again in less than a year for £2.00. It is worth knowing if the Ticketus deal was a double poison pill– not only did it fund the purchase of the club, but it effectively ensured that “the target company takes on large debts in an effort to make the debt load too high to be attractive. It would be so unattractive that no acquirer would want to pay the debts.”

Here is a classic anti-shark repellent move! This strategy also assumes that the club pays their debts in the long-run. However, under today’s company laws, in particular the Enterprise Act, struggling businesses can continue in new forms as government would rather see businesses keeping jobs going at the expense of toxic debt – which keeps far less in employment.

A plan to shed my business debts in a morally ambiguous, but legal way might look like this:

Run up massive debts and get served with massive bill from more creditors including, hopefully HMRC! Be unable to service those debts. Limit the ways the company can gain access to working capital. Then bankrupt your own business by putting it into administration. Make the company unattractive to legitimate parties of interest by taking on massive amounts of debt. Hire the same people who advised you on this strategy to run the company during the administration process. Offer to sell to a buyer (outside of the circle) to make the whole thing seem legitimate, but as soon as he sees the financial picture, he walks and walks away. Make it as unattractive as possible to any other potential buyers by having an element of your customer base threaten any potential buyers, but at the same time pay for the Old Guard (fine gentleman like Sandy Jardine, Andy Kerr and Mark Dingwall) to wax lyrical about how great Rangers is to anyone eager to lap it up. 

Forego your debts to the tax man other legitimate creditors and form a “newco”… Get a slap on your wrist from the regulatory organizations.  Cancel all of your debts. Buy your partners in consortium out. Return to the glory days of the past.

Smell a rat now?

Laters,

WED3DLAW

[1] Fundamentals of Corporate Finance (6th ed.), Editions McGraw-Hill Ryerson, §23: Mergers and Acquisitions

Rangers in Crisis: Some Legal Explanations and Questions for the Mainstream Media

17 May

Having listened to several mainstream media outlets struggle to explain to its listeners how the law operates in situations like the one Rangers find themselves in, I decided to spell it out for our less legally inclined.   One of the most common claim listeners make is, “How can Rangers be punished for the acts of an individual like Craig Whyte?”

Another one is,  “Why are the SFA making the rules as they go along?”

Thirdly Graham Spiers claimed last night on Clyde Sports Scoreboard that “he had seen no evidence to suggest John Mclelland or John Greig has done anything wrong”.

The balance of this blog post will debunk these 3 claims and whether you love Rangers or loathe Rangers, the laws have operated clearly and predictably.  These are the laws of the land and in part, govern how businesses and corporations operate.

The second part of this blog asks some real questions that the media are not asking.

Thirdly, I wrap up by laying out where Rangers are now and where Rangers will likely be at the start of next season.

For the avoidance of doubt, Rangers Football Club is a company, subject to the Companies Act 2006 and several other legal instruments that govern how the laws treat companies and businesses. In a legal sense, there is no such things as a ‘club’…

Some lawyers may cringe at the simplicity that follows, but this is for the layman, not you…

Point 1:

In the late 1800’s the House of Lords ruled in the case of Salomon v Salomon that a company is a separate legal entity from a person. This is one of the founding principles of our economic and company policy over the 20th Century. If I am worth a £1billion and I setup a business, specifically a limited company, and I fund it to the amount of £10,000, then I am only liable for £10,000 if it goes bust. Yours truly, me myself, and I do not own the assets of the company, the company does. Accordingly, this also means the company owns its own debts and liabilities. This is commonly referred to as separate legal personality and encourages entrepreneurship and risk taking. By creating a separate legal entity, one of the legal effects is commonly referred to as limited liability. This means, except in rare circumstances, if my business goes bust, my company’s creditors cannot hold yours truly, me myself and I accountable for the company debt – even if I am personally worth £1 trillion by the time my business goes bankrupt.  This is almost absolute – with a few exceptions, but importantly even when my business is in debt up to £120M.  I get to keep my £1 trillion and the creditors are doomed to accept their cruel fates.

What this also means in practice is that a person who makes decisions on behalf of a company is not liable, barring a few exceptions, for the dealings of the company. If a person makes a decision to the gain of the business, it is the business that is meant to gain the benefit. Likewise, if a person in charge makes a poor decision it is the business that suffers the consequences.

In football terms, let’s look at this way. Say a Rangers Chairman buys 2 talented schoolboys for £10K. One turns out to be a dud 5 years later. The other turns out to be the next Messi seven years later. When Chairman A leaves the company in year 6, knowing that he cost the business 5K for the dud player. Rangers own the loss. The chairman doesn’t have to take it with him. The same rule applies when the 2nd boy goes on to be sold for £50M. The club gets to keep the money. The ex-owner can’t come back demanding money for his hit purchase. This works great in practice and ensures a level of certainty. However, like any legal principle when things go bad, the same rule applies and this is where most Rangers supporters and the media are going wrong.

When someone suffers a loss as a result of the actions of a company, either a creditor or a party litigant or a shareholder, they often sue the business. They don’t sue the CEO or the senior manager or the call centre operative. They sue the corporation.

In reality, most CEOs or Chairmen have very little contact with customers about the day-to-day operations of the business. There is no point in suing Bill Gates if Windows 7 crashes. Bill Gates is separate from Microsoft.  You’re unhappy with your contract with Microsoft, you sue them.  When a manager doesn’t clean up aisle 6 at Tesco’s, and little Sally slips in the puddle, Sally sues Tesco’s, not the manager of the Silverburn Store.

The courts have developed a test to determine when a company and its representatives are acting out-with their official role, and when they are acting as a representative of the company. There is a very important distinction.

The SFA disciplinary panel made reference to this in the case of Tesco’s v Nattrass [1972] AC 153 – 9 times. This is the law. This is relevant law today and this case is the basis for the decision and the appeal.  The disciplinary panel make reference to this case throughout their reasoning.

Here are the facts of the case:

Tesco was offering a discount on washing powder which was advertised on posters displayed in stores. Once they ran out of the lower priced product the stores began to replace it with the regularly priced stock. The manager failed to take the signs down and a customer was charged at the higher price. Tesco was charged under the Trade Descriptions Act 1968 for falsely advertising the price of washing powder. In its defence Tesco argued that the company had taken all reasonable precautions and all due diligence, and that the conduct of the manager could not attach liability to the corporation.

The House of Lords accepted the defence and found that the manager was not a part of the “directing mind” of the corporation and therefore his conduct was not attributable to the corporation. The corporation had done all it could to enforce the rules regarding advertising.

In the House of Lords Tesco were successful with their defence showing that,

  • a store manager was classed as ‘another person’, and,
  • a system of delegating responsibility to that person was performance of due diligence, not avoidance of it
  • The store manager was not the directing mind and will of the company – the company had done all it could to avoid committing an offence and the offence were the fault of another person (an employee). The company was acquitted.

Lord Reid held that, in order for liability to attach to the actions of a person, it must be the case that “The person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company.”

Let’s look at that again. A person who is acting as the company and his mind which directs his acts is the mind of the company. In other words, according to the law of the land, if Craig Whyte is guilty then Rangers MUST be guilty. Every time a Rangers supporter screams, “its CW that guilty not us”, they are effectively reinforcing Rangers own guilt under the Tesco’s v Nattrass doctrine!

Point 3

This brings us to the Board of Directors and John McLelland and John Greig.  This section might sit uncomfortable with some of the Rangers support, especially Graham Spiers…

If a football club fans are going to insist that a person the fans can relate to is sitting on board level, they need to be aware that the law doesn’t recognize symbolism.  It recognizes statutes, regulations and case precedent.  When Mr McLelland and Mr Greig take the position on the Board as Non-Executive Directors (NEDs), they are under legal obligations to act in a certain way.

Both men sat on the Board during Mr Whyte’s tenure as NEDs.  If one is to sit at board level as a NED, then several legal obligations fall upon them.  NEDs are differentiated from inside directors, who are members of the board who also serve or previously served as executive managers of the company (most often as corporate officers). Sometimes NEDs are often confused with Independent directors who are people who do not own shares in the company. NEDs can also hold shares in the company.

After several high profile business collapses in the late 1990’s the British government commissioned the Higgs Report which was published in 2003. The recommended obligations placed on people who serve as a NON-EXECUTIVE DIRECTOR is as follows:

  • Strategy: Non-executive directors should constructively challenge and contribute to the development of strategy.
  • Performance: Non-executive directors should scrutinise the performance of management in meeting agreed goals and objectives and monitoring, and where necessary removing, senior management and in succession planning.
  • Risk: Non-executive directors should satisfy themselves that financial information is accurate and that financial controls and systems of risk management are robust and defensible.
  • People: Non-executive directors are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing, and where necessary removing, senior management and in succession planning.

It is not enough to give Mr Greig the title of “greatest ever Ranger” and call his appointment symbolic. At the moment he takes the legal title of non-executive director he loses the defence that he doesn’t know anything about corporate governance. When Mr Greig and Mr McLelland take the title of Non-Executive Director, they are considered the legal custodians of the governance process.  Anyone known as an NED at Rangers was under a legal obligation to provide an independent view on Rangers resources, appointments, and standards of conduct.

The failure to oblige to these legal obligations also put Mr Dave King, Mr Alastair Johnson, Mr Paul Murray, and Mr Martin Bain, who all have served as non-executive directors in one capacity or another during the Murray/Whyte reign, on notice.

As you can see, the Disciplinary Panel and the Judicial Appeal Board all were correct to hold Rangers and Craig Whyte together. Therefore, it is a fallacy to argue that Craig Whyte operated as a “rogue” when so many other people in the company failed to live up to their legal obligations to proper corporate governance.

Point 2:

The rules are quite clear. The SFA is not making them up as they go along.

The tribunal’s published determination makes reference to articles 94.1 and 95 of the Scottish FA’s Articles of Association, which relate to the permitted penalties for any infringement of the rules:

Rule 94.1 refers to the powers of the judicial panel, stating it “shall be the sole judge” when a club “in any way brings the game into disrepute or any other grounds it considers sufficient”.

And then they add:

Rule 95 then provides a mechanism for an independent tribunal to impose any sanction it wishes out-with the guidelines set down by the Judicial Panel Protocol, leading to the decision to hit Rangers with a registration embargo.

The Judicial Panel shall have the jurisdiction, subject to the terms of the Judicial Panel Protocol, to deal with any alleged infringement of any provision of these articles.

A… club… if found to have infringed the articles shall be liable to censure or to a fine or to a suspension or to an expulsion from the Challenge Cup [Scottish Cup] Competition, to any combination of these penalties or such other penalty, condition or sanction as the Judicial Panel considers appropriate, including such other sanctions as are contained within the Judicial Panel Protocol, in order to deal justly with the case in question.”

This should answer the first two questions.

 

Hopefully this will clarify some of the finer legal points that the mainstream media are struggling to get their heads around. In turn, I hope they help me answer the following questions that need answering…

  • Was the Ticketus deal a double whammy poison pill? I’ll address this in a future blog post, but Ill pose the following question – what if Ticketus deal was done to ensure the club doesn’t have a buyer and does go into liquidation? This is why it is important to make public the people buying into the Green consortium.
  • Did Craig Whyte give up his floating charge over the fixed assets of the club? Giving up his shares doesn’t really mean anything if he still owns a floating charge. I have it on good authority that an examination of the Rangers books will shows how Whyte was operating his floating charge to the tune of a charge of 2%-3% a month in interest. That is likely a premium RFC are paying to Rangers FC Group for the £18M loan facility allowing Whyte as a secured creditor to get cash out of RFC with impunity. Is he still doing this?
  • Thirdly, Dunfermline Athletic, Dundee, Hearts and Rapid Vienna are all due funds. They must be paid in their entirety in order for Rangers to satisfy the football authorities. However in a CVA, one cannot discriminate between creditors. If DAFC, Dundee, Hearts, and Rapid Vienna are to be paid in full, then so are Craig Whyte, Ticketus, and HMRC. How does Rangers (IA) satisfy their football debts without compromising the rules around non-discrimination of unsecured creditors?

Please let us know, MSM…

Where does this leave RFC (IA)? Here is what I see as the potential outcomes in no particular order…

Option 1 – Sell assets, namely players raising cash for a CVA pot. Ticketus and HMRC will have to agree.. Right now, either of them could block a CVA on the 75% Creditors rule. Ticketus has about a £26M claim as an unsecured creditor. HMRC has a claim of approximately £42M claim. (25M +9M PAYE +4M VAT on Ticketus deal, and 4M “wee tax case”). As the judgement from the ‘big tax case’ is not in yet, I’ll leave that out.  I still see HMRC and Ticketus having to agree to any CVA and the only way they will agree is for a fire sale of all Rangers assets to raise the value of the CVA pot.

Rangers stay in the SPL, and with the transfer embargo in place, have to field a team of youngsters for a season.

Option 2: Rangers sell Ibrox and all the other fixed assets to keep the players. I know this is an unlikely outcome. While Ally’s rallying cry “we don’t do walking away” made for good fodder for rallying the troops, when a players livelihood is on the line, he will be hard pressed not to walk away to the bank to collect a pay check from a club on much stronger foundations. Without any working capital and no legal right to buy players, the only way RFC can stay competitive is to sell their fixed assets – Ibrox, Murray Park, and the two car parks.  Take the proceeds from the asset sale and stick it in the CVA pot and hope all the unsecured creditors agree.

Rent Ibrox back from its new owners. Or play in Hampden and rent it from the SFA. Ouch. That would be a sore one. All the big name players go, with the exception of people like Lee McCulloch and one or two of the rising stars like Andy Little.  This gives the club some working capital. They can’t rely on Ticket sales to raise funds anymore because of the Ticketus deal and the season ticket deals.

Option 3: The big tax case comes back against Rangers and holds up the levy already placed on Rangers. HMRC moves for liquidation. All hell breaks loose and all the assets are sold off – players and fixed and creditors repaid pennies on the pound.  Rangers are killed off by two decades of financial mismanagement. The blame lies at Sir David Murray’s door as much as it is Craig Whyte’s.

Option 4: This is the ‘NewCo’ option and would involve literally start all over again by applying to get back into the SFA. Sell all players and sell all fixed assets. A possibility would be to rent Ibrox and Murray Park back from its new owners. The transfer embargo has ensured those 40 players on RFC rosters have a place to play. It just means that they can’t buy anyone for 12 months over the age of 18.

The competence of the panel and the reasoning behind the decision has now been explained. Let’s say we see, either an oldco RFC in the SPL next season, or a “NewCo” RFC next year.

Under the ‘oldco’ outcome, we will see a club with no stadium, no players, under an effective transfer embargo, and either playing at Ibrox rented from its new owners or Hampden, if Ibrox is sold off to developers. It will likely have been punished a further points reduction for still being in administration. It will likely be a shell club, well shy of its former glory.  It will be Rangers though, and that will be what a lot of the fans will want to see.

Under the ‘newco’ option, it will not be Rangers and that will be a sore pill to take for a lot of supporters.

All of this gets settled and then the double contract announcement comes home to roost. The former RFC as a “newco” can’t be punished anymore, because it is, well new. The “oldco” can be.  I think it will be appropriate  that the football community start to think of the totality of Craig Whyte’s actions as misdemeanours. There will be a wholesalfe shift in how the football community starts to view Sir David Murray. If the double contract judgement comes back against Rangers, it will likely be referred to as a series of felonies – systematic long-term cheating and we will have to have a serious of conversations about how to deal with this.  Do we invalidate all of the results over a year when EBTs and double contracts were in use? If that’s the case, I think we need to look at how much money clubs lost out on after amending  all of the tainted results. Should compensatory damages be paid to all of those clubs that lost out on a second, 3rd or 4th place finish because of a financially doped team? How much did clubs lose out on from not being able to play in Europe? What would be the difference in the amount each club would have received from the commercial fund?  What would attendance have been if the playing field had been levelled?

There will be a lot of questions to be answered. Hopefully, you and I will get there together.

Laters.

Web3dLaw

Duff&Phelps… A Modus Operandi…

30 Apr

I have gained access to a Duff & Phelps document that outlines their modus operandi when they take over a firm and start acting as administrators. The company in question went into liquidation after D&P acted as administrators. The document sent to creditors of the liquidated company has some interesting tidbits as to what modus operandi they follow when acting as administrators. Read the letter available here…

Right at the top of the document is the claim:

Duff & Phelps delivers independent opinions of collateral value, be it on a fair or liquidation case basis, of assets to be used as collateral, ultimately providing comfort to investors, credit committees and other interested parties.”

In discussing their methodology, D&P claim to use  “valuation methodology”.

2. Valuation Methodology – Unlike an engineering consultant’s asset-based approach, we rely predominantly on a cash flow approach augmented by market and cost approaches. This is particularly relevant for syndicated or stapled situations, where stakeholders look for comfort in both liquidation value and ability to service debt.

We know all too well that this is the approach taken by D&P with Rangers.It had to be. The primary concern was to get to the end of the season, and a positive cash flow can ensure that.  Stakeholders in Rangers include Craig Whyte, Ticketus, and HMRC. My previous post argued that Ticketus was actually in a much better position by dropping out of the BK consortium and joining the queue of  unsecured creditors, arguing that the writing was on the wall for Ticketus. Personally, I think the approach that Ticketus has taken is the right one, as far as their investors are concerned. Lining up as unsecured creditors makes them likely to claw a significant bit of their assets back if liquidation is to occur. The alternative would be a long, drawn out process in which they owned a football club, rather than profited from it.

The letter goes on…

3. Customization of Valuation Approach and Report – We tailor the premise of value depending on the deal situation, the purpose of the valuation and the type of asset(s) being valued; e.g., while the fair market value premise may be may appropriate if a fairly liquid market exists for the asset being valued, a forced sale premise might be most applicable where only a limited market exists, e.g., for a power plant financed in use.

I think we would all agree that a football stadium and a training ground is a perfect example of a “limited market” and therefore, a forced sale premise would be most applicable.

Check out this letter that Duff & Phelps sent to creditors.  I refer you to this section about half way down the first page.

In my previous post, I argued that Craig Whyte is a secured creditor, and all of these “bids” and “counter offers” from the Blue Knights and Bill Miller are nothing more than a PR exercise. As the statutory obligation call on adminstrators to attempt to do the following , the fact is that nobody can now accuse Duff and Phelps of failing to satisfy:

clause A)  to rescue the company as a going concern, or 

If there ever is an example of how a single word can change the meaning of something, look at the word that comes at the end of clause a)…. “or”…

“OR” in this context means that there is no obligation to satisfy more than one of the conditions…

The administrators have to satisfy clause a) OR clause b) which reads

b)  “achieved a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in adminstration), OR…

Clause C… Ill come back to that.

Earlier today, I read Paul McConville’s post on scotslawthoughts, available here. As Paul makes clear in his blog, D&P finally address the concerns of the creditors…

“However, since then, Mr Miller’s bid team have worked to develop a structure which enables the wishes of creditors to be taken into account whilst ensuring that the Club is taken forward well-capitalised and the requirements of the footballing authorities are met. Mr Miller hopes a solution to all regulatory issues can be found and his team has been in constructive discussions with all relevant parties this week.”

Does this mean that clause A has not been able to be satisfied? I really like Paul’s blogs and writing style. I am a novice to blogging, and Paul has supported me and given me advice.

Something he wrote struck me in his last post…

“There remains an SPL investigation into “double contracts” and illegal payments, and the SFA appeal process is still to conclude.”

This begs the following question: Can you imagine the embarrassment the SFA and the SPL would suffer if they were to rule that there were no double contracts in place at Rangers, only for the FTT to rule that Rangers did, in fact, on the balance of probabilities have double contracts and avoided paying tax and NI  through the use of EBTs?

Lost in the discussions about Rangers is the fact that we don’t even know Rangers true level of liabilities. It could rise to £120Million, if the FTT rule against Rangers. Why would Miller bid on a club when the level of  known liabilities might double after the FIRST TIER TRIBUNAL return their judgement?

Which brings me to clause C)…

C) realising property in order to make a distribution to one or more secured or preferential creditors.

Who are the secured creditors?

Close Leasing for at least £1.6 million. Craig Whyte. He owns a standard security over the fixed assets of Rangers. I presume this means Ibrox Stadium, Murray Park, and the Albion Car Park.

D&P are now under a statutory obligation to fulfill clause C, if Clauses A&B cannot be fulfilled.

Which brings me to my last point? What exactly is Bill Miller bidding £11.5M for? As CW owns a standard security over the fixed assets, what exactly is he getting?

The share in the SPL?

Nope. That is an intangible that is unclear right now. Maybe that is the reason he is adamant that the SPL refuse to hand out further sanctions for past, uh, indiscretions.

Players? Nope. Most of them have had their contracts reduced so they are free to leave in the summer.

Property? Maybe. But as CW owns a security over the fixed assets, I presume that he will want those without any involvement from CW.

The Club itself? Craig Whyte owns 83.5% of the shares in Rangers. D&P have no power to force him to sell his shares.

The unknown debt? D&P stated today, “this afternoon Brian Kennedy and Paul Murray submitted a bid which is conditional on a CVA being approved by creditors and we will seek guidance from prominent creditors.”

Colour me reactionary, but should D&P not have made clear from the creditors what would have been acceptable first? Remember in the Portsmouth case, HMRC sued to block a .30p on the pound CVA because it wasn’t enough in the Revenue’s eyes,  arguing they should have been able to block it  in order to get a better return.

If Miller’s bid is £11.5million,what does Mr Miller think he is getting? A club, possibly with an SPL share, with no players of any resale value, and property with two standard securities over them.

To put it into context, his bid also claims to leave the club “well capitalized”. Yowzer.

As Duff & Phelps have yet to receive a bid that accounts for  Craig Whyte’s 85.3% shareholding, and without an offer that makes a CVA a legitimate outcome, I agree with Paul’s analysis that liquidation is inevitable, but I also agree with @rangerstaxcase that it won’t be next week. For all the Rangers owe, they are owed quite a bit of cash. The SPL and other football clubs owe Rangers a few million quid.

Hopefully, this blog has shed some light on how OTT the D&P PR has been,but also explains the reasons they have behaved in the manner they have….

Are the Rangers Administrators Duff&Phelps Being Up-Front and Forthright?

27 Apr

Today Ticketus announced that they withdrew support for the Blue Knights consortium to buy Rangers Football Club and the Blue Knights and Bill Miller lodged improved bids. According to a statement released by the Brian Kennedy and the Blue Knights, the pair made a renewed bid conditional on Craig Whyte’s shares being acquired and subject to a CVA being agreed among the Ibrox club’s many creditors.

Craig Whyte has admitted that, through his company Wavetower as a vehicle to do so, he used a £24m payment for future season ticket sales from Ticketus to complete the takeover of the club by paying off an £18million debt to Lloyds Banking Group. This is simply a leveraged buyout. It is legal. The Glazer Family bought Manchester United in exactly the same fashion.  Accordingly Craig Whyte had Lloyds Bank assign a security over the club which @rangerstaxcase has linked to on his/her own blog. It was lodged with Companies House, as required by law.

Craig Whyte’s company Wavetower, therefore, is a secured creditor. A secured creditor is a creditor with the benefit of a security interest over some or all of the assets of the debtor. There are primarily two types of charges; fixed and floating.

A floating charge occurs when a security (i.e. mortgage, lien, etc.) is fixed to an underlying asset or group of assets which is subject to change in quantity and value. For example, a business that operates as a manufacturing company might apply for a loan to pay for new equipment. The lender will make the loan and take a floating charge using the businesses inventory as the asset to secure the loan. Although the equipment could be repossessed in the event that the business failed to make timely repayment on the loan, the floating charge does not prohibit the company from continuing to use the machinery as normal.

The special nature of a floating charge is that the company can continue to use the assets and can buy and sell them in the ordinary course of business. It can trade with its stock and sell and replace plant and machinery, etc. without needing fresh consent from the mortgagee. The charge is said to float over the assets charged, rather than fixing on any of them specifically. This continues until the charge ‘crystallizes’, which occurs when the debenture specifies. This will include any failure to meet the terms of the loan (non-payment, etc.), or if the company goes into liquidation, ceases to trade, etc.

This is different that a fixed charge, which is registered against a specific asset. A fixed charge is a charge or mortgage secured on particular property. A floating charge is a particular type of security, available only to companies. It is an equitable charge on (usually) all the company’s assets both present and future, on terms that the company may deal with the assets in the ordinary course of business. Very occasionally the charge is over just a class of the company’s assets, such as its stock.

When the charge crystalizes it fixes on the assets then owned by the company, catching any assets acquired up to that date, but missing any which have already been disposed of. If the charge was created before 15 September 2003 the debenture-holder is then entitled to appoint an administrative receiver, whose job is to collect the assets charged to pay off the loan. This is what is usually meant when a company goes into receivership or administration. If the charge was created after that date, the debenture-holder may appoint an administrator. The main purpose of any security is to enable the secured creditor to have priority of claim to the bankrupt party’s assets in the event of insolvency. However, because of the nature of floating charge, the priority of floating charge holder’s claims normally rank behind: holders of fixed security (such as a mortgage or fixed charge); and preferential creditors, who are given priority by statute.

As far as Craig Whyte is concerned, his company Wavetower, which is now known as Rangers Football Group (not to be confused with Rangers Football Club) owns 83.5% of the shares in and also has a standard fixed charge or security over Rangers Football Club.

In a normal insolvency event, there is not enough cash going around for everyone to be paid in case of liquidation. The liquidators come in and sell off all of the assets and divide them amongst all of the creditors, with the secured creditors paid first. In a normal event, there usually isn’t enough to go around, so the secured creditor is rewarded for his risk-taking by getting placed first in the queue – after the liquidators and before the administrators.

Both secured and unsecured creditors queue up in an orderly fashion (pun intended) and the liquidator slices up the pie accordingly.  This is why the CVA is so important and has been referred to as a “cat-and-mouse-game” as creditors bluff and counter-bluff with liquidators over what they will accept or not accept. Voting rights also become extremely important. As I pointed out in my earlier blog about Portsmouth Football Club, HMRC sued to prevent a CVA of .30p on the pound because it been given a lesser voting right than it thought it had been entitled to effectively ending its right to block a CVA agreed amongst the other unsecured creditors.

Let’s look at a couple of examples.

Example 1

If a creditor named ABC Ltd holds a security for £320,000 in a business called Widgets Ltd that has only £300,000 in assets, then ABC Ltd would get only £20,000 of voting rights in any CVA. That’s because the security is fixed against the assets of the company and the presumption is that the CVA works for the benefit of creditors. If the remaining unsecured creditors value their debt at £100,000, the secured creditor would be unable to block any CVA that the majority of creditors agreed to.

There are two major problems I can see here.  First, there is Ticketus.  In the Ticketus statement today, “there are a number of likely outcomes involving Ticketus re-obtaining its cash. If there is a CVA (company voluntary agreement) outcome, Ticketus is one of the biggest creditors and will get a share of what is left in the pot.”

Secondly, the “big tax case” judgement from the FTT is not in yet.  Until the judgement crystallizes, HMRC may only be a creditor to the tune of £13Million – £4million in VAT owed from the Ticketus deal and £9Million in unpaid PAYE.  However, figures released by Duff & Phelps earlier this month listed Ticketus as one of the club’s unsecured creditors to the tune of £26.7m. As we already know, any CVA must be agreed to by a 75% of the creditors’ value.

Let’s look at our example again of ABC Ltd and Widget Ltd. Previously I argued a secured creditor could not block a CVA if its value of the debt was less than 75% of the value of the entire debt. This was on the assumption that the assets did not EXCEED the VALUE of the SECURITY.

Look at it in a different way.

Example 2

Let’s say ABC Ltd owns a security over Widgets Ltd for £320,000 and the assets in Widgets were £350,000. Guess what happens? The liquidator must sell the assets to the benefit of the secured creditor with a security over the fixed assets. In this scenario, ABC Ltd gets £320,000 and £30,000 goes into the pot. A CVA could then be agreed by the unsecured creditors. In this example, the best unsecured creditors, that had claimed £100,000 in unsecured debt, can do is get .30p on the pound.

Let’s go back to Rangers and Craig Whyte.

Whyte claims he has given Ticketus, “personal and corporate guarantees underwriting their investment” and that he is “personally on the line for £27.5M in guarantees and cash.”  I don’t know about you, but if I had a security for £20-£30Million over a business with £100M in assets on the books, and I was potentially liable for £19M to another company because of “personal and corporate” guarantees”, would I sell to anyone for £11.2 Million?

Any offer that comes in for my business had better exceed the value of my security. Even David Murray knew this. He sold RFC for a security over £18M debt + £1.  As RFC already has paid Ticketus £8million I am sure a smart and savvy (I mean smarmy) businessman knows that the assets Rangers have on the books are grossly inflated and not worth in excess of £100Million. However, they will likely be in excess of the value of his security.

I have found no authority in the Insolvency Act, the Companies Act, the Enterprise Act or any other Act, quite frankly, that gives the administrators the right to sell Rangers. They may have been given permission to seek a buyer, but they cannot force CW to sell his shares. I have found no authority that allows Craig Whyte’s shares to be sold without his express permission, particularly when he owns 83.5% of the outstanding shares!  This is why Brian Kennedy and the Blue Knights can only offer a conditional offer to buy the club. The administrators have no power to force Craig Whyte to sell his shares. He is a secured creditor and is due £20-30Million. Like it or lump it. It is a fact.

Logic tells us then that the “pot” that Ticketus refers to has to fund itself from either from an offer to buy in excess of £20-30Million (Craig Whyte’s likely minimum buy-out price) or from the sale of the assets. I think Ticketus knows this.

Ticketus is actually in albeit a risky, pretty decent position. If CW gets paid, he is on the hook to them for £19M (27M – 8M already paid). The contract with Rangers Football Club is still in force, although they are not part of any consortium, so any new buyers will have to honour the contract they have with the club, which means they will get their funds back under the present season ticket arrangements, pending a successful legal challenge of course. If the club is liquidated, then the fire sale of the assets will likely mitigate their losses, if not pay off the entire amount owed. A sale of the assets MUST go to the benefit of the creditors not to the benefit of the football club, so none of the funds raised through the fire sale of the assets can be transferred to the NewCo. Even a bid for £33 million (three times the last Miller bid) would only satisfy the amount CW is owed and the debts to other football clubs. It would leave hardly anything else for Ticketus or HMRC who would then have to agree for pennies on the pound CVA allowing Rangers to come out of administration – when there is “£100Million” in assets sitting in Govan. Folks, this ain’t happening.

I am going to have to point out the obvious here, but with the HMRC “big tax case” judgement not in yet, how are even HMRC in a position to sit back and decide on a CVA when they don’t know what they are duly owed?!!? If I am right, it begs the question as to why and how D&P are taking offers for the club in the first place, especially since Craig Whyte can block any action to sell his shares.

Are the administrators fulfilling a PR exercise?

Of course. They must they be seen to be doing everything possible to save Rangers.  Are they under instructions from CW himself to try and find a buyer? To me, the whole thing reeks of incredulity and is an exercise in futility. Unless Craig Whyte’s security is less than publicly reported, it makes no logical sense as to why he would sell to either bidder and Duff & Phelps have raised a lot of Rangers supporters hopes for nothing. Again.

https://web3dlaw.files.wordpress.com/2012/04/assignation-of-the-debt-to-wavetower.pdf