Tag Archives: #rfc

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?


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?



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


A look at Portsmouth FC for Guidance on Football Clubs and Creditor Voluntary Agreements

17 Apr

Not surprisingly there has been very little analysis by the Scottish mainstream media of how other football clubs have dealt with administration where HMRC have been a major creditor. Portsmouth Football Club, on a factual basis has a significantly similar back story to Rangers and their current ‘predicament’. They both have an owner that bought the clubs for a £1. Both clubs had an owner that owned 80-90% of the shares in the business. They both had potential debts of £135-£140 million. The major difference is the percentage of the debt that was owed to HMRC. Another difference was that the Premier League paid funds to the clubs owed funds by Portsmouth. And there was court action by HMRC to prevent the CVA…

As the early stages of the 2009–10 season progressed, the finances dried up at Portsmouth and the club admitted on 1 October that some of their players and staff had not been paid. On 3 October, media outlets started to report that a deal was nearing completion for new owner Ali al-Faraj to take control of the club. On 5 October, a deal was agreed for a non exeecutive director named Al Faraj and his associates via BVI-registered company Falcondrone to hold a 90% majority holding, with Al-Fahim retaining 10% stake and the title of non-executive Chairman for two years.

In December 2009, it was announced that the club had failed to pay the players for the second consecutive month, on the 31st it was announced player’s wages would again be paid late on 5 January 2010. According to common football contracts, the players then had the right to terminate their contracts and leave the club without any compensation for the club, upon giving two weeks notice. Despite the financial difficulties, Grant’s time as manager was initially successful. He gained two wins (against Burnley and Liverpool) and a draw away at Sunderland from his first five games. The only losses inflicted on Pompey in this period were by eventual double winners Chelsea and the previous season’s champions, Manchester United. HM Revenue and Customs (HMRC) filed a winding-up petition against Portsmouth at the High Court in London on 23 December 2009. In March 2010, this winding-up petition was dropped, leaving Portsmouth with a nine-point penalty for entering administration.

On 17 June, the CVA was formally agreed with creditors with a 81.3% majority; Her Majesty’s Revenue and Customs (HMRC), Paul Hart and the agent of Pompey midfielder Tommy Smith were the only ones to reject it, but HMRC appealed against the CVA due to the reduction of their considerable debt. On 15 July 2010 HMRC appealed against the proposed CVA on the last day before it would be formally agreed, the case was originally going to take place in October 2010, but after an appeal from the administrators at the club it was set for 3 August at the High Court in London. The case was heard by Mr Justice Mann from 3 to 5 August where, having heard submissions from both sides, he turned down HMRC’s appeal on all five counts put forward by the revenue service. HMRC decided not to appeal against the verdict, leaving Portsmouth’s administrators to formally agree the CVA and bring the club out of administration.

HMRC applied to the court asking them to revoke/suspend the approval of a CVA.  HMRC also appealed against the decision on the amount of its debt to be allowed for voting purposes at the CVA meeting. HMRC sought to vote in the sum of £37,768,387, which included a sum of about £11 million of tax for “image rights” payable to players which the club claimed were not taxable but HMRC claimed were a sham. The chairman of the meeting (one of the administrators) permitted HMRC to vote only in the sum of £24,474,435, having rejected the whole of a claim of £2,947,468 and placed a value of £1 on the sum claimed in respect of the “sham” image rights.

Under the Football League’s insolvency policy a club was required to exit administration by an approved CVA, and that all football creditor debts had to be paid in full or fully secured. Football creditors were other clubs (to whom sums might be due for transfer fees), players (for remuneration) and various football authorities and organisations.

The issue here was that the Premier League had paid funds to other football clubs during a period of administration out of the moneys it would otherwise have paid to the club. There is no suggestion that the SPL/SFA have paid any of the money due to Dundee United, Dunfermline, or Hearts, all clubs that are owed funds by Rangers Football Club.

As mentioned earlier, HMRC sought to vote in the sum of £37,768,387, but was only permitted by the chairman to vote in the sum of £24,474,435. The CVA proposals were passed by more than 75 per cent of the creditors. The Revenue brought its application and appeal under the Insolvency Act 1986 s.6 and the Insolvency Rules 1986 r.1.17. The Revenue contended that the CVA unfairly prejudiced its interests because it would result in the loss of valuable claims under s.127 of the Act and had approved payments past and future payments to football creditors in full. It submitted that allowing football creditors to vote amounted to a material irregularity as they, unlike the other creditors, would be receiving payment in full. The Revenue argued that if the football creditor votes had been disallowed then it would have had more than 25 per cent of the vote and would have been able to block the CVA.

On 17 August, Balram Chainrai completed his takeover of the club and passed the owners and Directors F&PPT. During the 2009–10 season, it had become apparent to the new owner that Portsmouth were approximately £135m in debt.

This makes clear that HMRC has a precedent for seeking to block a CVA when unsatisfied with the percentage on the pound offered by the administrators. What is different in Rangers case, is that if the ‘big tax case’ goes against RFC, then HMRC will likely be the majority creditor. Payout is limited by however much money is on offer and is distributed by creditor class/negotiation, with threats of liquidation & security interests complicating matters. What the Portsmouth case shows us is that HMRC will be tough, tough customers. There should be no expectation that HMRC will do any favours to Rangers when there are 100M worth of assets sitting on their books…

If HMRC was willing to sue to seek to block a CVA on a debt of £25 million when the total debt of Portsmouth was £135 million, then what will they demand when the business is in debt to the tune of  up to £140 million and over 75% of the debt is owed to Her Majesties Revenue and Customs?

I wonder if the “two Bills, Miller and Ng” have done their due dilligence…

A mea culpa (of sorts) from Duff and Phelps, the Rangers administrators.

19 Mar

I am often asked my opinion on the “situation” at Rangers Football Club. I am often asked on the basis that a) I do not like Rangers (I grew up supporting DAFC, and although my extended family all supported RFC, I despised them out of spite)  and b) I am a student of the law and have a keen thing in all things Legal in Scotland.  Unfortuntely, the Scottish media has not been particularly up-front about what is really going on at Rangers. Several internet bloggers have made attempts to clarify what exactly is going on at RFC, including @grahamspiers, @pmacgiollabhan, and @rangerstaxcase) All have written extensively on the subject, and I would not begin to steal the varied and impressive work they have done so far. This blog is an attempt to make it all relatively clear to the layman. Ill try and keep it simple.

The situation is worse than the club and the administrators are letting on.

It has been widely reported that current owner and corporate takeover specialist Craig Whyte has used the money he received from the sale of season ticket books rom Ticketus to fund the takeover of the Glasgow Rangers Football Club.

To be clear, the deal can be broken down like this, in the simplest of terms.

Football financing company Ticketus physically bought 3 years of Rangers physical season ticket books from the club for a whopping £24Million. (of which £20 million was for the books, and £4million was VAT). This means the company literally owns 3 years of season tickets books. For the privilege Ticketus paid handsomely into an account, presumably into an account at Collyer Bristow, a London law firm. The deal operated like this:

Rangers gets cash in advance. When a supporter wants to purchase a season ticket book, they phone Ticketus ( or a subsidiary) and the books arrive in the post. Private estimations puts Ticketus profit on the deal to be within £30-40M.

By all accounts, Craig Whyte took this statement of  account at Collyer Bristow and showed it to Sir David Murray to prove his funds were there to facilitate the purchase of the club.

The deal likely took place as follows, “I’ll (DM) sell you the club for a £1 and you (CW) must pay off the club debt”.  The club debt was in the region of £18M and was owed to Lloyds TSB.

This seems simple enough. Except this isn’t a simple deal.

Craig Whyte  formed a company called Wavetower. Shortly afterwards, he changed the name of Wavetower to Rangers Group. The paperwork confirming this is here and here. The directors are Craig Whyte and property developer Andrew Ellis, who sit on the board of Rangers Football Club (more on this later).

It is my belief that Ticketus paid the £24 Million into the account of Wavetower/Rangers Group at Collyer Bristow. After the paperwork was signed, Rangers Group Ltd, (NOT Rangers Football Club Ltd) paid off the  £18M debt owed to Lloyds TSB.

In turn, Lloyds TSB assigned a security over the club to Rangers Group (not Rangers Football Club Ltd).

What this means is that Rangers Football Club owes £18M plus interest to Rangers Group. RFC never paid off the debt to Lloyds TSB. Rangers Group did. Afterwards, Lloyds assigned the security over RFC to Rangers Group.  Craig Whyte and Rangers Group own a floating charge over Rangers Football Club. Therefore, Craig Whyte is a secured creditor over Rangers Football Club. Rangers (Football Club) owe an additional £18M to Rangers Group (Craig Whyte).

And Duff and Phelps make a very subtle admission of this fact in a court document that was filed last week. (This was widely reported in the press as Rangers was not technically in administration)

Check out Note 3 of the Document filed in the Court of Session last week. (Available Here)

It reads as follows:

“otherwise dispenses with any further intimation, service or advertisement of this petition… blah blah blah…and the Rangers Group Limited as a holder of a qualifying floating charge”.

Duff & Phelps have stuck in to this document very quietly, what everyone including CW have always believed or suspected. Rangers Group have a floating charge over Rangers Football Club, Ltd.  So in addition to the £9M in PAYE owed, the £4M in VAT they owe on the Ticketus deal, the “small tax case” of £3-4M  and the “big tax case”, of up to £75M which has not yet been decided by the First Tier Tribunal, Rangers Football Club possibly owe Craig Whyte’s Rangers Group £18 million.

Watch this space…

Some more questions for Rangers and Sir David Murray…

19 Mar

From a legal point of view, what is going on at Rangers Football Club is fascinating and in many ways, a case study in UK Corporate Law, something in which I am really fascinated. For the clubs support, they care less about separate legal personality, liquidation, trusts, and administration, so this post won’t be for them. However, I am interested in what is going on at Rangers from a purely legal point of view. Rangers accounts certainly lead to many unanswered questions.

Here is a copy of Glasgow Rangers accounts for 2008 – the last ones available. If you look at note 6, Rangers were still using the EBTs as recently as 2008. Accordingly, Rangers and Sir David Murray must answer some obvious questions.

Q. When did the use of EBTs come to an end at Glasgow Rangers?

Q. In what time periods were EBTs used by players and staff? When did the use of the EBT come to an end? Are there currently any players that are currently paid by means of an EBT?

Q. The Report of the Directors (available here)  shows that the Blue Knights are basically the old guard.  If they were David Murray’s friends – why did he sell to Craig Whyte instead of the Blue Knights themselves originally?

Q. Note 15 shows that Rangers had £13m of what they describe as “trade creditors – payable within one year”. Is any of this amount owed to Ticketus?  Of course a club like Rangers would have creditors – but £13m worth? The comparable figure for 2007 is £6m so there was some hike!  There are several other places that could be Ticketus too.

One of the Scottish tabloid papers printed a copy of what Rangers called a “letter of Intent” – an agreement between the Club and the players for payment for playing for Rangers. Note the second box  on the right hand side makes reference to a clause in the letter that states that a player will received “payment” of £122,000 with the terms of the agreement redacted. Of note, is that the document contains a clause that states payment will be made “subject to you being a registered Rangers player on those due dates”.


Rangers wage bill jumped dramatically between 2007 and 2008.  In 2007, it was around £24m. The accounts have the comparable figures for 2007.  In 2008 it was £34m – so almost £3m per month – so perhaps the administrators aren’t exaggerating as to how deep the cuts they were forced to make really were.

It has been reported that Rangers highest player received £25K a week. It has also been reported that there are some 30 players on the Rangers roster. So lets do some math. The administrators Duff & Phelps made very publicized statements about having to cut £1Million a month from payroll in order to maintain the club to the end of the season.

4 weeks in a month

£25,000 a week

30 players on £25K a week

4*25000*30 = £3,000,000

Now we all know that some of the young boys are nowhere on £25K a week. But I used this as an example.

Lets say for argument sake that they were, this brings the monthly cost of paying the players to £3,000,000.00

If all the players took a 75% pay cut, that reduces the payroll to £750,000

Now what we do not know is what each player was on, but lets assume there are 5 players on £25K, 15 players on 10K a week, and 10 players on 5K a week. How does the math work out then?

5*25000*4 = 500,000 (Most likely Davis, Papac, McGregor, Naismith, Whittaker)

10*10000*4 = 400,000

10*5000*4 = 200,000

All of a sudden, we are down to £1,100,000 in players monthly salaries and Duff and Phelps claims don’t make any sense whatsoever. Where is the other nearly £2,000,000 a month salary costs going?

Will Duff and Phelps release the actual costs of players and their financial obligations to pay into EBTs as recently as 2008? Do even they have access to this information?

Why is this relevant? Current players McCulloch, McGregor, Papac, Naismith, Alexander, Broadfoot, Whittaker, Lafferty, and Edu all played in the Season 2008-09.

A strict interpretation of the wording of the Letter of Intent implies that The Murray Trust may STILL be paying the players. EVEN now. There is no limitation. Read that clause again. The only demand is that the party to the contract still be registered as a player with Rangers. Thus, the payments from the Murray Trust to the players may still be ongoing.

Q: Is the trust still making payments to any players? Does it have any contractual obligations to fulfill?

Q. Is one of the reasons none of Rangers accounts from 2009 onwards available because they show the ongoing use of EBTs?

Clearly, this story is not going to die any time soon….