How Section 216 of the Insolvency Act Could Prevent “The Return of Dave King” to Rangers

We almost seem to be having déjà vu when it comes to Rangers, yet again! A tweet from @Corsica1968 prompted me to have a look at Section 216 of the Insolvency Act 1986.

It looks as if that section would potentially be enough to prevent the involvement of Dave King in Rangers for 5 years from 5^th November 2012 onwards. It would also prevent John Greig, for example, from re-joining the Board.

The section relates to the re-use of a company’s name where it has gone into insolvent liquidation. The mischief the section is designed to stop is that of companies “dying” and leaving its debts with the oldco only to be resurrected a couple of days later as a newco but under the old trading name and with the same directors in charge. It can be legitimate to do so after a process of administration – but not when being “pre-empted” by the directors.

Can “Rangers” Play as “Rangers”? What’s In a Name?

Various suggestions have been flying about teh Internetz regarding the possibility that Sevco Scotland Ltd’s team ought not be allowed to play under the name of Rangers.

This is suggested to arise from differing sources.

Some say that calling the team “Rangers” will make it a “phoenix company” and as such it would be illegal to use that name.

Others hint that HMRC would prevent the use of the old team name.

It is regularly voiced that HMRC did this with Farsley Celtic, an English non-league team which, as the story would have it, was blocked from reforming under the name Celtic.

In fact the ownership of the club had planned a name change prior to insolvency, and there was no HMRC involvement in the new name being chosen as Farsley AFC. This has become an urban myth which, like all such stories, has a life far beyond reality.

There are also rumours that calling the team “Rangers” would allow creditors of the Rangers Football Club PLC (RFC PLC) to pursue Sevco Scotland Ltd for payment of debts.

Will Craig Whyte and Other Directors of Rangers Face Disqualification for £14,000,000 Unpaid Tax?

In which I comment on the Directors of Rangers Football Club PLC over the last year, and in light of a recent case decided by Lord Hodge, have a look to see if any of them might be at risk of disqualification for the non-payment of PAYE, NIC and VAT.

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One of the consequences of the decision of HMRC, of which I will write elsewhere, is that the liquidators, BDO, will be obliged to carry out a formal inquiry into the circumstances of the insolvency of Rangers Football Club PLC. This includes the actions of present and past directors and can lead to various possible outcomes. These are not mutually exclusive.

There can be criminal prosecutions of office holders, if there is evidence of criminal conduct (not an allegation which has yet been made by any official body); the parties investigated can be pursued in the civil courts for losses caused to the now insolvent company, where they have failed in their legal duties; and the Secretary of State for Business Innovation and Skills can initiate proceedings to disqualify the directors from holding such positions. Section 6 of the Company Directors Disqualification Act 1986 applies here, and is shown at the foot of this article.

It is also the case that shareholders of an insolvent company can, in certain circumstances, bring civil proceedings for damages against officers of the company, alleging that breach of duty has caused them losses. On the basis tough that shares in Rangers were seen as financially worthless when Mr Whyte took over the company last year, it is hard to see how even a shareholder like Mr King, owning 10% of the shares, can claim to have suffered a loss.

Proof That Rangers FC Follows the Rangers Tax Case Blog? Possibly

A new thread on the Rangers Tax Case Blog was posted on 30th December 2011. In the course of a discussion in the comments about areas where it appeared that Rangers Football Club PLC might possibly, whether through inadvertence, administrative errors or postal mistakes, have fallen short of its legal requirements under the Companies Act, and its regulatory obligations under the rules of the PLUS SX, one commenter, the “Casual Observer” raised an interesting issue.

John Greig and John McClelland had resigned from the PLC Board in October, alleging unhappiness at the absence of involvement in the running of the PLC since the takeover by Craig Whyte in May 2011.

On 17th October, as required by PLUS SX rules, Rangers Football Club PLC announced this. The link to the announcement is here – http://www.plus-sx.com/newsItem.html?newsId=1367093

However, as the “Casual Observer” pointed out, Companies House had no record of the resignations.

The Companies Act 2006 requires a company to notify appointments or resignations of Directors to the Registrar of Companies within 14 days, failing which a criminal offence is committed by the company and its Directors.

Rangers should have lodged its audited accounts with Companies House by 31st December. As of 15 minutes ago, the lodging of accounts is still listed as “overdue”. This may of course be down to delays in opening mail received at the end of the period and lodging it on the Companies House website. It is not necessarily the case that the accounts are late, which would be a criminal offence. Failure to hold an AGM is also a criminal offence.

These alleged offences are rarely prosecuted, and generally would have to be extreme cases of corporate irresponsibility, or part of a regular practice by the company or Directors involved, before a prosecution would be raised.

One of the factors for Companies House in deciding to refer the matter to the procurator fiscal is how quickly the error is remedied.

At least as far as the failure to notify the resignations of the directors goes, that has now been rectified.

The relevant “paperwork” in relation to Messrs Greig and McClelland was transmitted electronically to Companies House yesterday (3rd January 2012).

The documents can be found here Director resignation no 1 and here Director resignation no 2. (I haven’t quite worked out how to link the docs directly, so click through the next page which appears after clicking on the links above.)

The documents confirm (a) that the resignations were effective on 16th October and (b) that the intimation only took place yesterday.

I am sure that the “Casual Observer” and the Rangers Tax Case blog are happy that their disclosures have been noted and acted upon by Rangers, and that, notwithstanding yesterday being a public holiday, Rangers’ assiduous staff were hard at work attending to these technical requirements.