The saga of the takeover of Rangers Football Club PLC by Wavetower Ltd (now Rangers FC Group Ltd), the company controlled by Craig Whyte, has run and run.
As the most recent post on the Rangers Tax Case blog put it, it is now no longer news to hear that Rangers or Mr Whyte is involved in litigation in relation to allegedly unpaid bills.
I thought it might be useful to list a few of the questions which remain extant. I don’t come up with many answers, and I am sure wiser folk than me can make the necessary connections and deductions.
Craig Whyte v the BBC
Following on from the BBC Inside Story programme, Mr Whyte made it clear that he was going to pursue the matter through the courts, both against the BBC and indeed against the official from the Insolvency Service who appeared in the programme to discuss the allegations against Mr Whyte.
Carter-Ruck, the famed London libel lawyers, were quickly brought in to advise both Mr Whyte and Rangers. However, in the two months which have gone by, it does not appear that the case has yet been raised.
A few weeks ago, there was a flurry of press comment to the effect that Bannatyne, Kirkwood and France of Glasgow were now instructed as Carter-Ruck could not raise proceedings directly in Scotland.
I have repeated ad nauseam that, in Mr Whyte’s shoes, and if I was determined to sue for libel/defamation, I would initiate proceedings in the High Court in London. There are many reasons for doing so, and comparatively few for choosing to go to law in the Court of Session in a case such as this where both jurisdictions are applicable.
The BBC programme was carefully crafted. The most serious allegations either came from public records or from court paperwork. For example, the suggestion, vigorously denied by Mr Whyte, that he had acted as a director when disqualified from doing so, arose for court papers prepared in connection with the winding up of Re-Tex.
As I have mentioned before, there is not an absolute privilege when reporting court matters from the past, but malice requires to be proved. It is extraordinarily difficult to establish malice in the legal sense, short of an admission by the allegedly malicious party!
However, in the last few days, RangersTaxCase himself mentioned in a comment that he expected Mr Whyte to go ahead with the action.
Nothing else concrete appears to have arisen in this regard.
It may be that the purpose of raising an action would be to try to stifle comment on the matters at issue. Media organisations would be reluctant to delve too deeply into matters that were already the subject of litigation, in case the BBC turned out to be wrong, and other parties were found liable on the BBC’s coat tails. I would not expect Mr Whyte to announce that he is no longer going to sue the BBC, so until there is word about proceedings, I suppose we simply have to wait and see.
The wee tax bill
HMRC had successfully arrested around £2.3 million of a bill due in relation to Discounted Option Schemes operated by Rangers. This sum was part of a liability which had been accepted by Rangers, and indeed by Mr Whyte on the takeover. However, the bill was not paid, and Sheriff Officers were dispatched by HMRC to serve a charge for payment and then an arrestment.
The arrestment succeeded and the sum mentioned above was frozen.
Under the law as it now exists, if the funds remain frozen for 14 weeks, they are automatically remitted to the arresting creditor, in this case HMRC. It seemed hard to work out why, once the funds were arrested, they were not simply handed over to HMRC by Rangers. After all, they would not be coming back into Rangers hands.
Then, just before the transfer was due to take place a couple of weeks ago, there was a flurry of speculation that this formerly agreed tax bill was now to be appealed, and that steps would be taken to prevent the handover.
In the event that Rangers suffered an Insolvency Event, the arrested funds might come back into the pot for the secured creditor, namely Wavetower under its floating charge.
Normally any appeal so late would be doomed to fail. However, an application could have been made to Glasgow Sheriff Court to object to the arrestment (a) on the ground that there was some defect in its application or (b) that the arrestment was unduly harsh on the debtor.
In either case, there would not be any need for an initial hearing, but instead the matter would come before the court, probably in January, for argument. Until then the funds would remain arrested but not passed over to HMRC.
If the funds had been transferred, I would have thought that there would have been some spin to suggest that this was a liability Rangers were meeting, as the impression is being created that they do not do so, or at least timeously.
On the other hand, as the lodging of the application to object to the arrestment does not result in an initial hearing, it may well be the case that this had happened and that the court, as would be expected, has kept the matter confidential until the point next year when the case is listed on the court rolls.
As with the BBC case however, the lack of information leads to varying degrees of speculation.
The big tax case
This seems simpler (hah!). The First Tier Tribunal (Tax) is due to reconvene for three days on 16th January. It is hoped that the case will conclude during that period. Once that happens, it might take two or three months for the Tribunal to issue its decision.
Thereafter the losing party can appeal to the Upper Tribunal, and thence to the courts.
Very recently there have been suggestions made that in fact Rangers are about to “cut a deal” to pay around £5 million to settle this claim which, with interest and penalties, is believed to total around £49 million.
Mr Whyte is rumoured personally to be meeting HMRC officials in London to batter out a settlement.
Whilst that is not impossible, I would class it as highly unlikely. There is really no incentive for HMRC to reach a deal with Rangers here. Some have suggested that, should Rangers enter insolvency, the fact that Wavetower’s floating charge would eat up most, if not all, of the assets, means that HMRC has to strike a deal or else it would get nothing.
However, HMRC does not work as a normal commercial creditor. It emphasis the “moral hazard” caused by people who are unable or unwilling to pay their full liabilities. If HMRC is seen as letting taxpayers escape their full liabilities on the grounds that, if insolvent, HMRC might get nothing, then we would see a spate of these situations. HMRC is quite clear in its guidelines. It will not, except for extraordinary circumstances, accept the clearance of a debt to take over one year, and to enter into such an agreement they would require to be satisfied of the taxpayer’s full co-operation.
It does not appear that such co-operation has been forthcoming from Rangers over recent months, and they may, and I emphasis may, fall into the category of wilful no-payers. HMRC has no incentive to deal favourably with such parties, no matter how august an organisation they represent.
It remains the position, as acknowledged by Mr Whyte, that if a substantial finding goes against Rangers at the FTT (T), then some form of insolvency is almost inevitable. However, that might not hit now till near, or at, the end of this season.
Will Rangers Run out of Money, and Will They Sell Players to Keep the Doors Open?
There has been speculation about the state of Rangers bank balance for some time now. It was suggested that, in fact, they were running out of money a couple of months ago. Mr Whyte has not made public the present position of the Club financially, and so the guesswork continues.
It may be that a “firesale” of players will take place in January to generate cash, either to keep the club running till the end of the season, or to “fatten the calf” in advance of Mr Whyte appointing a receiver to get him Wavetower’s money back.
It would confound the pundits I there was not such a sale, although any sale of a player is dependent on there being a willing buyer and also the player himself being prepared to agree terms.
As has been seen recently with Hearts, where players are not paid (and if the club enters an Insolvency situation) the players can be come free agents. In such a case there would be no need for a transfer fee, and the signing on payment to the player would likely be much higher. Players, and their agents, will be gauging how likely Rangers is to make it to the end of the transfer window and then till the end of the season.
If Rangers start selling at the start of the window, this would be a clear sign that the sales were forced, and not voluntary.
The Audited Accounts and Annual General Meeting
Mr Whyte met the Rangers Supporters Trust in October. He told them that both the accounts and the AGM were on schedule.
The audited accounts were due by the end of the year, and company law required Rangers to hold their AGM by 31sdt December. As a result of the notice requirements, they could not now validly hold the AGM this year anyway.
Rangers, through Mr Whyte, released a statement to the effect that the AGM was being postponed as the tax case was due to resume in January, and Mr Whyte wanted to come to the meeting with more concrete news. However, that is not a valid reason for failing to hold an AGM!
Failure to do so is a criminal offence. Will the Directors of Rangers be prosecuted for this failure?
Press coverage of the matter seems non-existent over the last week or so. One can only imagine the furore if any other prominent SPL team produced unaudited accounts (without any real explanation as to why) and refused to hold an AGM.
On the back of the allegation that Rangers have not held a board meeting since the takeover, this seems consistent with what has gone before, and the rumours that all decision making at Ibrox is now in the hands of the triumvirate of Craig Whyte, Gary Withey and Ali Russell, and that all information is totally locked down, it seems that a policy decision has been taken to allow as little light as possible to be shed on Rangers’ affairs, at least till the tax case concludes.
It should be of concern to the football authorities that Rangers appear to be flouting their obligations in this regard.
Talking of the Football Authorities
When, five weeks after the BBC programme alleged that Mr Whyte had been disqualified from being a company director, Rangers confirmed this to the PLUS Stock Exchange, this prompted the SFA/SPL to make enquiries. The question was raised as to whether or not Mr Whyte remained a “fit and proper person” to have his role in a football club. It is understood that Rangers have not yet responded to the queries raised.
Bearing in mind the imminent holiday period, can we expect Rangers to reply before 2012? I doubt it. The football authorities cannot look into matters till Rangers reply. It must surely be coincidental that such a delay would appear to suit Rangers apparent proposes just now.
Mr Bain will go to court for his full hearing in July 2012, if Rangers still exists as an entity.
Mr McIntyre was supposed to have settled his case. It remains to be seen if settlement has been effected. If not, expect this case to be back before a judge imminently, to thrash out the disputed terms, if any.
The case involving Tixway, owned by Mr Whyte, is due to continue on a date to be fixed. Mr Whyte was cross examined by the other party’s QC. Mr Whyte told the court he could not remember, without paperwork in front of him, why he had been disqualified as a director. He was asked if it was for trading whilst insolvent. He could not answer.
Bearing in mind that he previously described the seven year ban as for a “technicality” it is a pity that he has become, in the intervening period, so forgetful.
What Will Happen to Rangers
This is the $64 million question!
There are as may theories as there are football teams in Scotland as to Mr Whyte’s plans and motivations.
I, as a simple man, have always tended to the simple explanation.
Here is a man who has a history of involvement in distressed companies and who gets involve in them to make a profit by asset stripping, or by rescuing the company and selling it on.
Rangers, with the debt to HMRC looming, and with the “black hole” described by Mr Whyte, is a distressed company.
Repeatedly in interviews Mr Whyte has commented that he has been shocked at the amount of scrutiny he and his activities have received. If it had not been for the early exit from European competition, he would have had a decent nest egg to keep the Club going either till it traded out of difficulties or, more likely, when it lost the FTT (T) thus allowing Mr Whyte to appoint his receiver.
However, fate intervened and the European cash expected failed to materialise. Since then it seems every penny, even bills admitted to be due, is watched like a hawk, and not paid till the last minute.
As to what will happen…. I have no idea, though I suspect that HMRC might be back knocking on the door very soon.