The system used in the UK for recording securities over company assets is not as clear as one (well me) would like.
Unlike mortgages and similar securities over property, which are lodged in Scotland with the Land Register; which are available for public viewing (and copies can be obtained for a modest price); and which depend for their validity on being recorded, the system for recording Floating Charges etc is far less clear. One might almost think that the rules were drawn up to prevent clarity.
Where there is a charge over a company’s non-heritable assets, this is meant to be recorded in the Register of Companies. The spirit of openness in corporate dealings requires that, for example, a lender can see authoritatively what other parties might be ahead of them in the queue in the event of the debtor failing to repay.
Whist the security does not depend entirely on registration for its validity, proper recording is vital for example, in a liquidation, so at to protect the lender’s security.
Unfortunately the system records what has been granted but without exhibiting the documents themselves. This means that there can be some detective work involved in working out exactly what the position is.
This leads us to an issue looked at in the Rangers Tax Case Blog in November 2011. After previous looks at the security documents lodged in connection with the variations to the Rangers Floating Charge, a further document, detailing changes to the floating charge, was prepared on 26th October 2011. The document can be seen here – Rangers Security Charge Change 11_11.
The floating charge is the security granted in 1999 by Rangers in favour of the Bank of Scotland. When Wavetower Ltd, Craig Whyte’s company, now called Rangers FC Group Ltd, bought the Club from MIH, the debt due to Lloyds Banking Group, which now controls the Bank of Scotland was paid off and the right to recover it assigned to Wavetower. The point is that the floating charge, being granted before 2003, allows Mr Whyte to appoint a receiver to the company to get back all the money Wavetower is owed. It “floats” over all the assets of the company until it crystallises, at which time it secures the assets of the company at that time for the creditor.
The receiver’s duty is to the individual creditor, unlike an administrator or liquidator, whose duties are to all the creditors. As the floating charge came into being pre 2003, Wavetower retains this power to appoint a receiver. This has long been seen as Mr Whyte’s trump card, and the way he can legitimately get his and Wavetower’s money back out of Rangers before anyone else.
So in October 2011 we have a form labelled “Particulars of an instrument of alteration to a floating charge created by a company registered in Scotland”.
This details that it relates to a floating charge granted on 24th February 1999 by Rangers Football Club PLC to the Bank of Scotland and the rights of the Bank thereunder have been transferred by way of an assignation dated 5th May 2011 to Rangers FC Group Ltd.
So far, so clear. All the assets of the company, with the exception of any already excluded, are covered by the charge.
Then we come to the most relevant part of the form for my purposes today.
This comes against the backcloth of the Rangers and Ticketus relationship whereby a large slice of Rangers’ season ticket income for the next three years has effectively been pledged to, or sold to, Ticketus in return for money now. Some have tried to work out whether or not Ticketus might have a security which had not yet been registered.
Where, if anywhere, Ticketus stands in relation to the floating charge is therefore very important.
The form then goes on to detail the parties which have executed the alteration. As the notes say, in terms of s466 (1) of the Companies Act, the minute of alteration needs to be completed by the company, the holder of the charge and the holder of any other charge affected by this one.
So, we would expect to see Rangers Football Club PLC, as indeed we do, as they are the company granting the security. We also find, as expected, Rangers FC Group Ltd, as they have the benefit of the Charge.
We have Close Leasing Ltd (a company with close connections to Phil Betts, erstwhile Rangers FC Director) and Close is mentioned as it is involved with the security regarding catering income at Ibrox, where provision of the service is contracted out to Azure.
Close Leasing seems to have provided funds to Rangers secured against the catering income, in another short-term loan. This type of arrangement would normally be used, as with the Ticketus arrangement, for short-term working capital purposes, and not for long term funding.
But there is a fourth party named in the document: – “Liberty Capital Limited with Registered Office at 7th Floor, Aldermary House, 10-15 Queen Street, London EC4N 1TX”.
That means that Liberty is a party, in some way, to the floating charge over Rangers Football Club PLC’s assets. Does this therefore suggest that rights under this have been assigned further from “Group” to Liberty? Otherwise, why mention them?
Is Liberty “the holder of the charge or the holder of any other charge affected by this one”?
The problem though might arise in connection with the designation. As the form states, it describes “Liberty Capital Limited with Registered Office at 7th Floor, Aldermary House, 10-15 Queen Street, London EC4N 1TX”.
A search in the Companies House register shows that there is no active company in the UK of that name. Liberty Capital PLC exists, but this is a non-trading company registered at a different address.
Liberty Capital Markets Ltd is incorporated at the same residential address in Sutton where Mr White, rather than Mr Whyte, incorporated two companies in 2010, as mentioned in my blog yesterday.
That company, formerly JB Woodward Investments Ltd, was struck off the register in November 2010.
A new company of the same name was incorporated on 1st November 2010, with its sole director being Wulstan Earley, mentioned in yesterday’s piece too.
A previous Liberty Capital Ltd was dissolved in 2000, but seems to have no connection to any of the parties linked to Mr Whyte.
Mr Whyte is the sole owner, he tells us, of Liberty Capital Ltd, but this is a company incorporated in the British Virgin Islands where transparency is not the first priority in the applicable Company law. Therefore there is, as far as I can see, no such legal entity as ““Liberty Capital Limited with Registered Office at 7th Floor, Aldermary House, 10-15 Queen Street, London EC4N 1TX”.
The security form was prepared by Morton Fraser LLP. I would assume that they would not have made a mistake in completing it, as almost certainly they were working from the actual security documentation.
It would be a real problem for Mr Whyte’s Liberty Capital Ltd, if indeed that is the company which is meant to be involved here, if it turned out that the paperwork had been completed incorrectly, denying the company the protection it ought to be due.
As on a number of occasions before, the standard of form filling on behalf of Mr Whyte seems lamentable (whether by his staff or his legal advisers, although as I have stated I would be very surprised if such an error was the fault of Morton Fraser).
It would be wrong to suggest that this displays a pattern of obfuscation or in any way is a deliberate attempt on the part of anyone actively to mislead people as to the identity of Mr Whyte or Mr White, or as to the nature of the corporate relationships supporting Rangers Football Club PLC. Paperwork can be so confusing.
There are some comments too to be made regarding the narrative of the document itself, but that is for another post.
Hopefully Mr Whyte might read this and take steps immediately to correct the error to avoid prejudice to Liberty Capital Ltd, and to parties involved with the various companies involved.
NB – I should say that my record checking was carried out on the Companies House website today (6th February) at 10.30 am and therefore, if those records are wrong, and there is indeed a Liberty Capital Ltd registered at the address mentioned, then I apologise to Mr Whyte’s form fillers. I might suggest they take the issue up with Companies House.