I suggested there might be immediate redundancies amongst the playing, backroom and “ordinary” employees. I also posited that season tickets would no longer be honoured, and all fans would be asked to pay at the gate for the game on Saturday.
I also pointed out an apparent offence under paragraph 45 of Schedule B1 to the Insolvency Act 1986.
So what have the administrators done? No redundancies, season tickets to be honoured, confidence in early exit from administration, and the paragraph 45 offence ignored! Don’t let me pick your lottery numbers!
Let’s deal with the various issues in turn.
Paragraph 45 of Schedule B1 to the Insolvency Act 1986
What I said last night was:-
“Under Paragraph 45, when a company is in administration, all business documents issued by the company and the company website must specify that the company is in administration and who the administrators are.
It is an offence by the administrators, officers of the company and the company not to do so. As at 11.35pm on 14th February, the Rangers.co.uk website is not displaying the required notice. I am sure that will be remedied very soon.”
Here we are, at 11.30 pm on the second day of administration. The Rangers website still does not show the required declaration. Failure to do so is a crime, committed by the administrators, officers of the company and the company. Maybe by tomorrow someone in Duff & Phelps might have read this blog and changed the website! It would not be a good start to the process to be reported for a breach of the Insolvency Act on such a trivial matter.
The Administrators’ Statement 14th February
Paul Clark, one of the administrators, was quoted yesterday on the Rangers official website.
He is reported to have said the following (emphases added):-
“As administrators we have a statutory duty to act in the best interests of all creditors and we will fulfil that function diligently.
“We fully recognise the great history of this club and what it means to people throughout the world.
“Whilst today is a sad day for Rangers, it also addresses the terrible uncertainty that has been hanging over the Club. The administration period, while difficult for all involved, will give stability to the Club in order to move forward.
“I can assure all Rangers supporters that all aspects of the administration will be carried out with the interests of the Club firmly in mind. As a first step, the administration team will ensure that Saturday’s match at Ibrox will proceed as planned and all other routine Club business will continue.”
This is a very interesting statement. As I detailed in the piece mentioned above, the administrators’ duty is as follows:-
“Subject to sub-paragraph (4), the administrator of a company must perform his functions in the interests of the company’s creditors as a whole.”
Sub-paragraph 4 relates to acting in the interests of a secured creditor where certain other conditions are fulfilled.
Nowhere in the rules is it stated that “the interests of the company” are paramount. Indeed, an undue focus on the company’s welfare might lead to the administrators acting to the prejudice of the creditors.
Bearing in mind the concerns about “perception” of the appointment of Duff & Phelps as administrators, this statement did not seem a very wise one, though perhaps excusable after what was clearly a hurried appointment.
It would not help any critic with doubts about the neutrality of Duff & Phelps, even if only a slip of the tongue.
The Administrators’ Statement 15th February
A further statement was issued by the administrators today. Extracts are below (emphases added.)
“Our first priority has been to ensure that the football club continues to function and this is being achieved with the help of staff, players and management at the Club.
“In broad terms, supporters can be reassured that Rangers will continue as a football club and we hope to reach a stage as soon as possible where the Club can emerge from administration.
“We have had expressions of support across the political spectrum in Scotland within the last 24 hours and there is clearly a desire to see Rangers come through this situation successfully.
“The Club has, however, taken the decision to postpone the Hall of Fame Dinner and Awards Ceremony scheduled for this Sunday (19 February, 2012) at the Glasgow Hilton as holding the event at this time was not considered appropriate.
“The event will be rescheduled for a later date and all table sales and sponsorship commitments will be honoured at that time. Rangers would like to apologise for any inconvenience caused to supporters, sponsors and clients and we will ensure details of the rescheduled event will be communicated as soon as possible. The Club would also like to thank the Glasgow Hilton for their understanding.
“There had been widespread publicity and speculation regarding the financial affairs of the football club.
“For clarity, the cost structure of the Club and ongoing losses were such that the Club had outstanding liabilities to HMRC. These were the subject of discussion and clearly HMRC wished to see them resolved as a matter of urgency. We are involved in dialogue with HMRC and will work with them constructively, as is the case with all other key stakeholders.”
I am reluctant to criticise professionals, and especially those as experienced as the gentlemen appointed to deal with the administration of Rangers but I am frankly astonished by some of the statements made above.
It starts ok. It is the job of the administrators to see if the company can be rescued as a going concern. However, unless something remarkable happens, no one has been able to come up with a way to satisfy the creditors, especially HMRC, without spending enormous sums of money. Mr Whyte himself admitted that there was a £10 million income shortfall, and over and above that over £9 million of tax arrears have accumulated since Mr Whyte took over. To accrue unpaid tax at a rate of over £1 million per month is a remarkable achievement.
But I cannot see how it is possible to “rescue” the company as a going concern. HMRC will include the assessments presently under appeal at the FTT(T) as part of their claim, and I find it hard to see how the administrators could legitimately reject this.
The statement seeks then to assure supporters that Rangers WILL continue as a football club. Now, if a developer appeared, offering £50 million to bulldoze Ibrox and turn it into luxury flats, for example, could the administrators reject that for a lower return for creditors, in order that the football team stayed in place? I can see HMRC off at high speed to the Court of Session if that was to happen.
It is true, as the statement then says, that the administrators want the club out of administration as soon as possible. There are two possibilities here – emerging successfully cleared of debt, via a CVA, or emerging to go into liquidation. (A pre-pack administration means the end of Rangers Football Club PLC (in administration) so I have left it out of account just now.)
“Expressions of support across the political spectrum” and “clearly a desire to see Rangers come through this situation successfully”.
This is a company which is in administration, not because of some sudden disaster, or malicious banks shutting down a profit making but cash poor business. This is a company which (a) might owe up to £75 million in tax (b) this accruing through an illegal tax reduction scheme with (c) the new owner having run up over £9 million more of unpaid tax over 9 months!
The owner now admits that, almost from day 1, he saw the business plan as unsustainable. Why then did he, in the summer, do the following, as detailed in his response to the recent Daily Record revelations:-
“In the summer transfer window last year we conducted 14 different pieces of transfer business, more than any other club in Scotland. This included new signings and improvement to existing contracts with key players, increasing the players’ wage bill significantly.”
Worryingly people such as Labour’s Shadow Secretary of State for Scotland, the SNP Sports Minister and even Mr Salmond himself, seem to be suggesting that HMRC should act more leniently towards Rangers Football Club PLC (in administration) than to other creditors.
I will come back to this in a further post.
The administrator then goes on to say that the Hall of Fame dinner is cancelled, but that all bookings will be honoured. This, in a small way, is in the same spirit as announcing that all season tickets will be honoured for the rest of the season!
If I was a creditor of Rangers, I would be most surprised at these unequivocal statements of support for the former ownership of Mr Whyte. One would almost think that the administrators are acting for him (which of course they are not).
The administrator is turning away the chance of significant extra funds, in an effort one assumes, to maintain goodwill amongst the fans.
However, as the Rangers Debenture holders are now owed, and due nearly £8 million, how much goodwill will there be amongst them?
From the last paragraph, I repeat the most remarkable part of a remarkable statement:-
“…the cost structure of the Club and ongoing losses were such that the Club had outstanding liabilities to HMRC. These were the subject of discussion and clearly HMRC wished to see them resolved as a matter of urgency.”
The Club had outstanding liabilities to HMRC because the owner, Mr Whyte, decided that he would spend the money deducted from employees’ wages and salaries for tax and NI, and the money from sales to be remitted to HMRC in respect of VAT. He decided (and we must assume it was him) NOT TO SEND THIS MONEY TO HMRC BUT TO SPEND IT!
No wonder HMRC wished to see matters resolved, bearing in mind they were forced to wait 10 weeks after an arrestment to be paid the “Wee Tax Bill” which was admitted as due by Rangers and which Mr Whyte pledged to pay in his takeover documents!
As I said, I am reluctant to criticise professionals, but I find it very hard to see how the statements above equate with administrators doing the job they will be paid handsomely for doing.
Where is the Money Coming From?
Craig Whyte told Tom English of Scotland on Sunday this month “We’ve got running costs somewhere in the region of £3.5m a month. That’s what it costs to keep the lights on.”
So, to get to the end of the season will require around £10 million. As the season tickets are being honoured, and no cup games are left, there is little scope for bumper cash sales. No staff have yet been let go. Where is the money coming from to fund the club to the end of the season, as any CVA proposed by mid April will fail. (Indeed Rangers said on Monday that the CVA proposal had already gone to creditors).
Mr Whyte stated that the parent company would fund the Club. As the parent company, as far as we know, is only a vehicle to buy Rangers, where has its money come from? Is Mr Whyte going to fund the administration by paying back to Rangers some of the interest and management charges he will have been levying since he took over?
The administrators must be confident they have funds, otherwise they would not be making the bullish statements they are putting forward.
It surely cannot be their intention, after the final whistle has gone on Saturday, and the last fans left Ibrox, to take the money raised at the game and then immediately call a halt?
Conclusion – Administration Day 2
As you will see, I am really baffled by much of the above. The administrators seem to be taking a line as cheerleaders for the club, talking about its status as an institution etc.
Maybe the administrators have found a pot of gold under the centre spot, and if so it will be need to pay for the services of their firm, even before we get to the creditors.
If Rangers owed me money tonight, I would be less confident about getting it than I would have been yesterday lunchtime. That is not the effect administration is meant to have.