Day 2 – Rangers (in administration) – Offence Already?+Administrators Talking Rubbish?+Where’s the Money From?


I wrote early this morning a blog post on what the administrators at Rangers Football Club PLC (in administration) were likely to do.

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 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.



Filed under Administration, Civil Law, Craig Whyte's Companies, Football, HMRC v Rangers, Insolvency Act 1986

27 responses to “Day 2 – Rangers (in administration) – Offence Already?+Administrators Talking Rubbish?+Where’s the Money From?

  1. I must admit that this is exactly the same questions that I have been asking myself all day.

    Actually, I thought that I was being stupid and missing something along the way because I kept telling myself that no practitioner would make such comments without a way of backing it up.

    I also do not see where the money comes from.

    Since you have now confirmed that I have not been doubting myself all day for no reason I am prepared to make a bold statement that for whatever purpose Rangers are going to be allowed to see out this week and the weekend fixture before any more major issues arise.

    I know perfectly well that is not quite how administration usually goes, in fact if I remember administration when I was at Motherwell FC it all happened virtually overnight

  2. JockHigh

    Good points, Paul. The bit about how Rangers came to owe HMRC is pretty fundamental and hard to explain without asking some pointed questions of the owner of the club regarding knowingly trading whilst insolvent.

  3. Once the lion tastes blood it has a taste for blood, he wants more of blood, and wants blood only!

    Mind wipe your chops when finished Mr McConville :mrgreen:

  4. cautious dave

    Good post Paul.
    It appears that even when faced with a legal process as strict as administration, RFC somehow, even when all logic suggests this to be impossible, find a way to operate outside of the rules. It is little wonder why many Celtic fans are fearful that Rangers will not only survive, but somehow come out of this smelling of roses.
    My current fear despite being lambasted by those claiming to be much smarter than me, is some sort of bail out or clemency. I hope they’re right and I’m wrong on this.


  5. NumbNuts

    But they’ve now set quite an expectation with what by any measure will be an unforgiving crowd down Govan Road way. Clearly to date your average Rangers has been assuming everything will all be fine, perhaps because they have only ever known success and with sustained success comes an arrogance and a deep-seated belief in your own infallibility. So they variously slagged off and ignored all the worrying analysis in sites such as this one, Hearing the Administrators comments today and yesterday will just confirm their expectations that they are a special case, too big to be allowed to fail. The contrast with the Motherwell situation could not be starker. I’m not in the legal business but it strikes me that setting such a high expectation is very unwise. But I guess they must know something we don’t know. Can’t wait to find out what it is. 😎

  6. Michael

    I’ve seen Administrators of football clubs acting like this before. Remember the guy who ran Portsmouth appearing with the scarf around his neck “From the moment he arrived he allowed himself, for reasons best known to himself, to be pictured holding a Pompey scarf above his head as if he were the new chairman rather than the man brought in to try to stabilise a sinking ship.” – By Darren Lewis Mirror Football 01/06/10

    He was also prone to signing autographs.

    It might not be right but they appear to get away with it.

    I’ll tell you this if I won £100m on the Euro Lottery I’ll spend half of it on that Bulldozer that you mention.

  7. Sheriff Dickson

    (2) Any of the following persons commits an offence if without reasonable excuse the person authorises or permits a contravention of sub-paragraph (1)—

    Did any person mentioned in para (2) authorise or permit the omission of this information from the website though? And would their more pressing business at this early stage of administration (which is obviously very well publicised in the mainstream and sub-level media like this site) not constitute reasonable excuse for the omission in any case?

    The defence rests m’lud.

  8. Ardee

    There is talk that HMRC have secured the funds frozen for the wee tax bill, as CW had not offered any defence. If this is true, will Martin Bain be able to spear the 800k or so he has ring fenced? I would assume that the administrators at Rangers FC (in administration) would be unwilling to incur further expenses to defend the claim.

  9. TLOPG

    I also have to say that I am pleased it is not only me who has been astounded by Wednesday’s statement from the administrators. I do believe they are doing everything to simply get this weekend’s match on – and it will all be a different ball game after that.

  10. kotton

    well done paul u have out done urself here

  11. Surely HMRC, as a big, powerful creditor, can go to court to challenge the administrators at any point?

    It’s a long time since I graduated with a Glasgow Uni law degree, but how easy is it these days to get the Court of Session to batter fu.., er, sanction administrators and remove and replace them?

  12. Andy

    I was astounded to hear on television comments by Mr Salmond, and others, implying that HMRC should take a lenient stance towards Rangers unpaid tax bill. Utterly astounded.

  13. Jonbhoy

    Paul, I was already on my high horse after seeing Margaret Curran’s comments in the SCosaman hat I wrote to her to complain that her comments seemedto be vindicating Rangers actions and that a ‘soft’ appraoch should be made, her ‘standard’ reply is below. I fear the ‘establishment’ club is now pulling in all it favours ! We all need to be vigilant on this one,,,,who can we ask to investigate the Administrators ?

    “Thank you for taking the time to contact me following the decision that has placed Rangers Football Club into administration.

    Football is Scotland’s national game and for one of its biggest clubs to be in such difficulty has an impact right across our city and indeed, the rest of the country. Without doubt, there are serious questions to be asked about how Rangers have found themselves in this position in the first place.

    However, I am absolutely clear that Rangers Football Club is not above the law and the HMRC has a duty to ensure that the club meet their tax obligations just like every other football club, business or individual.

    I have called for the HMRC to ensure that they focus on the best outcome for both the club and taxpayer. The HMRC should consider all options to keep the club functioning, purely on the basis that the best way for the club to pay back all the money that they owe is probably through continuing to operate. We should keep in mind that there are a number of other clubs – including Dundee United and Hearts – that are also owed money, as are a number of other businesses based in Glasgow. If there is no income coming in to Rangers Football Club, it is less likely that the tax payer and other creditors will be able to reclaim all of their money back.

    In the coming weeks, the corporate governance at Rangers Football Club will continue to be the focus of much debate. This crisis did not occur in the last year, but appears to have been the cumulative effect of poor management of the club’s finances over quite some time. These individuals responsible will have to account first and foremost to the fans of the club, many of whom will be deeply concerned about the dramatic developments in the last week.

    Best wishes,

    Margaret Curran MP

    • NumbNuts

      What outcome is she expecting?

      1/ HMRC reply “oh Lordy, now you mention it, ‘focus on the best outcome for both club and taxpayer’, hadnt thought of that argument, thank the good Lord you were there to remind us Margaret, Thanks! Kind Regards, HMRC.”
      Lads! Quick! We need to start cutting deals with tax-dodgers else some people will get upset…

      2/ HMRC reply “Thanks for you letter but we’ll do our job, you do yours. They were caught dodging tax and we can’t negotiate with tax dodgers because it only encourages other tax dodgers. PS – surprised someone in your elevated position didn’t have the wit to work that one out for yourself. Kind Regards HMRC.”

      Henry McLeish also over the radio this morning pedalling the ‘scottish football will not survive without them’ and ‘they will exit administration and continue’ lines. Wow. A ten point penalty for 10 years deliberate tax evasion and not paying £50m+ bills. Sounds like one helluva deal to me.

      • Craig

        NumbNuts it is a disgrace that HMRC have not been paid for 9 months. Whyte has a track record of the “old switcheroo” to avoid paying creditors, most commonly the HMRC. I am not a lawyer but hope there are provisions in the law which would see him join his friend Sykes behind bars if indeed he is successful in punishing the taxpayer in this way. However I fundamentally disagree on the deliberate 10year tax evasion statement. Firstly there has been no such finding at this stage of any wrongdoing and secondly it was the incorrect implementation of a perfectly legal scheme where the Club has fallen down. Thousands (circa 5,000) of businesses have used EBTs, most of which are presumably properly implemented with the correct supporting documentation. Do you think they are also guilty of tax evasion? No, this is a case of proper tax planning but improper execution, not evasion by any means.

      • NumbNuts

        Craig – Yes EBTs are not in themselves illegal but is this a case of “the incorrect implementation of a perfectly legal scheme” or actually “a deliberately incorrect implementation of a perfectly legal scheme”? Perhaps it was just incompetence. Perhaps they thought they were just really clever guys. I’m sure it will all come out in due course. Either way the point I was making is that a 10 point penalty is small recompense against the backdrop of the financial and sporting benefit accrued.

    • jocky bhoy

      Ms Curran says: “I have called for the HMRC to ensure that they focus on the best outcome for both the club and taxpayer. The HMRC should consider all options to keep the club functioning, purely on the basis that the best way for the club to pay back all the money that they owe is probably through continuing to operate. We should keep in mind that there are a number of other clubs – including Dundee United and Hearts – that are also owed money, as are a number of other businesses based in Glasgow. If there is no income coming in to Rangers Football Club, it is less likely that the tax payer and other creditors will be able to reclaim all of their money back.”

      Given that Rangers, by their own admission, have an annual £10m blue hole to fill before they even pay back one penny of additonal costs to other SPL teams, businesses supplying them with goods/services etc, how exactly does Ms Curran, or indeed the estimable Mr Salmond suggest HMRC structures any deal? I am sure we, and others interest in the art of turning base materials (asbestos, jumborton screens etc) into gold, are all ears.

      If the sums suggested are right – assuming (big assumption) that they can somehow plug their £10m annual gap and and giving them the benefit of the doubt by taking JUST the £49m suggested “BTC” figure AND rather than piling on new amounts and interest, I estimate that it will take about one generation (25 years) to pay off £2m a year without any additional interest (someone might want to check my maths there). Seriously? Have they even seen the numbers we’re talking about?

      Rather than stepping in front of camera and offereing a soundbite, read what’s been going on (this blog and RTC being two obvious sources) and then give your 1/50th of a Rangers-worth…

  14. Paul Davidson

    Mr Salmond just looking for votes, he is a terrible, horrible little man!

    More on topic, great work again Paul and I see that the Sun have the “Whyte PR Machine” in full flow today. You really need to write about that report – the best bit is “There is money available” – If that’s the case why are they in administration…..seems they must have found the pot of gold under the centre spot.

    A final point was raised yesterday. Neil Doncaster has stated that their MUST be 4 Old Firm games a season to appease the TV agreement. At the moment this is being argued due to Rangers being liquidated and the subsequent repercussions. What hasn’t been mentioned to Mr Doncaster is what would happen if for FOOTBALLING reasons Rangers or Celtic finished outwith the top 6 (denying the 4th OF game) or even one of them finished bottom and were relegated? Is it so in Scotland the other 10 teams are all fighting for 4 spots in the top 6 as the other 2 are pre-allocated? Is it impossible for the Old Firm to be relegated because of a TV deal? Surely this needs looking at, as the other clubs in Scotland might as well just pack up and go home now as EVERYTHING is stacked towards the Old Firm.

    • As a Celtic supporter, I find the proposition that either Celtic or Rangers are exempt from the rigours of League football. If a team is either not good enough to stay in the top division, or because of points deducted for breaking the rules, then that team must be relegated. The apparent concern being shown by the likes of Salmond, Mcleish, Cameron and the other politicians who have been uttering platitudes which amount to “let the Rangers off” translates as naivety on first pass. Think about it again – a few thousand votes extra in some pretty marginal constituencies could make all the difference in the next election or a referendum. That’s a disgustingly mercenary and condescending attitude to hold against the Scottish electorate – or even a small part of it.I am so glad I emigrated to Australia! Nobody here pretends anything other than they will cling to power by any means possible – brass neck is no bar to power here. I hope, though, that they all get what they deserve for their opportunistic, cynical and deliberate attempts to manipulate opinion for the benefit of their own ambitions at the expense of the many good hard-working folk who struggle every day to pay their bills on below-poverty wages because of the decisions these wasters make in government. And I include all those people at Ibrox and Murray Park who are likely to lose their jobs because of irresponsible and reckless management over the last 20 or so years.

  15. Craig

    It is very early to be criticising the administrators not to mention that none of us knows the truth behind where the money has gone. There seem to be a lot of people jumping to conclusions. I am an IP and found nothing unusual or untoward in the administrators statement. Yes it was a little gung ho but nothing in there called into question the motives of the administrator. The s46 technical breach is also likely to be a non point as I would suspect the Court will have granted dispensation on publicity given the high profile nature of the case, as I have seen in the past. You may be right, but it is nit picking.

    • Thanks Craig.

      I am always happy to be educated. It struck me that the statements seemed to be over the score, and potentially created hostages to fortune for the administrators.

      No one has mentioned the court excusing the publicity aspect. It might only be of interest to “nit pickers” like me however! 🙂

  16. Michael

    Another sterling piece of forensic analysis, Paul! May I just take this opportunity to thank you for your invariably perceptive comments both here and on RTC’s blog – and the witty and entertaining manner in which they’re expressed. I look forward to your forthcoming book on the subject!

  17. Excellent Piece. On the Portsmouth theme the HMRC were unsuccessful in challenging the CVA drawn up by the administrators there in summer of 2010. They argued that this was prejudicial as it favoured one group of creditors over others (ie football creditors).
    In essence it was a challenge to the (English) Football League’s rules on Insolvency and these were supported as valid in this context and not necessarily in breach of the Insolvency Act 1986 – court refused to make fully definitive statement on them. These rules of course don’t apply in Scotland but not sure if there is equivalent? They haven’t been mentioned yet.

    Significantly, maybe, for Whyte the court argues that there is not a prima facie case against one group of creditors being paid in full when others were not though this has to be subject to scrutiny.
    Anyone with Westlaw and (time!) can find it
    Revenue and Customs Commissioners v Portsmouth City Football Club Ltd (In administration) [2011] BCC 149

  18. Superb reading. Keep it up through all of this please.

  19. Jim

    From the BBC tonight :

    “Rangers administration: ‘Invisible’ £24m probed…

    The administrators running Rangers have said they do not know the whereabouts of £24m which was lent to the club.

    The money was lent to the club by Ticketus, a firm which hoped to profit from future season ticket sales.

    David Whitehouse of Duff and Phelps said they did not have “visibility” of where the money had gone.

    Mr Whitehouse said he believed the funds went through a parent company account rather than the account of the company now in administration.

    He added that the administrators were checking with Rangers’ former lawyers.

    He said the Ticketus debt was not secured against the assets of the football club.
    “We do not think that liquidation and the closure of the club is a likely outcome at all”

    It means the ticket firm is unlikely to be repaid in full should Rangers exit the administration process.

    Instead, Ticketus and other creditors would be asked to agree to a Company Voluntary Arrangement (CVA) to receive a percentage of what they are due.

    Rangers FC Group, a separate entity from the club itself, remains solvent.

    Ticketus loaned Rangers the money in return for flows of future season ticket sale revenue, a primary source of the Ibrox club’s income.
    Parent company

    David Whitehouse, from administrators Duff and Phelps told a press conference: “Our understanding is that the funds from Ticketus didn’t come through the company’s account, they went through a parent company account so we haven’t got visibility on that.

    “Ticketus don’t have security on the assets of the club.”

    Ticketus have refused to comment on the Rangers season ticket deal, citing client confidentiality.”


  20. I meant to say, in the first sentence of my previous post that “As a Celtic supporter, I find the proposition that either Celtic or Rangers are exempt from the rigours of League football disgusting”.

    Unfortunately, as often happens in verbal conversation, my brain moves on and my mouth forgets to follow. Or is it the other way round ?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s