Craig Whyte – The Notice of Appointment of Duff & Phelps – Could it be Invalid? + Other Questions

Since 13th February, when Rangers lodged with the Court of Session their notice of intention to appoint an administrator, there has been a flurry of activity, often too much for a humble blogger to keep up with!

One thing I initially missed was the publication of the Notice of Appointment of the Administrators.

It can be found here.

The Administrators, Messrs Whitehouse and Clark from Duff and Phelps (and who I will refer to as “D&P” from now on) have now a part on the front page of the Rangers website linking to a page where formal notices, like this, can be found.

We know that Mr Whyte has an unfortunate history with official paperwork, as highlighted by his various different addresses, names and dates of birth in Companies House, for example.

There could be various pitfalls, some of which are as follows.

Have the statutory requirements in Schedule B1 been fulfilled?

Was the floating charge holder notified in time?

Did the floating charge holder consent?

Who is the floating charge holder?

Have there been valid board meetings to appoint the administrators?

How does the declaration of being unable to pay debts tie in with issues of “wrongful trading”?

What if D&P are not validly appointed?

Has Mr Whyte has his name and address correctly recorded?

What happens if the information given to D&P pre-appointment was wrong?

However, I am sure that all will be in order with this one – shall we look and see?

The Notice of Appointment by the Directors

What we are looking at is pages 2 and 3, being the “application form”. The relevant sections of the application are as noted below.

Paragraph 1 indicates that the appointment is by the “directors of the company” rather than by “the company”. Either the directors or the company can appoint an administrator under Schedule B1 of the Insolvency Act 1986.

Messrs Whitehouse and Clark of D&P are named as administrators.

Paragraph 5 states that the appointment is in accordance with the rules of Schedule B1.

Paragraph 9 states that the appointor has given “at least five business days’ written notice of the intention to appoint…and that a copy of that notice was lodged in the Court of Session on 13 February 2012”.

Paragraph 10 states “I(e)Craig Thomas Whyte of 4 Bedford Row, London WC1R 4DF director, for and on behalf of the directors of the Company do solemnly and sincerely declare that – (i) the information provided in this notice; and (ii) the statement made and information given in the notice of intention to appoint, are, and remain, to the best of my knowledge and belief, true.”

The whole notice is stated to be made “conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act 1835.”

Finally the declaration is made by Mr Whyte on 14th February, and was lodged at the court at 14.45 that day.

Where Might There Be Problems?

I have detailed the full requirements at the bottom of the article regarding Schedule B1 but, read short, they are as follows.

Schedule B1 Requirements

A company or the directors can appoint an administrator if there is no winding up or administration petition pending; there is no administrative receiver in place; and at least five business days’ written notice has been given to any floating charge holder.

In addition, a notice of intention to appoint and administrator needs to be lodged with the court along with a sworn declaration that the company cannot pay its debts, or is unlikely to be able to do so.

The appointment cannot be granted unless the five business day’s notice is given, or the floating charge holder has consented in writing.

The “appointor” must lodge with a court a sworn declaration that the facts as in the earlier notice remain the same as at time of application.

Notice to the Floating Charge Holder

Therefore, to be valid, Rangers must have given written notice to the floating charge holder of the intention to appoint an administrator by Monday 6th February at the latest, or else the floating charge holder was prevailed upon to provide consent to the appointment within the five day period.

As there seems to be some public mystery about who holds the benefit of the floating charge, it should be simple to ascertain this.

The administrators must know on whom notice was served, and if within the five days, who consented to the appointment. Was it Rangers FC Group Ltd? Was it Ticketus? Was it Liberty Capital Ltd?

Maybe someone could ask D&P for confirmation.

Presumably the floating charge holder is not a body independent of Mr Whyte, as it is likely that, in those circumstances, it would seek to appoint its own administrator, or else, due to this being a pre-2003 floating charge, its own receiver.

As one of the duties of an administrator is, in the absence of a rescue as a going concern or settlement of all the debts, is to satisfy the security holder, then there would be much less to lose should the floating charge holder be linked to Mr Whyte.

“Unable To Pay Debts” and Wrongful Trading

Mr Whyte (as one assumes it was him) made the sworn declaration that Rangers could not pay its debts or was about to be unable to do so.

It would be interesting to see (a) when he received advice on this (b) when that declaration was made by him and (c) what transactions were entered into by Rangers in the intervening period.

Potential issues of wrongful trading arise. There is rarely a point when clearly trading becomes wrongful, but as the former Board took advice on this prior to the takeover, then it would appear that it was a potential live issue from Mr Whyte’s earliest days at the club. Indeed his recent public statements have made it clear his view of the solvency of the Club from when he took it over.

If I was a creditor who had entered into a contract with Rangers, or supplied it on credit, since he took over, I would be very concerned to draw such dealings to thane administrators’ attention.

If, as it appears, Mr Whyte kept Rangers running by non-payment of around £9-15 million of tax, then this raises very serious questions about wrongful trading. I suspect that phrase will be heard a good few times before this issue is finalised.

 

How Did the Directors Make The Decision to Appoint Administrators?

As indicated above, the appointment of D&P was made by “the directors” of Rangers.

The population of the Ibrox boardroom has been like a West End production if Agatha Christie’s “Ten Little Indians”! One by one, or two by tow, the board members have resigned or been removed.

According to the Rangers’ website today the Board consists of Mr Whyte, Mr Russell, Mr Smith and Mr King. However, both Messrs Russell and Smith are about to leave the Club, and they were never directors anyway.

Companies House records that the Directors are Mr Whyte, Mr Ellis and Mr King. Mr King was, of course, allegedly removed as a Director at the end of the week prior to D&P being appointed.

Even though Mr Whyte is, through his companies, the majority owner of the company, it is in his role as director that he has applied for administrators to be appointed.

Was Mr King removed for failing to agree to the Notice of Intention to Appoint an Administrator being sent out? Did Mr Ellis agree to that, and thereafter to the Appointment of D&P?

My reading of the Companies Act, and I am happy to be corrected on this, is that, unless there is only one Director (which is not the case here) there requires to be, at the very least, a quorum of two to conduct such a Directors’ meeting. Directors’ meetings can be informal, and indeed, if validly called, the Directors need not be in the same location.

I want to make it clear that I am not suggesting that there was no Board meeting, but I am sure that the relevant authorities would want to make sure that the meetings at which the relevant decision were made have been fully and properly minuted. If not, then there exists the prospect of legal challenge, perhaps even to the appointment of D&P at all.

It would appear therefore that there ought to be at least 2 meetings and therefore two minutes. The first would have been for the directors to decide to intimate an intention to appoint an administrator.

This was intended to give Rangers breathing space and it was made clear that the 10 day moratorium would have been used to explore ways of avoiding administration.

However, by late on 13th or early on 14th February, the directors of Rangers would have been aware that HMRC was seeking to get their own administrator in, and to force the issue.

That suggests that, at some point prior to Mr Whyte signing the Notice of Appointment in Glasgow on Valentine’s Day, a board Meeting took place. By that stage, the only directors left would have been Messrs Ellis and Whyte. Did they meet then or was it a telecon?

If there was no board meeting, then it would appear that D&P have not been properly appointed. (If that is the case then I am sure it arises due to inadvertence on the part of Mr Whyte or his administrative team, rather than from any other cause.)

If there are relevant board minutes, especially of prepared by the Company Secretary, Mr Withey, I am sure they would have avoided the pitfalls referred to in the disqualification proceedings regarding Mark Goldberg and James McAvoy relating to Crystal Palace Football Club. Mr Withey was Company Secretary there.

I wrote about that situation here.

Scroll down to the section about the Padovano Minute. Here it was alleged that a board meeting, recorded by Mr Withey, did not in fact take place. This was despite Mr McAvoy alleging that Mr Withey told him he had spoken to the two directors who later stated that the minute was of a non-existent meeting.

As Lewison J, the Judge in those proceedings said:-

“But he (Mr McAvoy) said that he was told by Mr Withey, who prepared the minute, that he (Mr Withey) had spoken both to Mr Alexander and Mr Barnes, that they had approved the agreement and that they would be signing a minute. Although Mr Withey was interviewed, he was not asked about the circumstances in which this minute came to be produced. Nor was he called to give evidence…. I record here that Mr McAvoy was given permission to serve evidence from Mr Withey, but chose not to do so.

I find that the contents of the minute were probably prepared by Mr Withey or at his dictation. The minute was signed by Mr McAvoy. However, no meeting took place, either by the physical presence of the purported participants, or by telephone. I find that Mr McAvoy knew that no such meeting had taken place. He also knew that Mr Withey had not telephoned the other named directors. I am, however, prepared to accept that Mr McAvoy was told by Mr Withey that the other named directors would be signing the minute. But even if that had happened, the resolution would still not have been valid under article 29, because, as Mr McAvoy knew, not all directors had been given notice of the meeting… Mr McAvoy signed a minute that purported to record a board meeting that he knew had not taken place. However, I find that he did so without any intention of misleading the board of Crystal Palace. He signed the minute because Mr Padovano’s lawyers wanted a minute, and one had to be produced in a hurry. Nevertheless, this allegation is made out against Mr McAvoy.” (Emphases added)

For the avoidance of doubt, as mentioned above, Mr Withey was not called to give evidence so did not have the chance in court to contradict Mr McAvoy’s allegations.

I am sure that, having been involved in such a mess before, any relevant minutes in Rangers’ case will have been prepared fully and correctly.

Indeed Mr Withey may have had nothing to do with the Minutes being prepared. After all, it is perfectly proper for minutes to be prepared by a participant in the meeting, whether Mt Whyte or Mr Ellis.

As I have said, I do not believe that Mr Whyte could validly appoint D&P on his own. The form is stated as being signed by him for and on behalf of the Directors.

 

Mr Whyte’s Address

I know it might seem like flogging a dead horse, but Mr Whyte appears on this declaration at yet another address!

This time he is designated at the address of Collyer Bristow in London. Collyer Bristow is Mr Withey’s firm. I assume Mr Whyte has not taken up lodgings there!

According to this article in theLayer.com, Biggart Baillie is acting for the administrators. The signature on the form is not clear but Ronald W Brown is one of the partners there.

“His practice covers a wide spectrum of corporate tax including VAT and Stamp Duty Land Tax.  He specialises in tax efficient structuring of corporate finance transactions (including mergers and acquisitions and venture capital investments) and commercial property sales and acquisitions.  He also advises clients upon tax efficient forms of share inventive schemes for officers and employees.”

Perhaps Rangers could have sought his advice many years ago, thus preventing the EBT debacle?

One wonders why Mr Whyte has recorded his address as at his London solicitors’ offices.

 

False Declarations

It is a criminal offence to make a declaration which is false and where the person making it does not reasonably believe it to be true. Therefore a person can make a mistake, but cannot do so deliberately.

I am sure that all the matters addressed by Mr Whyte in his declarations would be accurate, to the best of his knowledge and belief.

In connection with the subject of declarations which turn out to be incorrect, I recall the decision of Lord Hodge regarding the Bain v Rangers arrestment. As His Lordship recorded at paragraph 11 :-

“In relation to the HMRC claim for £2.8 million and penalties, Mr Whyte’s affidavit suggests that HMRC have been able to arrest £2.3 million in Rangers’ bank account. Discussions are continuing between HMRC and Rangers in relation to the level of penalties imposed. In any event, the purchaser of Rangers has undertaken to pay the debt to HMRC.

Quite how Mr Whyte was able to make the sworn statement referred to above, when in December, as confirmed earlier his week, the whole of this tax bill was appealed, I do not know. No one should suggest that Mr Whyte was making a false declaration.

I am sure that Sheriff Ross’ finding in the Tixway UK case that Mr Whyte’s evidence was “wholly unreliable” is the one time that his standards have, through inadvertence, slipped.

What If D&P have not been Appointed Validly?

This is an interesting one. Should it turn out, for example, that there was no valid appointment, then D&P would not be administrators. I assume then that either Rangers would seek to appoint another administrator, although this could be a problem as over 10 days have passed since they indicated an intention to do so, or HMRC would seek either to put their own administrator in place, or indeed seek to wind Rangers up.

Schedule B1 provides that, if the appointment is invalid, the administrators are indemnified by the person responsible for the invalid appointment.

Therefore, should it turn out that D&P were not appointed correctly, Mr Whyte could find himself personally liable for D&P’s costs and for liabilities incurred by them.

Whilst that would not be pleasant, I am sure that the sums involved would make little more than a small dent in Mr Whyte’s fortune.

 

The Administrators’ Declaration

D&P will have lodged a declaration themselves that the purposes of the administration appear likely to be achieved. As this is said pre-appointment, they are entitled to rely on what the Directors tell them, even if that turns out to be wrong.

As the first two weeks of administration have seen the outstanding tax bill stated to be far higher than first thought, and as the administrators can’t find trace of money they thought was in the company, it may well be true to say that the information has not turned out to be very accurate!

That does not invalidate the appointment, but perhaps makes it more likely that an early liquidation happened.

 

Appendix

The Rules for Appointment under Schedule B1

Under paragraph 25 of the Schedule an administrator cannot be appointed by the directors if (a) a winding up petition has been presented and not yet disposed of; (b) an administration application has been made and is not yet disposed of; or (c) an administrative receiver is in office.

Under paragraph 26 of the Schedule the directors must give at least five business days’ written notice to (a)any person who is or may be entitled to appoint an administrative receiver of the company, and (b)any person who is or may be entitled to appoint an administrator of the company under paragraph 14. (Paragraph 14 allows the holder of a qualifying floating charge to appoint an administrator.)

Under paragraph 27 of the Schedule the person giving notice of intention to appoint an administrator under paragraph 26 must file with the court as soon as is reasonably practicable a copy of (a)the notice, and(b)any document accompanying it. The copy notice filed must be accompanied by a statutory declaration made by or on behalf of the person who proposes to make the appointment that the company is or is likely to become unable to pay its debts, that the company is not in liquidation, and that the appointment is not prevented by paragraphs 23 to 25. A person commits an offence if in a statutory declaration under sub-paragraph (2) he makes a statement—(a) which is false, and (b) which he does not reasonably believe to be true.

Under paragraph 28 an appointment may not be made under paragraph 22 unless the five business days’ period of notice specified in paragraph 26(1) has expired, or each person to whom notice has been given under paragraph 26(1) has consented in writing to the making of the appointment.

Under paragraph 29 a person who appoints an administrator of a company under paragraph 22 shall file with the court a notice of appointment which must include a statutory declaration by or on behalf of the person who makes the appointment that the person is entitled to make an appointment under paragraph 22, that the appointment is in accordance with the Schedule, and that, so far as the person making the statement is able to ascertain, the statements made and information given in the statutory declaration filed with the notice of intention to appoint remain accurate.

The notice of appointment must identify the administrator and must be accompanied by a statement by the administrator that he consents to the appointment, and that in his opinion the purpose of administration is reasonably likely to be achieved. For the purpose of that statement an administrator may rely on information supplied by directors of the company (unless he has reason to doubt its accuracy).

A person commits an offence if in a statutory declaration under sub-paragraph (2) he makes a statement—(a) which is false, and (b)which he does not reasonably believe to be true.

Under paragraph 34 where a person purports to appoint an administrator under paragraph 22, and the appointment is discovered to be invalid, the court may order the person who purported to make the appointment to indemnify the person appointed against liability which arises solely by reason of the appointment’s invalidity.

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19 Comments

Filed under Administration, Bain v Rangers, Companies Act 2006, Craig Whyte's Companies, Football, Insolvency Act 1986, Rangers

19 responses to “Craig Whyte – The Notice of Appointment of Duff & Phelps – Could it be Invalid? + Other Questions

  1. Derek

    Paul

    The wee tax bill was not appealed – only the penalty loading was.

    • Thanks Derek.

      I was only going by what Mr Whyte said on 21st February.

      “The truth is that around £4.4m of the £9m demand is, in fact, the ‘wee tax case’, including penalties, and which is in dispute.”

      Whether that is correct of course….

  2. Seems to make a lot of inadvertant mistakes, this Mr Whyte.

    Great work as always in pointing them out!

  3. Martin Gray

    What a great insight Paul, I almost wish I was a creditor of RFC (in admin) !

  4. TheBlackKnight

    It’s amazing what can be uncovered via the ‘net’ 😉

    Perhaps the Whyte Knight was confused as to which of his roles (or personae) he was signing on behalf of. I’m sure it’s just another misunderstanding. 😉

    Excellent work again Paul. I am beginning to feel that ‘blogs’ have become the modern day man’s shed. 🙂

  5. Nikki

    To summarise questions that I personally feel need answered:

    1) Craig Whyte proved to David Murray and co that he had sufficient funds (33m I’m led to believe) to fund the takeover of Rangers. Whyte has himself indicated this was before the Ticketus deal. So why was this apparent £33m not used to clear the debt with Lloyds? The Ticketus money could then have been used as “running costs” for the club meaning Rangers would not be in administration (yet).
    2) Why blatantly lie about what the Ticketus money was used for when it became public knowledge?
    3) The line “in the best interests of Rangers” now seems to be the party line …. how, when the big tax case is still undecided, is putting Rangers in administration now “in the best interests of Rangers”?
    4) Ultimately, did Whyte acquire Rangers with the sole intention of going down the administration route? Not paying PAYE for the whole year would indicate this.
    5) Whyte said he has personally never taken any money out of Rangers and covers all his own expenses (how nice of him). But to turn the question round …. how much of his own personal money has he invested in the club? Investing in (the club he has supported since he was a boy) and in the financial state he inherited, it’s a no brainer tht he would need to invest his own funds!!

    I’m a Rangers man but can only see more lies to follow. And follow I will, as seems to be the chant these days “Rangers til I die” – lets just hope they don’t die before me haha

  6. lurchingfrompillartopost

    Great researching again Paul but it highlights the problem of this whole debacle for me. Which is that for all the laws, rules, guidelines, and exposed breaches, ambiguities, omissions and contradictory or false declarations that have been unearthed, rangers 1873 is still in operation (in administration) and no action has been taken by any of the relevant authorities to address these or bring anyone to book.

    They just sit there on record for people to see with their own eyes. Do you have any belief that any of these details will be followed up in a timely manner, if at all?

    Sadly I have a diminishing amount of confidence that this will happen, yet the details you highlight could be the finer points of justice on which the outcome rests.

  7. Midlothian_Celt

    Excellent stuff as ever Mr McC! Thoroughly enjoy your forensic dissection of the train-wreck that is Rangers FC (In Administration).

    To this layman some of the stuff you unearth here could be dynamite. I hope those who should see this DO see it.

    More power to you keyboard.

    All the best.

  8. brogan rogan trevino and hogan

    Paul,

    lets presume that they have been properly appointed– after all they must have satisfied Lord Menzies that they had been properly appointed and in the course of so doing, satisfied HMRC that they had been properly appointed.

    In the course of satisfying, the court, HMRC and so on– surely some reference must have been made to whoever is the holder of the floating charge? It would seem logical to me that somebody at sometime must have advised the court that there is a floating charge in existence, and indeed have told the court who holds that charge?

    Now, let’s presume for the minute, that the holder of that Charge is Rangers FC Group Ltd– which as we know is a separate company to Rangers PLC.

    As Wavetower, that company enetred into a contract with MIH and Sir David Murray to buy the share capital belonging to Sir David in Rangers PLC. As part of that transaction, the seller will have formally disclosed the floating charge granted by the target company ( Rangers PLC ) in favour of the Bank of Scotland- now Lloyds!

    In turn, it seems logical to me, that in any dealings with Ticketus, Wavetower will have advised Ticketus that on completion of the Rangers transaction as planned– and more on that later— Wavetower will have the benefit of that floating charge. In turn, that disclosure and assurance may well have been a material factor which persuaded Ticketus to proceed with the season ticket transaction.

    Therefore, it is very VERY possible that so far, the list of people who in the very recent past who have formally relied on the existence and validity of the floating charge extend to:

    1. The Court
    2. The Administrators- ( they accepted the appointment )
    3, Rangers PLC
    4. Rangers Group PLC
    5. Ticketus
    6. HMRC ( who also accepted the appointment of the receivers in the court )
    7. Lloyds ( who assigned it to……? )
    8. Companies House
    9. Close brothers?

    On this basis, with all of these people contracting,litigating, acceeding, accepting, delivering, implementing and proceeding with all sorts of things all on the basis of this floating charge being in existence and being valid——- How difficult is it going to be to have a court declare it invalid, when none of those people have at any time come to the court to question its validity?

    • BRTH,

      As far as the floating charge goes, what struck me as concerning was the terms of the form lodged when it was revised to take account of the “Close Leasing” deal. That form included amongst the interested parties Liberty Capital Ltd (although it incorrectly stated it was registered at a London address).

      Mr Whyte had not publicly, as far as I know, mentioned that Liberty Capital had an involvement in the floating charge. Why therefore was it named on the MG05?

      As far as things being wrong but ignored by lawyers, two examples will suffice.

      First of all, RBS v Wilson – for 40 years solicitors in re-possession proceedings under the 1970 Act were failing to follow what the Act said as far as calling up notices were concerned.

      Secondly, and on a more humourous note, I was speaking to a conveyancer once who told me that he had once been looking over a commercial lease where his client was the licencee under a sub lease of an assignation of a head lease (or something like that) in connection with an industrial property.
      On page 165 of the document, in amongst details of the rights of wayleave and access to rhones, drains and sumps etc he came across the line “such access not to be refused unreasonably My God, I can’t stand any more of this nonsense, it’s driving me mad and therefore to permit the landlords, its agents, heirs and successors in their order….”

      He could only assume that some demented assistant had got frustrated dictating the lease. The thing was that, by his count, there had been at least seven firms whicj had looked over thge lease on behalf of their respective clients, and no one had noted this issue. He debated whether or not to raise it as an observation, and decided that, having seen it, it was best to comment on it, if only as a way of showing he had actually read the full thing!

  9. eddie rice

    Paul can I ask an unrelated question? Someone on RTC blog asked how could HMRC use the £2.3m that was arrested for the wee tax case be used for payment towards VAT owed on the Ticketus deal? From what I’ve read the Ticketus deal wasn’t with RFC but Wavetower/RFC group, does the suggestion that HMRC used it to pay VAT on Ticketus deal mean that they are now creditors of RFC and not Wavetower?

  10. oisin71

    One word Paul, “FORENSIC”.

    Have you ever considered writing an episode of CSINY…or even a season?? CSIGlasgow

  11. oisin71

    Oh, I forgot to mention, just to spice things up…you could write in a link to the porn industry. Those sort of stories always seem to do well. Obviously this would be completely ficticious and nothing to do with the facts of this case.

    • Oisin,

      Mr Baxendalw-Walker provides yet another piece of spice to the recipe, doesn’t he?

      If this was presented as the plot for a TV series, drama or comedy, it would have been rejected as totally unbelievable!

  12. ifa007

    http://www.hmrc.gov.uk/mlr/your-role/resposibilities.htm
    Your everyday responsibilities under Money Laundering Regulations
    “If your business is regulated by the Money Laundering Regulations you have certain day-to-day responsibilities. These include carrying out ‘customer due diligence’ measures to check that your customers are who they say they are.”

    With all these regulations in place it makes you wonder why so many “mistakes” have been made in documentation/registration regarding Mr Whyte.

  13. ifa007

    Merchant House Group has said it cannot determine whether its clients may lose out as a result of Financial Services Authority restrictions on Pritchard Stockbrokers.

    http://citywire.co.uk/new-model-adviser/merchant-house-cannot-determine-client-loss-from-pritchard-fallout/a567343

  14. Albert

    I honestly cannot be bothered to read my Glasgow based broadsheet anymore as I now fully understand what drivel it, and the rest of the MSM, spouts. It is possibly the last place where I would now look for factual information. Pity you couldn’t add a crossword to your Blog.

    Great work, and quite astounding that you are able to maintain the momentum.

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