Monthly Archives: March 2012

Saturday Musings on Rangers, EBT’s and Directors – After C4 News

NB – This is a copy (with spelling corrections) of a comment I have made on the RTC thread “Evading Avoidance”. I commend RTC’s piece to anyone who has not read it.



The two changes in tax and insolvency law which most impinge on Rangers were (1) HMRC losing its preferential creditor status and (b) the addition of the anti-avoidance provisions.

It was felt that the taxman sitting on the shoulder of indebted businesses, and grabbing the pot ahead of unsecured creditors stifled enterprise, and discouraged risk taking. That is arguable, but in “normal” cases HMRC often will not hold enough debt to block a CVA. Here they can, and as published by them in their policies and guidance, will do so.

The anti-avoidance rules, requiring accountants to “register” schemes is a bit like inviting computer hackers to break into your system and rewarding them for doing so, as long as they help you fix the vulnerability.

It was projected that at the very worst the two measures would balance out, or indeed lead to a bigger tax take, as fewer businesses would fail.

Unfortunately for Rangers, as Mr Baxendale Walker alleged last night, RFC did not operate the scheme properly at all. (As an aside, I am sure that the solicitors’ rooms in Scotland are deprived by not having a character like Mr BW sitting in them.)

There are numerous “big questions” which one would like to ask the main players.

The one which strikes me for today regarding the EBT’s is why no provision at all was made for the potential tax bill. I don’t mean a “paper” provision, as I recall Adam having long arguments about many months ago, but a real one.

The first Tax Determination re EBT’s reached Rangers in February 2008! Would a prudent company have salted away say £5 million a year towards a potential bill? By now they would have had £20 million in the pot, and at the very least have been able to make more concrete proposals to settle with HMRC.

If, mirabile dictu, they had won the case 100%, then suddenly there would have been a “war chest” with real money in it.

So, as well as allegedly getting the operation of the EBT wrong, and thus opening up RFC to the tax bills, the “ancien regime” failed to make even the most rudimentary of provision for the case going wrong. I cannot imagine that (a) standing the legal advice the Board would have been receiving and (b) the alleged state of knowledge of Messrs Bain, McClelland etc the old Board would have expected for a minute to have no bills to pay.

Of course, if Sir David Murray had succeeded in his plan to sell early on, then the tax case might have been glossed over as a distant and unthreatening cloud on the horizon (apologies for the mixed metaphor and I do not suggest any underhand “glossing over”).

Finally, I wonder if the administrators might give consideration to actions against the directors or former directors personally where it could be alleged that breaches of duty by the directors has led to Rangers Football Club PLC suffering losses…



Filed under Administration, Rangers

Be Careful What You Wish For – Alex Thomson of Channel 4 Breaks Big Rangers News


Alex Thomson is a distinguished war correspondent, and one of the UK’s top news broadcasters. Recently he has been looking into Scottish football, and especially the Rangers Tax Case.

Various pundits and fan sites have accused him of being deluded and following the hidden agendas of others. He has even been described as a dupe, and taken in by “Timmy” conspiracies.

When last week he fronted a Channel 4 news piece on the story there were various disparaging remarks about the lack of anything new.

As I say in the heading – be careful what you wish for!

Tonight he has a piece on the story on Channel 4 News, which definitely moves the saga on.

You can read his article here.

Some choice highlights:-

Mike McGill, former Rangers director – admitting that none of the EBT “loans” have ever been repaid.

Correspondence from Martin Bain, former Chief Executive, looking to have his pay rise put through the trust “obviously as a discretionary bonus it cannot be contractual”

Martin Bain referring to payment through the EBT to players coaches “and more recently John Greig”.

Martin Bain (again) writing to chairman John McClelland referring to having his contract letter “shredded”.

As Mr Thomson concludes his piece – “what they were doing could well be perfectly legitimate but it’s questions like these upon which the tax case may hinge”.

I had speculated about Mr Bain’s dropping of his court action yesterday. Today leads to national UK coverage which, at the very best, looks bad for him and for Rangers.

Those who criticised Mr Thomson for being “taken in” might have to look at their views again.


Filed under Channel 4, Rangers

Martin Bain v Rangers – Settlement Agreed? All Friends Again?

News broke yesterday which rather surprised me.

Martin Bain Drops damages action against Rangers” stated the BBC.

I wonder if the settlement of this case, as I discuss below, is a prelude to Mr Bain throwing his hat into the ring with one of the bidders, perhaps with the Blue Knights?


Mr Bain’s statement, issued through his lawyers, Levy & McRae, included the following:-

“Everyone close to Rangers Football Club knows that I am, and always have been, totally committed to the club and that remains my position. As chief executive and part of the independent board, our job was to assess and highlight to all stakeholders if we believed there was uncertainty over the future financial viability of the club under new ownership.

“Unfortunately, the independent board had no legal power to block the transaction and Sir David Murray made it plain that he wanted to sell.

“I strongly recommended on more than one occasion that Craig Whyte should not be allowed to buy the club. Unfortunately that forceful representation was not accepted and when he took over I was suspended and my contract ripped up.

“With what has subsequently transpired, it is quite obvious why he disposed of me in the manner he did. I was further vilified in the press and continue to be subjected to endless rumours and attacks.

“I had no option but to pursue a claim based on Craig Whyte’s actions – the litigation was a response to his actions and not those of Rangers Football Club.

“I firmly believed it was important to make sure he would have to explain everything he did in a court of law.

“Because of the legal process it has not been possible or appropriate to make public comment, which has been extremely hard given the flow of misinformation and falsehoods both myself and the club had been subjected to.

“In light of the club’s current position I instructed my lawyers to advise the administrators that I am willing to discontinue the legal action. Subject to recovering the costs associated as a result of this action, I will give over to the administrators the remainder of the money that was arrested as part of my case in an effort to help the club.

“I always have done, and will continue to do, everything I can to help the club in these difficult times.”


  Continue reading


Filed under Administration, Bain v Rangers, Football, Rangers

Rangers + Ticketus – Part 3 – Loans, Sales, Financial Assistance and Unjustified Enrichment

On Friday Lord Hodge issued his decision in the application by D&P for “Directions” in connection with their handling of the Rangers administration.

Prior to going into the bulk of my post, can I suggest a visit here for another, but different, legal perspective on why a Rangers “fire sale” is the most likely outcome?

Back to the regularly scheduled programming –

From Lord Hodge’s judgment I have extracted the following section:-

[16] The administrators’ legal advisers have challenged the enforceability of the STA (Season Ticket Agreement). It envisaged that Rangers would use the payment for the first tranche STA tickets to effect the repayment of its debt of about £18 million to Bank of Scotland plc. It was also proposed that Rangers would lend £16 million to Wavetower Limited (now called The Rangers FC Group Limited) to enable that debt to be repaid and that the bank’s debt and its securities would be assigned to Wavetower Limited (Schedule 19). The administrators’ legal advisers have asserted that the STA is illegal on the ground that it was an agreement for the giving indirectly by Rangers of financial assistance for the acquisition of its shares contrary to section 678 of the Companies Act 2006. The existence of this challenge is not however relevant to the directions which I have to give as I must assume at this stage that the Ticketus agreements are valid.

As I mentioned in my last post, this discloses (a) that Rangers lent, or it was proposed that it should lend, Group £16 million and (b) Duff & Phelps are trying to strike the Ticketus deal down on “financial assistance” grounds.


What Chance Do the Administrators Have of Striking Down the Ticketus Deal as Illegal “Financial Assistance”?


OK – I’ll explain. My “workings” are shown below but, put simply, it looks as if, even if the loan from Rangers to Group was “financial assistance” the sale to Ticketus is a normal and legitimate business transaction. Whilst it might be argues that the sale is “tainted” by illegality in the loan deal, the two transactions can be separated.

However, even if the Ticketus “sale” is struck down, Ticketus would have a claim against Rangers for return of the money on the grounds of “unjustified enrichment”. Ticketus will either have a valid contract or will be creditors. They will not, to coin a phrase, be walking away!

Continue reading


Filed under Administration, Football, Rangers, Ticketus

Rangers & Ticketus – Part 2 – What Does Lord Hodge’s Decision Mean for a Newco Rangers?

On Friday, Lord Hodge determined the application by the administrators of Rangers Football Club PLC (Rangers) to receive directions from the court regarding the Ticketus deal and whether the administrators (D&P) could get out of it, without being tangled up in litigation.

He declined to give D&P carte blanche to rip up the Ticketus deal on the basis that he did not have sufficient information about how that would affect the bids for Rangers to do so. It was left, after a general re-statement by the court of the principles under which an administrator has to operate, that D&P would need to give more detail to the court about the effects on the generality of creditors should the Ticketus deal be breached by D&P, thus making Ticketus a creditor.

The trade off for oldco Rangers would be that repudiation of the contract with Ticketus would give Rangers access to its full season ticket income, but at the expense of adding a sum close to £40 million to the creditors.

Ticketus’ claim against oldco Rangers would, in those circumstances, be for (a) the money paid for the tickets and (b) the lost profit from the deal, less (c) anything paid to them so far. It is very hard to see how the addition of such a large sum to the pool of creditors helps D&P achieve the purposes of administration, especially in light of the huge deficit which still exists.

As I suggested in an earlier post, I do not believe that there is any hope for oldco Rangers to avoid being wound up.

Therefore the second option considered by D&P is “a sale of the business and assets of Rangers … combined with a CVA”.

How Would a Sale of the “Business and Assets” Work?

If Rangers was a “normal” business, then it is almost certain that administrators would immediately have got rid of the high earning staff to see if the business could be sold as a going concern, perhaps to a competitor with an interest in taking over the shell of oldco.

The nature of a football club renders the matter worthy of very different considerations.

I believe that D&P have deliberately kept their first option, that of a share issue, alive so as (a) to keep up the spirits of the fans and (b) to keep alive the hope that HGMRC, for some bizarre reason, might approve a CVA contrary to its own published principles.

Realistically however, I think their goal must be to raise funds by way of a sale of the business and assets, and in these circumstances the suggestion of a CVA is a fig leaf.

If Rangers’ assets are sold off, will this generate enough to pay (a) the fees of D&P; (b) the secured creditor, if any; (c) HMRC, for all liabilities claimed to be due; (d) Ticketus (if D&P breach the contract); and (e) everyone else.


Will there be enough for a CVA to work, in those circumstances?


Even if there were, what would be “saved”? A football team with no ground and no players and no money and no prospect of getting out from under the debt burden. Continue reading


Filed under Administration, Football, Insolvency Act 1986, Rangers