What Deadlines do Duff & Phelps Have re Rangers Football Club PLC (In Administration)?

A flying visit back to blog land for me from real life – will try to put out a few quick (ish) posts to explain everything that has happened at Rangers over the last few days…

Or maybe I will simply cause more confusion!

Anyway, first port of call is our familiar friend, Schedule B1 to the Insolvency Act 1986 which lays down the rules for administrators.

The Appointment – 14th February

Duff & Phelps (hereafter “D&P”) were appointed as administrators on 14th February, under Paragraph 22(2) of the Schedule. They were appointed by “the directors”. As I have mentioned, the only directors at the time were Messrs Whyte and Ellis (although Mr King’s apparent sacking as a director has not made it to Companies House yet).

I wonder how the meeting of the directors which decided to put the company into administration took place. It could have been over the phone of course.

Maybe Mr Whyte held it just after his meeting with Messrs Martin Bain and John Greig, two of the other three Trustees of the Rangers Charity Foundation, when the Charity decided to forgo most of its donation from the Rangers Legends v Milan Glorie “no longer charity” match?

I have mentioned Gary Withey the Rangers Company Secretary before.  His place as a partner at Collyer Bristow, Solicitors, has gone. He has prior experience of a situation where an alleged minute was prepared recording a Board meeting, where no such meeting had taken place. This was some years ago when Mr Withey was Company Secretary at Crystal Palace.

It is always possible that, in the flurry of Rangers related litigation there will be, these minutes might be produced, reassuring people that everything which took place entirely properly was similarly recorded.

Proposals to Achieve Purpose of Administration – 10th April

On the basis that D&P are validly in place, the timescales are short.

Under paragraph 49, D&P must make a statement setting out proposals for achieving the purpose of administration.

Paragraph 3 tells us “The administrator of a company must perform his functions with the objective of—

(a) rescuing the company as a going concern, or

(b) achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or

(c) realising property in order to make a distribution to one or more secured or preferential creditors.

The objectives are in that order of priority – (1) can the “going concern” be rescued, failing which (2) can the administrators do better for ALL of the creditors by administration rather than liquidation, failing which (3) to sell off property to pay the secured or preferential creditors.

On a side note, the administrators’ statements need to be analysed as closely as this of Mr Whyte! No one has suggested that Mr Whyte holds a floating charge over Rangers’ assets. Rangers FC Group Ltd may hold it, this being a company 100% owned by Liberty Capital Ltd. Liberty Capital Ltd is, we are told 100% owned by Mr Whyte, or perhaps by another company, or Trust, or some other corporate body. Therefore “Mr Whyte” is unlikely ever to have been involved in the floating charge. His company/companies undoubtedly are. He is not his companies.

More on the administrators’ statements later.

Here!

On this site!

(Sorry – don’t know what came over me there…)

The rules lay down that the “statement of proposals” must be issued within eight weeks of appointment. It must be sent to the Registrar of Companies, to every creditor whose details are known to the administrators and to every shareholder. To avoid D&P being forced to send out 35,000 copies to the shareholders, they can publish a notice telling the shareholders to write in to be sent a copy post-free. The administrators could choose to publish the information on the company website. If so, I suspect that day Rangers.co.uk might receive its most traffic!

If D&P consider that one or both of objectives (a) and (b) cannot be met, they must explain why.

The proposals can include the making of a CVA or some other form of compromise.

The eight-week period is the maximum. The rules state, at Paragraph 49 (5) (a) that they must do so “as soon as is reasonably practicable”. They do not have to wait the full eight weeks.

As they are looking for firm bids by the 16th March, this suggests that they want to put the best option into the proposal, and want time to consider it.

However, the fact that D&P have said that wage reductions will allow the team to continue to the end of the season seems to suggest that they have assessed the debt and running costs part of the equation. If the “Blue Knights” propose to buy Rangers for £100 million, then this will make a difference to the proposal if instead they offer £10 million.

Can the Proposal Come After 10th April?

Yes.

Under Paragraph 107, D&P can ask the court to extend the time limit. This would require them coming to court and explaining fully to the Judge why they could not fulfil their statutory duties.

I imagine that an interested creditor, like HMRC, could seek to make representations, and the Judge would be pro-active in asking counsel for D&P to explain what they have been up to.

Whilst an application to extend the time period can be made after the date has passed, I imagine that, if D&P did not do so until then, they would be subject to an even greater storm of criticism than they are at present!

Creditors’ Meeting by 24th April

Once the proposal is sent out, D&P must convene a meeting of creditors. This must be within ten weeks of appointment. D&P would present the proposal to the creditors.

Can D&P Avoid Holding a Creditors’ Meeting?

Yes.

Under Paragraph 52 there is no need for a creditors’ meeting where any of the following applies.

If the administrator thinks:-

(a) that the company has sufficient property to enable each creditor of the company to be paid in full, (Which will not be the case with Rangers)

(b)that the company has insufficient property to enable a distribution to be made to unsecured creditors other than by virtue of section 176A(2)(a), (That section of the Insolvency Act deals with the power of an administrator, receiver or liquidator to distribute the remaining assets over and above sums due to a floating charge holder amongst unsecured creditors – so if there is not enough for there to be a CVA or arrangement and it is a case of dividing up and selling off the assets) or

(c) that neither of the objectives specified in paragraph 3(1) (a) and (b) can be achieved. (Which would mean neither than the company can be rescued nor that administration is better for creditors than liquidation)

However, even of D&P decline to hold a creditors’ meeting, they can be forced to. A request by a creditor or creditors “whose debts amount to at least 10% of the total debts of the company” must be complied with.

Thus HMRC can insist on a creditors’ meeting. Depending on the sums involved, Rangers FC Group Ltd or Ticketus could require one.

This might explain why the administrators are honouring season tickets. If they refused to do so, then the season ticket holders would certainly be creditors. If there are, say, 40,000 season ticket holders, it might make for a difficult (in regards to practicalities) creditors’ meeting!

What Powers Do the Creditors Have?

The creditors can accept the proposals made without qualification, or accept them with modifications. As long as D&P accept the modifications, then the administration continues, working towards the goals set and agreed at the meeting.

If the creditors reject the proposals, then this has to be reported to the court. At that stage the court can make any order it thinks fit, including terminating the administrators’ appointment there and then or from a specified date.

Therefore D&P need to come up with something which will get the approval of the creditors. Approval is based upon the percentage of the company’s debt “belonging” to each creditor. HMRC clearly have the biggest block vote (which conjures up an image of Hector as the leader of the TGWU casting 3 million votes on his own at a Labour Conference – moving on…)

Are There More Creditors’ Meetings?

Yes.

As the administration process continues, D&P have a duty to keep creditors advised. They can do so by correspondence, which can, in certain circumstances, count as a “meeting”. At any time a creditor or creditors with 10% of the debt can call upon D&P to have such a meeting.

Can a Creditor “Interfere” with the Administration Process?

Yes.

Under Paragraph 74 any shareholder or creditor can apply to the court claiming that—

(a) the administrator is acting or has acted so as unfairly to harm the interests of the applicant (whether alone or in common with some or all other members or creditors), or

(b) the administrator proposes to act in a way which would unfairly harm the interests of the applicant (whether alone or in common with some or all other members or creditors).

In addition a creditor or shareholder may apply to the court claiming that the administrator is not performing his functions as quickly or as efficiently as is reasonably practicable.

The court, on hearing such an application, can direct (which means order) the administrators to do certain things as required by the Judge.

Therefore, for all of the huffing and puffing about D&P, no creditor or shareholder has felt the situation so serious that they have sought court intervention. However, that “threat” is always there.

There is of course the possibility that Rangers FC Group Ltd could head to court if it views D&P’s comments about it and Mr Whyte as requiring the Judge to direct D&P as to how to deal with it. As matters stand, Group is undoubtedly a shareholder, and likely a creditor too.

Whilst D&P have wide powers, if HMRC thinks that a deal is being planned which is to their prejudice, they will knock on the door of the Court of Session immediately.

What is “Misfeasance”?

Paragraph 75 is headed “misfeasance”. It has been defined as: – “to take inappropriate action or give intentionally incorrect advice”.

Under Paragraph 75 the court can examine the conduct of the administrator of a company.

Such an “examination” can be applied for by a creditor. Any application must allege that the administrator—

(a) has misapplied or retained money or other property of the company,

(b) has become accountable for money or other property of the company,

(c) has breached a fiduciary or other duty in relation to the company, or

(d) has been guilty of misfeasance.

The court can order the administrator to repay, restore or account for money or property; to pay interest; or to contribute a sum to the company’s property by way of compensation for breach of duty or misfeasance.

So D&P knows that it is accountable for its actions, and that the eyes of the court are upon it. Or, as a Sheriff once described the sentence of probation and the scrutiny which goes with it to a man he was about to sentence, “There’ll be Klingons on your starboard bow!”

Conclusion  

The clock ticks on now to the 10th April. By then D&P will need to “put up or shut up”.

HMRC will be poised to go to the court if Hector believes that his interests are being prejudiced.

I would not put it past Mr Whyte, with his “Group” hat on, to go to the court either.

It would not be appropriate of course for any creditor of Rangers, however small, who (a) had deep pockets and (b) was a supporter of football teams other than Rangers, to make an application under Paragraph 74 calling D&P before the court, unless of course the creditor did have genuine concerns that there was potential prejudice as defined in the Paragraph.

It is very possible that there will be more days in the near future with cases connected in court involving Rangers than without!

 

NB I have not referred to the plethora of dates for football-related matters in connection with UEFA and SFA licences, nor with dates for potential newco’s to get up and running. That will appear, in due course, I think.

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14 Comments

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

14 responses to “What Deadlines do Duff & Phelps Have re Rangers Football Club PLC (In Administration)?

  1. Joseph

    Thanks for that. Again an excellent analysis. This is going to run for a while. I hope you’re up for it Paul. If you had planned that holiday to Outer Mongolia then you’ll have to put it on hold in the interests of justice. When you get to that place beyond I am sure you will be well rewarded.

  2. JD

    Also thanks Paul.
    Keeps all in line with what may be to come

  3. GuyFawkesaforeverhero

    Excellent. Now I have a handy cut out and keep summary with which to tick off events as they occur ( just as if it’s a tournament planner MSM would have provided back then when Scotland regularly qualified to play with the grown-ups).

    Also, if intuition serves me well here, congratulations for using sublime mockery as a weapon against your protagonist, Mr Angry.

    Mess’rs Swift, Wodehouse and O’Brien must be looking on with approval that their lessons haven’t been lost to us all yet.

    • Thank you Guy.

      As long as you’re not referring to the half back line for Dunfermline in the 30’s (wasn’t that Swift, Wodehouse and O’Brien?) I am very honoured to be mentioned in their company.

      Maybe there is a commercial opportunity for the MSM – a CW wallchart!

  4. Finn MacCunaill

    Most enjoyable read whilst tucking into the succulent bacon & egg. Time for another sup of tea!

  5. perthlurker

    Hi Paul

    Hav been following you and RTC blogs from Perth in West Oz and you are a great read.

    You even managed to make me misty eyed remembering the good olde days of the bloc vote! Was in Pollok when Tommy S was telling porkies about not being a member of militant / rsl, so not very surprise about pants down and telling more porkies!

    Keep up the great blog!

  6. redetin

    Thanks for clarity on this matter. I posted recently a rough timetable:
    1. SFA Enquiry: Appointed 21st February, 2 weeks to report, due 5th March (reported, but not published).
    2. Administration: Appointed 14th February, Interested purchasers by 16th March. Administrators have 8 weeks to present proposals, due 14th April.
    3. Strathcylde Police investigation: announced 16th February, due date?
    4. First Tier Tribunal (Tax): Commenced November 2011, Resumed 17th January, due date? Upper Tribunal follows? due date?
    5. SPL investigation of non-disclosure of payments: Commenced 5th March 2010.

  7. Richboy

    Thanks Paul for another great article. I have one question but don’t know if it applies here. Should a new owner be forthcoming, and satisfy the requirements of D&P, would this be a valid reason to defer stockholder/creditor meetings and the April 8 deadline?

    I am asking this as they would have to be thoroughly vetted by the various governing bodies and I do not envisage any of them taking the chance on another Mr Whyte.

  8. Paul, can you explain what the status is of the Rangers FC shares now that the club is in administration? In particular, is Craig Whyte’s 85% shareholding still significant or is it a dead letter?

  9. Fisiani

    Given the financial state of rangers one must assume that they will enter liquidation. The only question is when will this happen.
    If Rangers are liquidated and there is no newco in place then Rangers are no more.
    The players taking a reported 1million a month pay cut gives more time for a newco to be formed.
    The cunning plan is to somehow a) form a newco b) have the SPL share transferred c) avoid all the debts and responsibilities of Rangers d) be acknowleged as ‘still Rangers’ d) claim that a club which no longer exists cannot be further punished by points and titles stripping. e) gain access to Ibrox, Murray Park and season ticket money. This will take some doing.

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