The SFA’s “Fit and Proper” Test – Self-Certification for Football Clubs – A Farce? Part 1 – Craig Whyte

Secretly recorded phone conversation between the SFA and the new Chairman of Dukla Pumpherston of the Scottish First Division:-

SFA      –           Is that Mr Hannibal Lecter? This is the SFA calling.

Lecter  –           Hold on, just finishing my dinner, these fava beans and chianti are delicious…how can I help you?

SFA      –           Just wanted to make sure you are a fit and proper person to take over Dukla.

Lecter  –           OK. What do you need from me?

SFA      –           Just sign the form to say that you are fit and proper and pop it in the post to us.

Lecter  –           And then you will meet to consider it?

SFA      –           No. As long as you tell us that you are fit and proper, then that’s you in!

Lecter  –           Thank you very much!

Call ends

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And a quiz question too, which will be answered below – what do the following have in common – the unicorn, Pandora’s Box, Brigadoon, the SFA “fit and proper” test, Theseus and the Minotaur?

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The issues of football governance at the forefront of media coverage just now, not just in Scotland but in England too, as well as worldwide.

The BBC recently reported, under the headingOwners face increased scrutiny in football governance revamp”, that the English football authorities propose to put the suitability of prospective club owners and directors “under scrutiny by a new regulatory body set up to help improve football governance.” The FA Regulatory Authority will have, amongst other responsibilities, the duty to check if the “fit and proper” test is satisfied by English club directors. Government pressure has forced the FA to act.

This contrasts with the parlous state of football governance in Scotland as detailed below.

Craig Whyte

Craig Whyte has been declared not to be a “fit and proper” person to be a director of a Scottish football club by the SFA.

The investigation by the SFA started in October after the BBC Inside Story revelation that he was a former disqualified director. Matters were delayed as a result of the alleged lack of co-operation shown by Collyer Bristow, acting for Rangers and Mr Whyte.

After the club entered administration, a panel chaired by Lord Nimmo Smith was convened and reported to the SFA in the two-week period set for it to do so.

The decision followed the Special Board Meeting which considered Lord Nimmo Smith’s report highlighting “a number of other potential rule breaches by the club and its owner”.

As a result, Rangers have been charged with bringing the game into disrepute. As Stewart Regan of the SFA said:-

“Specifically, areas of potential breach to be considered by the Judicial Panel include:

·         Obligations and duties of members

·         Official return

·         Financial records

·         Division of receipts and payment of expenses (Scottish Cup).”

I think I will look into what the Judicial Panel can do at a later date. For now, it is interesting that the finding regarding Mr Whyte comes ten months after he took over at Ibrox, and almost five after the BBC revelation of his disqualification! I will return to issues about delay.

The “Fit and Proper” Person Rules

The rules regarding the “fit and proper” person test are contained in the SFA Articles of Association. They state at Article 10.2 :-

…The Board must be satisfied that any such person is fit and proper to hold such position within Association football. The Board hereby reserves its discretion as to whether or not such a person is fit and proper, as aforesaid, after due consideration of all relevant facts which the Board has in its possession and knowledge, including the undernoted list which is acknowledged to be illustrative and not exhaustive:-

 

(a)   he is bankrupt or has made any arrangement or composition with his creditors generally;

(b)   he is of unsound mind and has been or is to be admitted to hospital as suffering from a mental disorder following an application for admission for treatment under the Mental Health (Scotland) Act 1984 or Mental Health Act 1983 or a Court having jurisdiction in the United Kingdom or elsewhere has ordered in matters relating to mental disorder his detention or the appointment of a curator bonis or any other person to exercise power with regard to his property or affairs;

(c)     he is under or is pending suspension imposed or confirmed by the Scottish FA;

(d)   he is listed in the Official Return of another club in full membership or associate membership;

(e)   he is currently participating as a player of another member club or referee in Association football;

(f)     he is the subject of an endorsed Disclosure from Disclosure Scotland;

(g)   he has been disqualified as a director pursuant to the Company Directors’ Disqualification Act 1986 within the previous five years;

(h)   he has been convicted within the last 10 years of (i) an offence liable to imprisonment of two years or more, (ii) corruption or (iii) fraud;

(i)     he has been suspended or expelled by a National Association from involvement on the administration of a club;

(j)     he has been a director of a  club in membership of any National Association within the 5-year period preceding such club having undergone an insolvency event;

(k)    he is currently under or is pending suspension imposed by or confirmed by the Scottish FA in accordance with the Anti-Doping Charter.

This forms part of Article 10 which deals with the “Official Return” – the annual statement by which the clubs tell the SFA details of all office-bearers, directors and board of management of the club.

On the face of it, the “fit and proper” question is one for the SFA Board. As the rule states, “…the Board must be satisfied…”

Article 10.1 (b) states that each office-bearer etc must “personally confirm to the Scottish FA that he is a fit and proper person to hold such a position within Association football.”

Then what happens?

Nothing! The statement by the person that they are “fit and proper” is accepted by the SFA.

Mr Regan Spells It Out

Saturday’s Scotsman had a lengthy piece regarding this issue, where Mr Regan made it clear what the activities of the SFA were in connection with the “fit and proper” test.

I have quoted Mr Regan below together with my comments on what he is saying in bold beneath the relevant parts of the quotes.

——————————————————–

“We need to understand this idea of a ‘fit and proper person test’. It’s a myth. There is no test. People don’t have to come in and pass an exam. What happens is that any change of director, any change of ownership or team manager, etcetera, etcetera, has to be notified to us on an official return. In doing that, there is a very clear statement, which is set out in our articles.

“It says that ‘each member club will procure that the relevant office bearer, secretary, director or member of the board of management will personally confirm to the Scottish FA, using the form prescribed by the board, that he has been furnished with a copy of the articles and having read, in particular, Article 10 and Article 13, the information supplied by him using the prescribed form is complete, true and accurate; and he is a fit and proper person to hold such position within Association Football’.

“Now, what that says is that we rely on our members, bearing in mind we are a members’ organisation, to say they have gone through all the contents of Article 10. For example, it talks about being bankrupt, being of unsound mind and treated under the Mental Health Act, pending suspension and so on.”

Here is the answer to the quiz question!

The fit and proper test is a myth! There is no test! It is interesting that, as far as I am aware, this statement was the first indication by the SFA that that was their position. At all the time when the investigations into Mr Whyte were ongoing, the SFA never made this point clear.

One wonders if perhaps clarity is forthcoming now because of hints of possible legal action by “interested parties” who claim to have lost out financially as a result of Mr Whyte’s alleged activities. After all, the argument goes, if the SFA is the regulator, and refuses to carry out that job, leading to losses, then ought it to bear moral and indeed legal responsibility?

Mr Lecter, in my whimsical example at the top of the page, or Colonel Gaddafi, or Saddam Hussein, or Bernie Madoff, or Dr Shipman, or any wrongdoer would therefore be treated by the SFA as a fit and proper person, as long as they were willing to lie on the form!

As the Articles stand, a person needs to satisfy the Board of the SFA that they are fit and proper. In reality this is achieved by filling in a form. That appears to be the Board abdicating responsibility.

Mr Regan states that they rely on the members of the SFA to police the matter. However, that is not what the Articles say. The responsibility for deciding that a person is fit and proper rests on the Board and has not, as far as I have seen, been formally delegated to the member clubs. Even then, is it reasonable to expect Dukla Pumpherston, now wholly owned by Mr Lecter, to “tip the wink” to the SFA that the infamous murderer and cannibal is not actually OK?

“The alternative to that is that we, as a Scottish FA, would have to employ a cast of thousands to research every potential takeover, every potential change of director, across the entire game. Bear in mind we don’t just govern the professional game, we govern the entire game of football in Scotland.

“We don’t have the resources or time to do that. We are not going to use Scottish football’s money to do that. We rely heavily on the clubs themselves.”

They would not need a “cast of thousands”. There are many bodies with regulatory responsibilities across Scotland who do not require huge ranks of people to check these matters. It would involve more staff undoubtedly, but the SFA could, for example, introduce a fee structure for new applicants to fund this. That could be variable, depending on the level if the organisation. An SPL club would pay more than a team in the bottom rung of the South of Scotland League, for example.

As I said above, if the SFA does not want the responsibility, it should change its Articles to make it clear that, in fact, it is each member club which must be satisfied about its own office bearers, not the Board of the SFA.

“In the case of a plc like Rangers, you have a board of directors who are selling a club to an individual. That board of directors would undergo due diligence and, because they are a plc, would have to go through a fairly stringent process of testing out who they are selling the club to.

“When you get confirmation that the person they have sold the club to has satisfied these criteria, then you have to take a certain amount of credence from what those directors are saying. That is what the Scottish FA have done.”

Mr Regan here shows an interesting view of the legal responsibilities of a board of directors. Let’s look at the Rangers case. Who decided to sell the club to Mr Whyte? Was it the Rangers plc board?

No, it wasn’t.

Instead the Board of Murray International Holdings decided to sell its 85% stake in Rangers plc to Mr Whyte’s company, Wavetower Ltd. Rangers plc’s board had nothing to do with that. The Board could not stop MIH selling the shares.

Because it is a plc, an Independent Board Committee was set up to consider the rights of the minority shareholders. That IBC expressed serious concerns, but on the basis that 85% of the shares were being sold for £1, the total value of the remaining 15% of the shares was about 20p! There was no value for the minority shareholders to lose. In any event the IBC could have triggered a requirement for Wavetower to offer to buy all the remaining shares, but at that value there was no reason to do so.

So, Rangers plc, a member of the SFA, had nothing to do with the decision to sell to Wavetower. That was decided by MIH, who are not members of the SFA.

What due diligence about the purchaser must a company do when it is being sold? None. As long as the seller is happy that the purchaser has the money to pay the price, then the sale goes through.

In any event, most members of the SFA are not plc’s. What investigations does Mr Regan think they should undertake before selling, or taking on a new office bearer?

Mr Regan says that the SFA has to take on a certain amount of credence from what the directors say. In Rangers’ case the IBC said, and I paraphrase, “DON’T DO IT – WE CAN’T SEE WHERE HE HAS THE MONEY TO DO THIS!!!!”

“When the individual has then told lies and hasn’t disclosed the disqualification that he was holding, then comes back and tries to argue that wording in Article 10 is misleading and he believes it was the point of disqualification that had to be disclosed, not the fact he was still disqualified, and uses smoke and mirrors to try and buy time, then it becomes very difficult to deal with the matter quickly.

The Articles are a legal and binding document. What matters is what they say, not what they are meant to say, if there is a difference. They are not a model of clarity in their drafting (which is being polite).

My reading of clause (g) is consistent with the approach taken by Mr Whyte. I read it as referring to the date of “sentence” passing, rather than whether the “sentence” is continuing. The interpretation of Article 10 will be a matter, ultimately, for the courts, whether through the legal system or the sporting courts.

The clause is ambiguous, at best, and I think it is unfair of Mr Regan to state that using a different interpretation o is using “smoke and mirrors”. He should make sure his organisation’s Articles say what he means them to say!

Mr Regan appears to have decided that Mr Whyte is a liar on this point. Whilst Mr Whyte could be criticised for various matters, following a valid legal interpretation of a question, even if it turns out to be an incorrect interpretation, is not lying.

“That’s why from October to February we were in dialogue with [Rangers secretary] Gary Withey from Collyer Bristow trying to get to the bottom of Whyte’s disqualification. In the meantime, there were clearly lots of other issues coming out under the table.

“To put the fit and proper issue to bed for a second, we have to say we rely heavily on a plc managing their own due diligence and the directors of that plc managing the transfer of ownership in the best interests of the club.

As I mentioned above, I think Mr Regan misunderstands the responsibilities of the directors of Rangers plc. In addition, how does his position fit with all of the clubs under the SFA umbrella who are private limited companies, or unincorporated associations?

“It is my understanding that for the four years or so the club was up for sale, the talk of acting in the best interests of Rangers was top of the agenda. I think that has to be taken into account.

Talk is cheap. Sir David Murray saying that he wanted to sell to a person acting in Rangers’ best interests creates no legal responsibilities.

Let’s say that the best offer for Rangers came from Joe Bloggs, a multi-millionaire property developer, whose intention was to pay MIH £100 million for 85% of the shares, run the team for a couple of years while going through the planning process, and then demolish Ibrox and Murray Park, turning them into luxury housing, hotel developments, and retail parks, and at the same time as the bulldozers move in, closing the club down completely.

The Board of MIH would be in dereliction of its duty to its shareholders to refuse that offer.

Mr Bloggs would be seen as a fit and proper person, even whilst declaring that, on buying the club, he was shutting it in two years. If the Rangers plc board objected to this as not being in the interests of Rangers plc, how would the SFA deal with this? Would they demand Mr Bloggs’ business plan and then decide not to let him run the club? How?

The statements about acting in the best interests of Rangers are meaningless in this case.

“It’s easy after the event to try and find a scapegoat, to say we should have done a fit and proper person test and that we should have prevented the takeover. I can’t see how we could have done that without having gone through a long, bureaucratic process on every single director.”

This issue shows that the matter of football governance in Scotland is seriously flawed. As I mentioned, the Articles place the responsibility for deciding if someone is fit and proper upon the Board of the SFA.

If the Board abdicates that responsibility informally, as it has done here, then it can be answerable for its failures.

If a member club can prove that it has lost out directly as a result of Mr Whyte being deemed a fit and proper person, when, as Mr Regan now says, he should never have been, then surely the SFA Board will be answerable for this failure?

Whilst not of course equating Mr Whyte with Dr Shipman, one of the issues raised in his horrible case was that the health authorities and regulatory bodies failed to heed the warnings, allowing him to continue his murderous activities. They by no means had the primary responsibility for what he did – he did, but he could have been stopped earlier.

Hindsight is always perfect. However, in the case of Mr Whyte, there were whistles being blown about him from before the takeover, although not in the mainstream press. Websites and blogs of various hues raised serious issues about his business record, and not all of these were motivated by anti-Rangers malice. Indeed, anyone so motivated would have been better saying nothing and waiting for the mess to get even worse!

Conclusion

In part 2 I will look at Dave King’s position, and what this tells us about the SFA governance procedures, and also how the Articles could scupper the “Blue Knights” before they even get saddled up.

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10 Comments

Filed under Alleged Humour, Football, SFA

10 responses to “The SFA’s “Fit and Proper” Test – Self-Certification for Football Clubs – A Farce? Part 1 – Craig Whyte

  1. Silver City Tim

    It strikes me that Rangers are being charged with bringing the game into disrepute by their actions rather than purely for their actions. Is there any significance to be taken from that? Easier to get a conviction; greater penalties available or just routine wording?

  2. TheBlackKnight

    One thing that has troubled me from Lord Nimmo’s investigation is that there is no mention, or indeed reference, to trading while insolvent.

    It has been confirmed by the administrators that tax payments were not being made. No apparent funds were available to the club. Did this allow Rangers FC Plc (IA) to have an unfair financial advantage over other clubs, who were meeting their obligations. I refer in particular to the difficulties faced by Heart of Midlothian in regard to player and tax payments and how they were dealt with.

  3. Nice summary of the situation. I am a fit person if I say I am a fit person, whether I am fit to judge that or not!

    A couple of point for the SFA to consider:

    The wording of the section relating to a disqualification as a director within the last five years could definitely be tightened, given Whyte’s argument that he didn’t need to mention a decision taken more than five years ago even although the disqualification finished within the relevant period.

    The Mental Health (Scotland) Act 1984 has been superseded by the Mental Health (Care and Treatment) (Scotland) Act 2003.

  4. Michael

    The SFA don’t need a cast of thousands. They should look at outsourcing it to The FA Regulatory Authority.

  5. mollocate

    Great article Paul. Thanks.

  6. Jim

    Is it as simple as replacing :
    “(g) he has been disqualified as a director pursuant to the Company Directors’ Disqualification Act 1986 within the previous five years;”
    with :
    “(g) he has been previously disqualified as a director pursuant to the Company Directors’ Disqualification Act 1986”

  7. Son of the Rock

    A couple of hours on the Internet would have told you all you needed to know about Craig Whyte. This was too much for the SFA and the Scottish media to accomplish. A couple of minutes would tell you all you need to know about Dave King.

  8. ifa007

    A bit off topic but…..reference to this article
    http://www.moneymarketing.co.uk/investments/awd-and-sjp-caught-up-in-octopus-eis/rangers-saga/1046625.article
    “In a statement in the press, Whyte says: “The Ticketus deal was by far the best way to protect the club, given the circumstances in that they have no security over any assets. The only person at risk from the deal is me personally because I gave Ticketus personal and corporate guarantees underwriting their investment; the club and the fans are fully protected. In terms of exposure, I am personally on the line for £27.5m in guarantees and cash.”
    IF what Mr Whyte has stated is correct, what is the interest of Ticketus/Octopus joining the Blue Knights. Also Merchant House have not commented on how many of their clients have been sold these investments……in fact they are remaining unusually quiet……….!?

  9. KrakowDon

    I disagree with the analysis that all someone has to do is to effectively say ‘Yes I am a fit and proper person’…

    Article 10 does say that, but it goes on to say that the SFA Board must be satisfied that someone is fit and proper. It also says that the SFA Board reserves the right to decide if someone is a FAPP. We know that in the past they never gave it any scrutiny. To that extent the test was a myth.

    But the rule is there, and it mentions ten circumstances which would be considered relevant to the decision making process. Murray clearly falls within 10 (10) having been a director in the five years prior to administration. That doesn’t disqualify him automatically, but there MUST be an investigation and a robust decision made. Equally, if one of these circumstances exists, then surely the question MUST be asked and answered by the SFA Board.

    A Dundee or Dunfermline could seek a judicial review of the SFA’s decision that he is a FAPP if they are not convinced there has been a transparent process. The SFA have therefore to be able to demonstrate a proper decision making system, that this has been followed, and that the decision is justifiable on the facts. Given the current scrutiny the SFA will have to do, and be seen to do, something.

    The rule is therefore not a myth, and on a clear reading of the Articles there can be no doubt in my view that there is a question mark over Paul Murray being a FAPP and a mechanism by which to determine that he is or isn’t.

  10. Pingback: Responsibilities of the Scottish Football Association – And Other Myths – Questions For Mr Regan | Random Thoughts Re Scots Law by Paul McConville

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