Rangers and the Incubator – Part 1 – Can the Players “Walk Away” For Nothing?

The Bill Miller takeover of Rangers is intended to take place this week (by 11 May). That does not leave much time. My plan is to write a few posts looking at the hurdles Duff & Phelps and Mr Miller will need to cross to achieve the goal of having Rangers play its last game of the season next Sunday under the ownership of the American trucking tycoon.

The first area I will look at is that of the players. Here straight away is a gamble. Any players who do not want to join newco can, as far as I can see, leave with no payment due to either newco or oldco Rangers. One suspects this might not have been not D&P’s plan.

Let’s remind ourselves of what Mr Miller said pre his preferred bidder status.

Bill Miller –

“My proposal on the table now is to pay £11.2M for the club which includes the £500,000 deposit required by Duff & Phelps.

“In order to preserve the club’s history, records, championships and assets, I will put the “heart” of the club into an “incubator” company while Duff & Phelps works to make the “sick patient” healthy through a CVA process that effectively works to “radiate” the toxicity of past administrations’ sins out of the patient while the “healthy heart” is preserved and moves forward. Once the CVA process has been completed and the patient is on the mend, the administrators will return Rangers Football Club plc to me for a nominal sum. The healthy heart and the healthy patient (The Rangers Football Club plc) will then be reunited through merger.

In this scenario, the club can continue with all of its business assets, including its history, protected from the present illness. Thus a new corporate entity will own the club’s assets during the incubation period including all of its history.”

And what did D&P say when Mr Miller was chosen as preferred bidder.

Paul Clark of Duff & Phelps –

“We are delighted to announce that today we have received an unconditional bid for the business and assets of Rangers Football Club plc from Mr Bill Miller which has been accepted and he is now the preferred bidder. Mr Miller now proposes to complete his transaction by the end of the season.

“Mr Miller’s proposal involves the use of a specially created newco in addition to the retention of the Rangers Football Club plc. The business and assets he proposes to purchase will be sheltered in a newco and returned to the plc once the plc has been ‘cleaned up’.

How does this work as regards employees?

The Transfer of Undertakings (Protection of Employment) Regulations 2006 apply.

These regulations are designed to protect the rights of employees when a business is transferred. There is no doubt that what is outlined above by Messrs Miller and Clark would amount to a relevant transfer. Therefore, in law, the employment contracts of the employees transfer over to the new employer, and the contracts cannot be terminated by the new employer without this constituting an unfair dismissal and breach of contract.

However, in Rangers’ situation, the most relevant issues arise from the perspective of the employee looking to leave.

Whilst the worker automatically becomes an employee of the new company, he is not forced to do so. The employee has the right to object to this. If the employee objects to the transfer, then his employment does not continue with the new employer. It is treated as a resignation, and therefore the employee has no right to compensation from the new employer for redundancy or dismissal.

However, the new employer has no right of action for damages against the employee for terminating the contract.

It is illegal and unenforceable to purport to contract out of these rights.

ACCORDINGLY, ANY RANGERS PLAYER WHO DOES NOT WISH TO JOIN A NEWCO CAN “OBJECT” AND WILL NO LONGER BE A RANGERS (either oldco or incubator) EMPLOYEE.

If a player walks out on an existing contract with his team, then in contract law his employer could seek damages from him, and sporting sanctions would likely be applied to the player, whether by way of suspension or a fine.

However, if a contract terminates under the circumstances above, the player would be a free agent. The only thing the player would need to do would be to send the SPL written notice that the contract was terminated and 14 days later the registration of the player is terminated.

Under Mr Miller’s plan, the SPL share passes from oldco to newco. Accordingly oldco would not be a football club capable of seeking compensation for the player leaving from any new team. As the player would never have had a contract with the newco, then that entity also could not seek compensation from any team signing the player.

Effectively therefore, unless D&P are very careful, they could lose the entire playing staff, or at least those who would be of interest as free agents, for nothing.

Duff & Phelps, as representing the employer, need to consult with and inform the employees about what is happening. This should have included the above information. Now, if one is a member of the office staff, for example, or a groundsman, or even a youth team player, continuity of employment is a good thing. If not, and one is a highly paid and marketable player, of whom there are still a number at Ibrox, then why not take the chance to leave as a free agent, and cash in? After all, a football career is short, and can be ended by an injury at any time. From all that Mr Miller has said about cloth cutting, one would not expect Rangers to be able to pay similar wages for a while, if ever again.

Might the prospect of some top players leaving persuade Mr Miller to offer less than he has put forward so far?

If he has told the SFA and SPL that he wanted written guarantees of no penalties, then he would presumably want something similar from the valued players. Their agents would not be doing their jobs if they did not try to obtain compensation for their clients for giving up the right, effectively, to get an early “Bosman”.

TUPE rules protect the employee by limiting the ways in which the new employer can vary the contract. TUPE rules do not prevent the employee negotiating a better deal, or a new contract with the new boss!

Therefore we have one week to see how this issue is going to be dealt with.

Bearing in mind how much needs to be done to effect the transaction, I suspect that the D&P bill for this week will be rather higher than the average £200,000 so far!

PART 2 – to follow – could Craig Whyte, Ticketus or HMRC stop the Miller deal?

Posted by Paul McConville

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16 Comments

Filed under Administration, Employment Law, Football, Rangers, TUPE

16 responses to “Rangers and the Incubator – Part 1 – Can the Players “Walk Away” For Nothing?

  1. Littlerabbits

    Can you type quicker Paul? We’re all dying for these questions to be answered 😉

  2. Ian =B=

    Another enjoyable post, thanks Paul. For me this raises questions about D&P’s competence to represent the creditors. Surely the players could have been pre-sold before the end of the season for more than the £11.2M? this plus the fixed assets would have taken things up to the £30M mark.

    Is it possible that the players or the high value ones have already been sold and that there are gagging clauses in place to keep everything Schtum? Any big players being seen to bail out until liquidation or a messy CVA might end up with an angry mob intimidating them.

  3. Bill McCreath

    Spot on as usual Paul. It is difficult to believe that D&P have not been advised around this and perhaps the delay in appointing a preferred bidder is partly due to negotiations with players in their willingness (or not) to move to the Newco.

    We are certainly in for another interesting week.

    If an agreement with the players is not in place the already shaky prospect of completing by next Friday looks impossible.

  4. Frank-W

    So if all that happened as of 11th may, and Rangers Football Club PLC is an empty shell. Everything transferred into a Newco, I take it RFC (IA) will not be the club taking the field against St.Johnstone in Perth. If Miller forms the Newco say by Friday Mid Afternoon, does it only take a nod from the SPL board to give them RFC (AI) share and entry into the SPL. For the share transfer and vote on entry into the SPL can’t be done until the Newco is form and everything moved into it.

  5. mick

    firstly a would like to thank paul for telling the truth about whats going on here .am scottish and intermediate and after all the lying and cheating press we have had a feel this is the only place to get a true dignified look at the whole situation with the truth applied .we all know players are not as loyal to there clubs as of in the past so a ibrokes exodus is well on the cards it looks to me that d&p are as crooked as any1 involved .the are breaching employment laws by not telling the workers there rights thats totally shocking are the d&p admin.audited what are there auditors saying ?????

  6. N1CKY

    @Ian (administrators competence) – In the interview I watched with Alex Thomson the joint administrator Paul Clarke says he was working in the interests of the creditors then goes on to say and the survival of the football club. I would see the point of his statement had he/they managed to secure that for RFC 1873 as a going concern, not as a newco ditching all their debts! I’m amazed why no one has pointed out to Mr Clarke his contradictions!

  7. mick

    there making a mockery of scots law and justice .if a bump ma tax a would get the jail .all this incubator talk shows how curupt business is 100m of tax is two hospitals 3 schools 100 new teachers the assets should be sold to pay the taxman its a sick circus that has killed scottish football and neil doncaster and co should be sacked for haveing no back bone .a personally think its all going to go pear shape for them as a cant see ticketus lawyers players agents and the taxman putting up with this and of course last but not least saint criag whtye

  8. scapa

    Paul, if this takeover happens by the end of this week I’ll eat Tony Mckelvie’s hat, with some fava beans and a nice Chianti. I seriously doubt it will happen at all, but it is a fun what if, while we wile away the deathwatch.

  9. johnnyD

    I’m thinking that Miller was never a serious contender, merely a stalling horse, to prevent the BK’s getting their hands on the club. Another week and when this deal falls through, D & P will call the end. The carcass is surely bare.

  10. Bhoywonder

    As I have said all along, I do not believe this will happen. I believe RFC (ia) will be placed in liquidation by the court. The players then would be free agents.

    I have been involved in a TUPE transfer from a corporate company to an ALMO (Arms Length Management Organisation) so I know first hand how this works. Trade Unions are normally on the ball and will be advising their staff, as will the Players Union. Staff and Players should have been given at least one months notice of this arrangement in order that they can make a balanced and unhurried decision.

    The problem with this situation is, there is little room for manoeuvre. The TUPE transfer will basically be to accept the new management structure with the same employment terms and conditions of service, but not essentially salary as this would most certainly be a very different pay scale, or resign with notice.

    Transferring to a Newco in any ones books is not an attractive option, given all the sanctions and spendthrift necessities as outlined by Mr Miller. Therefore I would fully expect, in this scenario, any sensible player to cut their losses and find a new club, regardless of players’ loyalty which incidentally, is to be commended.

    The players will in all probability move on, particularly the older ones as football is a short career.

    Yet again, a great post Paul. 7 days to the watershed. and counting.

    • Bill McCreath

      You make a good point.

      The other issues around pension schemes make this even more interesting/challenging.

      I believe there is some form of player pension scheme.

    • Bhoywonder

      I don’t know a great deal about pensions, but when I transferred under TUPE my pension was entirely unaffected. I suspect pensions in this scenario will be frozen until takeup of contributions is instigated by a new employer. I think players can continue to make direct contributions to their particular plan whilst they move between clubs thus maintaining the value of their policy.

      • Bill McCreath

        If the pension scheme is part of the players contract Miller will have to provide a scheme which will deliver benefits equivalent to the current scheme. It will be an on going cost for him in terms of employer contributions.

        The more I think about this whole deal the more I believe it can’t be done by Friday.

  11. Carntyne

    The subject of whether the players can be forced to join any NewCo has me puzzled.

    Rangers had an annual operating loss or black hole as Whyte referred to it, of £10mill.

    Players agreed a 75% cut in wages to assist the club to get to the end of the season.

    Since Miller has stated the club under his stewardship will have to live within it’s means, there’s no way the current squad will have their full wages restored after the end of the season.

    If they’re not paid what they are contracted for the question of them transferring to a newco won’t arise.

    They will walk because Rangers have broken their contracts.

  12. Richboy

    I do not believe any of the following will stay at Rangers due to the reduced wages.

    GK, McGregor( ireplaceable), Alexander,

    Defenders, Goian, Papac (already said he is leaving) ,Bartley (back to Arsenal), Broadfoot, Whittaker, Bocanegra, Lee Wallace (possibly returned to Hearts),

    Midfield, McCulloch, Edu, Davis, Aluko, Bedoya, Ness (already on loan, can he be registered with SFA on time)

    Forwards, Lafferty, Naismith, Kerkar (rubbish anyway) and possibly Little.

    As they will be unable to register any new players, this leaves a side that would barely compete in the under 19s league (they came fifth this year) and will cost upwards of 25 million pounds to replace over the next few years.

    My question to Bill Miller is;

    How much working capital do you intend putting up to see Rangers through the initial three to four years of rebuilding, which could possibly involve playing in the first division for a couple of years?

  13. Den

    The season ends next week.

    There are a lot of registrations and contracts to be changed to reflect the player transfer from Oldco to Newco, even if they just register the bare number to field a team.

    Agreeing the temporary wage cut took how long ? So one week to convince the big players to move is ambitious. The players all have agents, the agents like transfers, particularly when their man has a value but becomes a free agaent. Agents are not known for their loyalty to a club.

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