Will Craig Whyte and Other Directors of Rangers Face Disqualification for £14,000,000 Unpaid Tax?

In which I comment on the Directors of Rangers Football Club PLC over the last year, and in light of a recent case decided by Lord Hodge, have a look to see if any of them might be at risk of disqualification for the non-payment of PAYE, NIC and VAT.


One of the consequences of the decision of HMRC, of which I will write elsewhere, is that the liquidators, BDO, will be obliged to carry out a formal inquiry into the circumstances of the insolvency of Rangers Football Club PLC. This includes the actions of present and past directors and can lead to various possible outcomes. These are not mutually exclusive.

There can be criminal prosecutions of office holders, if there is evidence of criminal conduct (not an allegation which has yet been made by any official body); the parties investigated can be pursued in the civil courts for losses caused to the now insolvent company, where they have failed in their legal duties; and the Secretary of State for Business Innovation and Skills can initiate proceedings to disqualify the directors from holding such positions. Section 6 of the Company Directors Disqualification Act 1986 applies here, and is shown at the foot of this article.

It is also the case that shareholders of an insolvent company can, in certain circumstances, bring civil proceedings for damages against officers of the company, alleging that breach of duty has caused them losses. On the basis tough that shares in Rangers were seen as financially worthless when Mr Whyte took over the company last year, it is hard to see how even a shareholder like Mr King, owning 10% of the shares, can claim to have suffered a loss.

I want to look at an example of what can happen as regards disqualification of a director. Mr Whyte has been disqualified before, for a seven-year period in 2000, arising from the collapse of Vital Security Ltd.

This will have

The Court of Session recently considered the issue of disqualification in the case of the Secretary of State for Business Innovation and Skills v Khan [2012] CSOH 85. The case was considered by Lord Hodge.

In this case, the respondent was one of three directors of a business which had started as a nursing home before, following closure by the Care Commission, it had turned into a Hungarian restaurant. Dr Khan is the only one of the three directors not to defend the proceedings to disqualify, but the court still had to be satisfied that the order sought by the Secretary of State for disqualification was justified.

The case was simple. It was founded on the directors’ failure to pay on behalf of the Company any of the monthly PAYE and National Insurance contributions to HM Revenue and Customs (“HMRC”) in the tax years 2008/2009 and 2009/2010. In the tax year 2008/2009 unpaid PAYE and NIC amounted to £94,758.31 and in first three months of the tax year 2009/2010, before the Respondent resigned as a director, the equivalent figure was £27,757.46. The total unpaid therefore was £122,515.77.

It was argued by the Secretary of State that the Company had favoured its other creditors over HMRC and, by not accounting for the sums due as PAYE and NIC, in effect used sums due to HMRC to fund its trading, to the specific detriment of HMRC. In the relevant period the Company withdrew £989,406.29 from its bank accounts to pay, among others, wages (£412,376.45), employee expenses (£7,798), trade creditors (£390,848.82) and for a share buy-back (£113,000). In that period the Company paid only £4,384.34 to HMRC, none of which related to PAYE and NIC in those tax years. The claims of ordinary creditors in the administration that accrued in the relevant period amounted to £143,015, of which £122,515.77 was due to HMRC for PAYE and NIC liabilities and only £20,500 remained due to other creditors.

Lord Hodge noted “HMRC has been significantly disadvantaged by the conduct of the directors and has submitted a claim for £140,083.07 in the Company’s administration for unpaid PAYE and NIC.”

It was submitted that the conduct of the Respondent and her fellow directors had been recognised in case law as a relevant ground for disqualification. It was argued that the circumstances fell within the lowest bracket (2 to 5 years) identified by the Court of Appeal in Re Sevenoaks Stationers (Retail) Ltd [1997] BCC 224. Counsel for the Secretary of State suggested that a period of disqualification of three years and six months might be appropriate.

Lord Hodge noted that the test is “whether the director’s conduct has fallen below the standards of probity and competence appropriate for persons fit to be directors of companies” (Re Grayan Building Services Ltd [1995] Ch 241, Hoffmann LJ at 253F-G).

He commented that the case law vouches the proposition that “the adoption and carrying out of a policy of non-payment of HMRC debts for a prolonged period supports a finding of unfitness other than in very exceptional circumstances. Where a company has insufficient reserves to enable it to trade except at the risk of such creditors, the adoption and carrying out of such a policy without their consent will almost always amount to misconduct.”

Dealing with the degree of blame falling on a direct or, he stated that “it is not in doubt that a director is responsible for all aspects of the business of the company and that directors collectively and individually have a continuing duty to acquire and maintain sufficient knowledge of the company’s business to enable them to discharge their duties as directors (Re Barings plc (No 5) [1999] 1 BCLC 433, Jonathan Parker LJ at 489; Re Westmid Packing Services Ltd (above), Lord Woolf MR at 842-843).”

However, he went on to say that that does not prevent the court considering the individual director’s role in the management of the company in deciding what disqualification to impose.

He stated “In this case the petition and documents reveal that the Company failed to make payments of PAYE and NIC to HMRC over the last fifteen months of the Respondent’s period as a director and that a debt to HMRC of £122,515.77 accumulated in that period while almost all other creditors were being paid. That sum was part of the debt which the Company owed to HMRC on its insolvency. This appears to be the result of a deliberate policy on the part of the directors for which the Respondent must share some responsibility, whether or not she had a primary responsibility among the directors for the Company’s financial affairs. In the absence of further information I can make no assumptions as to which director had such responsibility or as to the distribution of roles between the directors.”

He continued “The application for disqualification proceeds on the basis of misconduct comprising the adoption and carrying out of the policy to the detriment of HMRC. There are no suggestions of bad faith or a motivation of personal gain, such as by giving preference to a creditor who had the benefit of personal guarantees. In the absence of further information, I must assume that the misconduct of the Respondent was principally a failure to maintain sufficient supervision and control; she did not have sufficient knowledge of the company’s affairs and, in any event, failed to challenge an unacceptable practice. On that basis I consider that an appropriate period of disqualification is two years and I so order.”


What Might This Mean for the Directors?

Mr Whyte

The Khan case only dealt with non-payment of PAYE and NIC.


As the SFA Judicial panel under Gary Allan QC determined:-


“67. That … Mr Craig Whyte stated to Mr Olverman that non payment of the sums due was a tactic or negotiating ploy intended to improve the position of Rangers FC in any attempted negotiation with HMRC of a settlement in “the Big Tax Case”.


68. That between September 2011 and February 2012 Rangers FC withheld in excess of £13,000,000 from HMRC due in respect of PAYE income tax, National Insurance Contributions and VAT. “


Lord Hodge made clear how the law stands:-


the adoption and carrying out of a policy of non-payment of HMRC debts for a prolonged period supports a finding of unfitness other than in very exceptional circumstances. Where a company has insufficient reserves to enable it to trade except at the risk of such creditors, the adoption and carrying out of such a policy without their (HMRC) consent will almost always amount to misconduct.

As far as Mr Whyte goes therefore, ignoring any other case which might be out against him, he would seem to face a new disqualification. The sums in the Rangers case are 100 times more than the Khan case, and Mr Whyte was found by the SFA Panel to have done so deliberately. As there was less than £4 million in Rangers’ bank when D+P were appointed, then, on a simple approach, over £9 million was applied by Rangers to other creditors, wages and running costs whilst payment to HMRC was being withheld.


Dr Khan received a 2-year ban where there was no suggestion she had been directly complicit in the non-payment, but rather her misconduct was principally a failure to maintain sufficient supervision and control; she did not have sufficient knowledge of the company’s affairs and, in any event, failed to challenge an unacceptable practice.


I think Mr Whyte might face, apart from any other action there might be, a lengthy suspension for this aspect alone.


Mr McClelland and Mr Greig


As the SFA Panel found:-


“58. … after 6 May 2011, on the instructions of Mr Craig Whyte, little or no information relating to the affairs of Rangers FC was made available to Mr David King, Mr John McClelland, or Mr John Greig.


“69. That Mr John McClelland and Mr John Greig were increasingly aware of rumours surrounding Mr Craig Whyte and the affairs of Rangers FC and they became increasingly concerned about the current situation of Rangers FC and their own positions.


“71. That as a result of the discussion and the perceptions of both Mr John McClelland and Mr John Greig arising from the absence of any management accounts or financial information about Rangers FC being provided to them, the failure to convene any Board meetings and Mr McClelland’s exclusion from the offices, they both arrived at the conclusion that they were now being so marginalised and excluded from the governance of Rangers that their position as directors was untenable.”


Whilst Messrs McClelland and Greig can each, and with good cause it seems, plead ignorance of the Company’s affairs, their failure to challenge this might seem to leave them vulnerable, although only at the lowest end of the scale. However, the fact that both resigned weeks into the non-payment policy should leave them blameless for that misdeed. They were simply not directors long enough to be in position to do anything about their treatment, other than resignation.

Even the fact that by the time they had resigned the unpaid tax would have been over 10 times as much as the total in the Khan case would not of itself render them liable to disqualification on this ground.

Therefore, as far as the non-payment of tax is concerned, both gentlemen should be in the clear.

Mr McIntyre

His position is clear. Even though he resigned in October, after the start of the non-payment policy, he had been suspended since May and as a result he was in no position to take any action. Mr McIntyre will not be affected by any investigation on this issue.

Mr Betts and Mr Ellis

Mr Betts resigned as Director on 20th January 2012 to be replaced by Mr Ellis.

As Mr Ellis was only a director for lass than four weeks when administration struck, I suspect that he too would be unaffected by this issue.

However, Mr Betts was an Executive Director for several months of the operation of the policy. The best that can be said for him is that he took no steps to challenge the practice. As he has been threatened with action by the administrators for an alleged gratuitous alienation, the suggestion is that he did have an involvement in the running of the team and the purse strings. Mr Betts faces disqualification over this issue, I submit.

Mr King


Dave King remained a director until the company entered administration. As the SFA Panel found:-


“62. That during the period from 6 May 2011 until October 2011 Mr David King (Non Executive Director) who lived in South Africa, made repeated requests by email to Mr Ken Olverman for financial and other information and accounts in order to fulfil his duty as a director in the governance of Rangers FC. Mr Ken Olverman went some way to prepare the materials for Mr David King but on seeking approval from Mr Craig Whyte for the provision of the requested information to Mr David King, a director of Rangers FC, Mr Craig Whyte instructed that Mr Ken Olverman should not provide it to Mr David King. Mr Craig Whyte then assumed responsibility for communicating directly with Mr David King and did so. In email correspondence he instructed that Mr David King should not make requests for information from Mr Ken Olverman but should instead obtain any information through Mr Craig Whyte. Mr David King became deeply disturbed by the manner in which he as a director was being treated and the manner in which Rangers FC were being governed.”


Mr King was actively blocked from any involvement in Rangers by Mr Whyte. However this does not absolve him of his legal responsibilities. He may have felt that staying on board was the best way to deal with matters. He was a Director and a 10% shareholder in the company. He had the power to insist upon Board meetings taking place, and in the absence of such to take action, through the courts if need be, to force Rangers Football Club PLC to abide by the rules.


As Messrs McClelland and Greig found, there was a point to say that enough is enough and to step away.


Mr King did not do so, and therefore he faces, I suggest, similar issues to those of Dr Khan in the case mentioned above.




The Khan case shows that the last Board of Rangers Football Club PLC all face some risk of disqualification, if only for the non-payment of tax issue. As I have explained, Mr Whyte, the architect of the policy, runs the risk of a disqualification even longer than his initial one for this alone.


Mr Betts too was an Executive at the time the policy was being carried out, even if not an active participant in it.


Messrs Greig, McClelland, Ellis and McIntyre should, for the reasons mentioned above, be safe from any sanction for this issue.


Mr King will, if proceedings are taken, have to justify to the court why he stayed on board as a director and what he tried, behind the scenes, to get Mr Whyte to play ball. However, in the absence of some activity towards forcing Mr Whyte to fulfil responsibilities, Mr King runs the risk of a disqualification, if only at the bottom end of the scale.


In the Khan case, the company was placed in administration by its bank in March 2010. It took until 2012 for disqualification proceeding s to start in what seems a clear-cut case.


Vital Security went under in 1995, yet it took until 2000 for Craig Whyte to be disqualified.


As there are many factors present in the Rangers situation, and dating back some years, potentially, then if there are to be disqualification proceedings they might not take place until the next European Championships are being played. By that stage, will there be a “Rangers” at all? Will it have climbed back up from Division 3, or will it have stayed all along in the SPL? Right now, who knows!


Posted by Paul McConville


Company Directors Disqualification Act 1986 Section 6

(1) The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied—

(a) that he is or has been a director of a company which has at any time become insolvent (whether while he was a director or subsequently), and

(b) that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of any other company or companies) makes him unfit to be concerned in the management of a company.

(2) For the purposes of this section and the next, a company becomes insolvent if—

(a )the company goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up,

(b) an administration order is made in relation to the company, or

(c) an administrative receiver of the company is appointed;

and references to a person’s conduct as a director of any company or companies include, where that company or any of those companies has become insolvent, that person’s conduct in relation to any matter connected with or arising out of the insolvency of that company.

(3) In this section and section 7(2), “the court” means—

(a) where the company in question is being or has been wound up by the court, that court,

(b) where the company in question is being or has been wound up voluntarily, any court which has or (as the case may be) had jurisdiction to wind it up,

(c) where neither of the preceding paragraphs applies but an administration order has at any time been made, or an administrative receiver has at any time been appointed, in relation to the company in question, any court which has jurisdiction to wind it up.

(3A) Sections 117 and 120 of the Insolvency Act 1986 (jurisdiction) shall apply for the purposes of subsection (3) as if the references in the definitions of “registered office” to the presentation of the petition for winding up were references—

(a) in a case within paragraph (b) of that subsection, to the passing of the resolution for voluntary winding up,

(b) in a case within paragraph (c) of that subsection, to the making of the administration order or (as the case may be) the appointment of the administrative receiver.

(3B) Nothing in subsection (3) invalidates any proceedings by reason of their being taken in the wrong court; and proceedings—

(a) for or in connection with a disqualification order under this section, or

(b) in connection with a disqualification undertaking accepted under section 7,

may be retained in the court in which the proceedings were commenced, although it may not be the court in which they ought to have been commenced.

(3C) In this section and section 7, “director” includes a shadow director.

(4) Under this section the minimum period of disqualification is 2 years, and the maximum period is 15 years.




Filed under Administration, Craig Whyte's Companies, Rangers, The Company Directors Disqualification Act 1986.

12 responses to “Will Craig Whyte and Other Directors of Rangers Face Disqualification for £14,000,000 Unpaid Tax?

  1. “it is not in doubt that a director is responsible for all aspects of the business of the company and that directors collectively and individually have a continuing duty to acquire and maintain sufficient knowledge of the company’s business to enable them to discharge their duties as directors”

    What, even if they just sign things? (The RC Ogilvie defence)

  2. Araminta Moonbeam QC

    Well done for all your analysis on this matter, Paul. I know there will be more to come as this all unfolds and the forensic accountants get stuck in. As a long time reader of RTC, I am enjoying an evening of quiet satisfaction (and decent wine). Hurrah for the internet bampots.

  3. mick

    surely the police have to file charges at the end of the forensic reporting .it would not surprise me if murry and whyte end up in jail as tax ivasion is a serious crime .

  4. mick

    am intermidate but this site has helped me grasp the true reality of business in this country .also yous keep it non tecnical for all to understand well done to yous and thanks keep up the good work yous have made the whole country united agianst wrong doing hope yous are here for years …

  5. mick

    a also feel my iq has incresed although a wont be buy broad sheets lol

  6. k

    Wot’s good for the goose is good for the gander, and to keep the theme goin’ humpty dumpy sat on a wall.

  7. Richboy

    Is this the beginning of the end or the end of the beginning. It astonishes me that Rangers fans could not see that liquidation was the best way out for the footballing side of their beloved club.

    Gone now are the big and small tax cases, penalties applied due to the misdeeds of Craig Whyte, all debt, worries over any sanctions due to dual contracts etc. (although they may still have some titles and trophies stripped)

    If I was a Rangers fan I would be breathing a massive sigh of relief.

    All they have to worry about going forward is whether they will be accepted into the SPL and what sanctions will be applied. I believe that the “gang of ten” will negotiate a 50/50 split of all gate money, changes to the voting structure and an even split of TV money. In return Rangers will be allowed to play in the SPL with minimum sanctions.

    In all honesty, I do not believe, with the exception of Mr Grieg, that a single Rangers fan will give a second thought to the potential problems facing their Directors.

    PS when the liquidators move in are D&P ignominiously shown the door?

  8. Den

    Craig Whyte is a certainty to be disqualified for a long time, the rest may come in at the lower end or get off.

    Murray and Whyte exercised a lot of control and the rest will try to portray themselves as totally ignorant of all of this high finance stuff. It would be interesting if two years ago someone had the temerity to suggest to Gordon Smith or Campbell Ogilvie that they were out of their depths in their roles and ignorant of even the basics of Corporate management

    The ignorance defence shouldn’t work but it does. Even for successful people like Smith and Ogilvie who have been around in a lot of high Senior roles in Football.

    I wonder if David Murray’s role will be looked at?

  9. Pingback: Bankruptcy and Insolvency Accounting (v. 2)

  10. T Barr

    Just read the current edition of Private Eye regarding history of Mr Whyte. How is this guy been allowed to get away with all his asset stripping? And he fails to turn up to answer his shortcomings. Is he above the Law?

  11. Lleddil

    Craig Whyte lives in a castle but needs a moat to keep them out of the keep jcge

  12. Boss Hogg

    The circumstances may not be directly comparable but Mr Whyte may be nonetheless interested to learn that one Thomas Scragg has been awarded a prison sentence totalling 17 years after being found guilty of stealing millions of pounds of tax due on PAYE.

    In an article which may even generate a frisson of excitement in the nether regions of more than officer of the previous Rangers regime the august journal, The Daily Mail, reports that “Workers would be paid in cash without deductions for tax being made.”

    Perhaps Mr Billy Dodds might be asked for his legal opinion on the case. The full report may be enjoyed at :


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