In which I try to explain some details about the July 4 meeting; suggest why Rangers PLC can vote on Sevco Rangers; clarify precisely what the SPL members are considering; and what this has to do with the ongoing EBT investigation.
As matters stand, it looks as if the SPL is treating Rangers FC as an ongoing entity, which is bad news for Mr Green as it seems there are still lots of things to be done which have not been carried out yet, and the season looms ever closer.
It also leaves the possibility of chaos if Dunfermline, Dundee or both, challenge the actions of the SPL as ultra vires!
As things stand, do the SPL know what they are doing?
The SPL Board considered various issues today, including two related to Rangers.
The section of the press release relevant to the admission of “The Rangers Football Club” to the SPL is shown immediately below.
An application for registration of transfer of Rangers’ SPL share has been received. Consideration of the application will depend on receipt by the SPL Board of all required documentation and verification.
A general meeting of all 12 member clubs has been convened for 10am on Wednesday 4 July 2012 for members to decide whether to approve the transfer.
So what will happen on 4th July, who can vote, and what does Sevco 5088 Ltd need to achieve for Club 12 to be ”Rangers”?
I will refer in this piece to Rangers Football Club PLC (In Administration) as “Rangers PLC”; to Rangers Football Club, as distinct from the corporate entities, as “Rangers FC”; and to “The Rangers Football Club” and Sevco 5088 Ltd as “Sevco”. I will refer to the General Meeting as “GM”.
Can “Rangers” Vote on 4th July?
Under Article 28, every Member of the SPL has a duty to attend the General Meeting fixed for 4th July. Under Article 46, every Member shall have one vote.
A Member can cast a vote and is defined in the Articles as follows – “Member means a person who or which is the holder of a Share”.
At present Rangers PLC owns the SPL share. Rangers FC has no corporate identity allowing it to own the Share, and Sevco cannot be the owner of the Share until the transfer is approved. Even although the SPL Share has been sold by Rangers PLC to Sevco, it only is completed when the transfer of the share is approved. This is what the SPL Members are being asked to decide at the GM.
Therefore it seems that Rangers PLC, in the form of Duff & Phelps, have a vote. They can appoint Mr Green as their proxy. In addition, the sale agreement between Rangers PLC and Sevco will undoubtedly have required D&P to use its best endeavours to ensure that the share transfer was successful. Therefore Rangers PLC will vote for Sevco.
Article 6 states that a share may only be held by a person who “is the owner and operator of a Club and if a Member shall cease to be the owner and operator of a Club then such Member shall cease to be entitled to hold a Share”. The whole assets and business of Rangers have, we are told, been sold unconditionally to Sevco. Therefore this must include the “Club”. If Rangers PLC is no longer an owner and operator of a football club, then surely it loses its vote?
No, it doesn’t.
Whilst Rangers PLC is no longer entitled to hold a share, it still does hold it until it is removed or transferred away. A member is not defined as someone entitled to a share, but as someone who has a share. Therefore, even if no longer entitled to a share, until the share is no longer in the person’s ownership, they are still a shareholder and have voting rights.
Under Article 14, where a Member is no longer entitled to hold a share, the share can be removed from it and transferred to another party, effectively by force. This involves a GM of the Members passing a Qualified Resolution instructing the Board to write to the Member instructing the transfer of the share to a named transferee. That transfer causes the transferor’s club no longer to be a member of the league. If the no longer entitled Member fails to effect the transfer, then the SPL can enforce the transfer by filling out the papers itself.
That procedure will not take place prior to the vote on 4th July and therefore Rangers PLC will have the right to vote.
What Is the Vote to Decide?
Article 11 states “…the approval of the Members in General Meeting shall be required before the transfer of any Share shall be registered …”
It is the registration of the transfer which completes it. Until the transfer is registered, the original owner remains the “owner” of the share. As a Private Limited Company, the Company must consent to the transfer before it is completed. If the Company does not consent, then the transfer is ineffective.
Therefore the vote on 4th July is to approve the transfer.
As less than 21 days notice of the meeting has been given, the SPL must consider that this is simply an Ordinary Resolution, which is dealt with under Article 36. This requires “not less than 66% of the Members of the Company who are entitled to attend and vote at a General Meeting” to consent. Put in simple numbers, there need to be 8 votes in favour of the transfer. That is the case whether or not there are abstentions. An abstention is therefore a “no” vote. Failure to turn up would be a “no” vote.
Can Sevco muster an additional seven votes to have the transfer approved?
Might The Meeting Be Considering the Wrong Motion?
This relates to the question of whether there is an existing Rangers FC, or a newly created one.
If it is seen as an existing and continuing Rangers FC, then the vote on the share transfer seems to sort the matter out. Eight votes for Sevco, and Rangers are in as Club 12 for the coming season.
However, there are a couple of issues here. The SPL itself does not seem to have worked out the precise status of Rangers FC.
As its press release today said:- ”The SPL Board heard a report from its solicitors following the investigation into payments to, or for the benefit of, players allegedly made by Rangers FC outside of contract. The delay in concluding the investigation was caused by an initial lack of co-operation from Rangers FC. The investigation has now been completed and, in the view of the SPL, there is a prima facie case to answer in respect of its Rules. Disciplinary charges will be brought when the future status of Rangers FC is clarified and prior to the start of season 2012/13.”
If Rangers FC is a continuing entity, then it still possesses, subject to the SPL Disciplinary Processes, its “history”. However, if it is a continuing entity, then it also needs, under Rule A2.2, to satisfy the “Membership Criteria”. These are detailed in Article A2.5 and I wrote about them here.
It is quite clear that Rangers FC has not fulfilled the Membership Criteria, in connection with audited accounts, audited financial statements and non payment of taxes.
Under Article A2.4 where the requirements of Rule A2.7 are not met, a member club “shall be subject to such sanction or sanctions and such action may be taken as the Company in General Meeting shall, in its absolute discretion, determine”.
If Rangers FC is a continuing club, then there ought to be a hearing at a GM to establish what sanctions there should be for its failure to meet those requirements.
Under Rule A2.6 a club can apply for a waiver by 31st March, but Rule A2.7 permits the Board “in its absolute discretion to waive, relax or grant a period of grace in respect of any Club’s or Candidate Club’s requirement to comply with any part of the Membership Criteria…”
If Rangers FC is a continuing entity, then did D&P apply to the SPL for a waiver of the requirements, or for a further extension of time? Bearing in mind that the SPL commented on the lack of co-operation of Rangers FC in the EBT investigation, how helpful would the SPL be to Rangers in looking for their failings to be forgiven?
As matters stand therefore, the July 4 GM is considering the share transfer. If approved, there will still need to be a decision made about what “sanction or sanctions” should be imposed on Rangers FC for its failure to meet Membership Requirements.
The way round this is for the SPL Board to be asked by Rangers FC for a waiver. Would the Board permit a team to ignore and indeed wilfully flout the Financial Fair Play rules, bearing in mind the importance of these matters to UEFA?
What if it is not “Continuing Rangers”?
If the SPL treats Rangers FC as a new entity, this would probably negate the effects of the EBT investigation going forward. Is it simply a case of transferring the share, and automatically Sevco has a team in the SPL?
Rule A2.1 states “The association football clubs eligible to participate in the League in any Season shall … be those Clubs which participated in the League in the immediately preceding Season…“
Therefore “new Rangers” has no right to participate in the SPL, without being “admitted”. Indeed, if Rangers PLC’s team no longer exists, then there are only eleven clubs left in the SPL.
On that basis, Article 38 becomes relevant. This states, inter alia, that “A Special Qualified Resolution, (83%) shall be required for the passing of a resolution in respect of the following Reserved Matters:-
(i) any expansion of the League by the addition or admission of new Members (other than as a result of the operation of the Rules governing promotion/relegation between the League and the SFL).”
Logically the “addition or admission” of a new Member, which is what Rangers would be if not a continuing Member, would expand the SPL from its present eleven members to twelve.
That would require an 83% vote in favour. That equates to 10 votes out of 12 to allow “new Rangers” into the league. Bizarrely Rangers PLC would still have its vote, as the holder of a share!
If that is the case, has Sevco fulfilled the Membership Requirements? It does not have historical accounts. It does not have financial statements. It might have financial projections, but of what value?
It is by now axiomatic that nothing involving Rangers is simple, and I don’t think that this is simply because I complicate matters.
If the SPL has decided to proceed down the road of “only” requiring a share transfer, that is an acknowledgement that Rangers FC continues. However, all the Membership Requirements are still to be addressed, either by applying for a waiver or further time extension. Can that be carried out in time for the season starting? Bearing in mind that the SPL has said that disciplinary procedures will start prior to next season, once the position of Rangers is clarified, it would be possible that, having been admitted by the SPL, Rangers FC would be eliminated as part of the disciplinary process.
If Sevco Rangers is treated as a new entity, then I think that either Dunfermline or Dundee, or indeed both, would have grounds for action against the SPL. This would be on the basis that the SPL was not following its rules. There might then be an argument about which team was to replace Rangers, but the SPL could be putting itself in difficulties. Either of the clubs mentioned would, I submit, not fall foul of rules against football litigation, on the basis that they have no other forum for arguing that a decision to admit a Sevco Rangers would be ultra vires.
The dangers is that vested interests will argue that only “Rangers” whatever that entity might be, is set up to play in the SPL next season. That would be a lame excuse though.
Roll on the 4th July!
Posted by Paul McConville
RELEVANT SPL RULES AND ARTICLES
Article 6 -“A Share may only be issued, allotted, transferred to or held by a person who is the owner and operator of a Club and if a Member shall cease to be the owner and operator of a Club then such Member shall cease to be entitled to hold a Share.”
Article 11 -“Except where the transfer of a Share is occasioned by the promotion of an association football club from and relegation of a Club to the SFL, the approval of the Members in General Meeting shall be required before the transfer of any Share shall be registered and the Members may, in their absolute discretion, refuse to approve the registration of the transfer of any such Share.”
Article 13(1) -“The Members shall refuse to approve the registration of the transfer of a Share:- (i) to a person who the Board is not satisfied is or, at the time that the transferee will be entered in the Company’s Register of Members as the holder of the Share, will be the owner and operator of a Club;”
Article 14 -“If:-
(i) a Member shall cease to be entitled to hold a Share; or
(ii) a trustee in sequestration, manager, receiver or administrative receiver shall be appointed in respect of a Member or any property of a Member, or an administration order shall be made in respect of a Member or any property of a Member or an order shall be made or an effective resolution passed for the winding up of a Member otherwise than for the purpose of reconstruction or amalgamation;
then that Member or its manager, receiver, administrative receiver, administrator or liquidator or any other person entitled to the Share shall, on receiving notice in writing from the Board following the Company in General Meeting passing a Qualified Resolution that such notice should be issued by the Board and confirming the identity of the proposed transferee, transfer its Share to such other person as the Board shall direct at the price of £1 and the Club owned and operated by such Member shall forthwith cease to be a member of the League and the Club owned and operated by the transferee shall become a member of the League in its place.”
Article 17 -“Whenever a requirement to transfer a Share shall arise, if the relevant Member shall fail to transfer its Share within seven (7) days of notice having been given of the requirement to transfer, the Board may authorise any Director of the Company to execute a transfer thereof and a transfer so executed shall be valid and effective as if the same had been executed by the Member concerned and the transferee shall on payment of the sum of £1 to the Secretary to be held in trust for the transferor be entered in the register of Members as the holder of such Share.”
Article 19 -“If the Members refuse to approve the registration of the transfer of a Share, the Board shall after such refusal send to the transferor and transferee notice of the refusal.”
Article 25 – “A General Meeting called for the passing of a special resolution, Qualified Resolution or Special Qualified Resolution shall be called by at least twenty-one (21) clear days’ notice. All other General Meetings (including any General Meeting at which a resolution in respect of a Reserved Matter for which a Qualified Resolution or Special Qualified Resolution is not required) shall be called by at least fourteen (14) clear days’ notice…”
Article 28 – “Without prejudice to the provisions of Article 30, every Member shall attend (whether in person, by proxy or by duly authorised representative in accordance with these Articles) at every General Meeting.”
Article 36 – “Except … as otherwise provided in these Articles, not less than 66% of the Members of the Company who are entitled to attend and vote at a General Meeting of which notice has been duly given (whether all the Members of the Company actually attend and vote or not) shall be required for the passing of all Ordinary Resolutions of the Company and for the giving of all consents, approvals or the like considered at a General Meeting.”
Article 38 – “A Special Qualified Resolution, (83%) shall be required for the passing of a resolution in respect of the following Reserved Matters:-
(i) any expansion of the League by the addition or admission of new Members (other than as a result of the operation of the Rules governing promotion/relegation between the League and the SFL);
(ii) any reduction in the number of Members of the Scottish Premier League (other than as a result of a Member ceasing to be a Member of the Scottish Premier League in accordance with the Rules and/or these Articles or as a consequence of the expulsion of a Member); and,
(iii) the allotment and the issue of a Share.”
Article 46 – “Subject to any rights or restrictions attached to any Shares, every Member present by a representative or proxy shall have one vote whether on a show of hands or on a poll. The Chairman shall not have a second or casting vote.”
Rule A2.1 – “The League shall consist of 12 leading association football clubs in Scotland. The association football clubs eligible to participate in the League in any Season shall, subject to the Articles of Association and Rules, be those Clubs which participated in the League in the immediately preceding Season, except that, subject to Rules A2.2, A2.3 and A2.4, the Club finishing in last place in the League in the immediately preceding Season shall not be eligible to participate in the League and shall be relegated to the SFL and the Candidate Club shall be promoted from the SFL and admitted entry to the League.”
Rule A2.2 – “Subject to Rule A2.7, the Candidate Club for any Season, if it is to be promoted from the SFL and admitted entry to the League, and the Clubs participating in the League, must satisfy the Membership Criteria.”
Rule A2.4 – “In the event that any Club, in the opinion of the Board in its absolute discretion, shall or if it were to participate in the League in any Season would, fail to fully comply with the Membership Criteria and no waiver, relaxation or period of grace is or has been granted to that Club in terms of Rule A2.7, such Club shall be subject to such sanction or sanctions and such action may be taken as the Company in General Meeting shall, in its absolute discretion, determine.”
Rule A2.5 – “The Membership Criteria are:-
A2.5.1 A Club participating in the League must be a member of the SFA.
A2.5.2 A Club participating in the League must have registered or be deemed to have registered its ground in accordance with Rule H6.1.
A2.5.3 A Club participating in the League must:-
A188.8.131.52 itself, or through a subsidiary or holding company of such Club, own its Registered Ground; or
A184.108.40.206 have such other rights of occupation or tenure in its Registered Ground as may be approved by the Board.
A2.5.4 Any ground which a Club or the Candidate Club registers or is deemed to have registered as its Registered Ground, must, by not later than 31st March preceding any Season and for the whole of that Season:-
A220.127.116.11 subject to Rule H6.8, have satisfied and satisfy the Stadia Handbook requirements for a Club taking part in the League;
A18.104.22.168 have provided and provide individually numbered seats in areas under cover of a roof for not less than 6,000 spectators; and,
A22.214.171.124 have had and have adequate winter pitch protection, as provided in Rule H6.7,
A2.5.5 Clubs shall take all steps determined necessary by the Board to implement the development of youth football in Scotland in line with the requirements, philosophy and recommendations of the Company.
A2.5.6 Where a Club or the Candidate Club registers or is deemed to have registered as its Registered Ground for any Season a ground at which it is intended to play League Matches on a pitch utilising a synthetic or artificial playing surface then such Club or Candidate Club must have made an application to the Board in accordance with Rule B23.1.3 by not later than 31st March and must have been granted an approval by the Board in terms of that Rule by not later than 1st June, both preceding such Season.
A2.5.7 Clubs and the Candidate Club shall from and including 1 January 2010 comply with the Financial Disclosure Requirements.”
Rule A2.6 – “Any application for approval for the purposes of Rule A126.96.36.199 or application for a waiver, relaxation or period of grace for the purposes of Rule A2.7, must be made in writing to the Secretary not later than 31st March preceding any Season or, as the case may be, first Season, in relation to which the ground for which such approval, waiver, relaxation or, as the case may be, period of grace is sought, is to be registered or deemed to be registered in accordance with Rule H6.1, as the Registered Ground of the Club or Candidate Club concerned.”
Rule A2.7 – “The Board may in its absolute discretion waive, relax or grant a period of grace in respect of any Club’s or Candidate Club’s requirement to comply with any part of the Membership Criteria and/or Rules A2.6 and H6.1.”
Rule A4 – “The owner and operator of a Club participating in the League shall become a member of the Company by acquiring one Ordinary Share therein at par for cash, such Ordinary Share to be acquired, through the Secretary, in accordance with the provisions of the Articles of Association. The owner and operator of a Club ceasing to be entitled to play in the League shall cease to be a member of the Company and shall relinquish its Ordinary Share at the end of the relevant Season in accordance with the Articles of Association.”