I had partly written the post below but had laid it aside to do other things. Therefore yesterday’s news, which leads the post now, encouraged me to tidy it up and finish it off. For the avoidance of doubt, I am not suggesting that Mr Green or his associates are doing anything underhand or inappropriate. However, the stance seems to re-emphasise the Schrodinger’s Cat like qualities of the Rangers Football Club “entity”.
I wonder about the issue of the corporate entity v club idea, and suggest a scenario for Rangers fans to consider in the event that they choose to invest in the “corporate entity”.
The new owner of Rangers Football Club is close to appointing advisers to kick off a swift return to the London stock market.
I understand that the consortium led by Charles Green, which took control of the Scottish outfit in a cut-price £5.5m deal to acquire its assets in June, is poised to hire Cenkos Securities, the broking firm, to handle the flotation. Cenkos is one of a number of brokers which have held talks with Mr Green’s consortium in recent weeks, and it remains possible that another firm will be appointed if an agreement cannot be reached, according to insiders.
The listing is likely to see the newly-reconstituted Rangers … listed on the junior AIM market before the end of the year. People close to the situation said that it could seek to raise as much as £20m, part of which is likely to be used to fund the acquisitions of new players.
Details of how supporters and investors will be able to acquire shares in the company, called The Rangers Football Club, will not be available for several weeks, insiders say.
Since the deal Mr Green, a former chief executive of Sheffield United, has struck a merchandising joint venture with Mike Ashley, the tycoon who owns Newcastle United and who may acquire a stake in Rangers as part of a stock market listing.
Mr Green believes that despite its recent travails, Rangers has considerable international potential as a sporting and leisure brand.
If Rangers successfully floats with a valuation of around £30m, that could augur well for the prospective valuation of the club’s ‘Old Firm’ rivals, Celtic, which is also listed on AIM.
The club declined to comment.
“The Rangers Football Club Limited confirmed today the appointment of Cenkos Securities to assist with plans to raise additional capital for the Club.
Chief Executive Charles Green said: “From the day the consortium I led became owners of Rangers we have repeatedly stated our intention to raise additional capital for the Club and would explore all avenues, which may or may not include a stock market listing.
“We are pleased to announce that we have now appointed Cenkos Securities to assist with our plans. We are still in the preliminary stages of this process and will make further announcements once the Club has been able to consider its plans in further detail.”
RANGERS chief executive Charles Green revealed last night he hoped to unveil his plans to float the club on the stock market “in the next couple of weeks”.
He expressed confidence that, in spite of delays during the summer in securing Scottish Football Association membership for the newco Rangers, the flotation would be “done before the end of this year”. If his plans for a swift flotation come to fruition, Rangers will join the stock market as a Scottish Third Division club.
Mr Green told The Herald: “We have obviously lost a few weeks because, until we got admitted to the [Scottish] FA and got admitted to the league, we wouldn’t have been sure what we were floating on the stock market.
“We are now members of both. We are hoping to announce what our plans [are] in the next couple of weeks, which are on track for it being done before the end of this year.” Mr Green voiced his flotation hopes as he unveiled a major merchandising joint venture with billionaire Newcastle United owner Mike Ashley’s Sports Direct retail chain.
As he says he was not sure what he was going to be floating on the market. As he says, “we are now members of both (SFL and SFA)”.
Therefore what he is looking to do is to float Rangers Football Club, selling shares to the fans who will be encouraged to take ownership of their football team. In addition, he plans to limit the largest shareholdings, so that one man, in the manner of Murray and Whyte, can control the club in the future.
For the past two months the board of the RST, in partnership with other members of the Rangers Family, have been working on a Community Share Scheme.
The Community Share Scheme is designed to bring about a significant stake in Rangers FC by way of investing in the club as a collective and helping to secure the club’s long-term future.
Because of the size of the task involved, we sought out help from our members and the wider Rangers support. We were delighted by the response and the calibre of individuals that have got involved.
Supporters Direct, the governing body for supporters trusts in the UK, have also supported the process through their network of resources.
Ian Davidson MP’s involvement to date has been to, very helpfully, broker a meeting with the club.
Paul Goodwin (SD), Ian Davidson MP and Chris Graham (Chris has been helping to co-ordinate the project) all attended a meeting with Mr Green and Mr Stockbridge recently to discuss the concepts of fan investment and involvement in the club. Mr Green and Mr Stockbridge were very receptive to these concepts.
The content of this meeting and previous discussions has been communicated to The Rangers Supporters Assembly and Rangers Supporters Association in order to hopefully achieve widespread backing for the project. The groups will reconvene after consultation.
Despite all the troubles of the past six months, the Rangers Family will hopefully soon have an opportunity to invest in, and have a real say in the future of, the club we all love. The Trust Board will further update members if and when the project is ready to launch.”
The fans will be given their chance to invest in “the club”.
I am confused.
The fans are getting the chance to invest in a company formed in May 2012. Repeated arguments have come from Rangers supporters, with which arguments I have some sympathy, that the club and the “corporate entity” which happens to own the club from time to time are two completely different things. Therefore the administration and soon to be liquidation of the company which has been the “operator” (to use a neutral word) of Rangers since 1899 did not affect the continuity of the team, as the company and the club are not synonymous.
As John D C Gow wrote on the Rangers Standard blog after the failure to carry the CVA:-
Liquidation it is then. No CVA, means no more The Rangers FC. The club is dead and you better get used to it. I’m paraphrasing, but this is what we’ve been told to accept.
Yet it’s rubbish.
True, there will be liquidation of the company but the football club will survive. The Rangers FC will continue to be a football team that was founded in 1872 by the ‘Gallant Pioneers’. Nothing except a time machine can change that. In any case, the Rangers club ‘share’ held by the football authorities will probably be transferred over to the new company, thereby guaranteeing the football history remains intact.
Of course, as it turned out, the Rangers club share was not transferred, but that would not persuade Mr Gow that the history remained with the share, I am sure. Nevertheless, fans of the Rangers FC claim that the club is continuing, and can date its history back 140 years. However, all of the debt is left abandoned in the books of oldco. Newco saved the “club” by buying the assets of oldco.
Paul Clark, joint administrator, said today: “We have been informed by HMRC they will not support the proposal for a Company Voluntary Arrangement at the meeting of creditors on Thursday, June 14.
“As a result of this decision, the Sale and Purchase Agreement in place with the consortium led by Charles Green will take effect and Rangers Football Club will continue within a new company structure.
“HMRC has taken the view that the public interest will be better served with the liquidation of The Rangers Football Club plc as a corporate entity. The Club will continue to operate as it has always done but within a new company structure.
“The consequence of the rejection of a CVA outcome is that sanctions will be applied to the Club by UEFA and that the Club will not be able to participate in Europe for three years and the new company will need the consent of the other SPL clubs to the transfer of the share in the SPL, in order for Rangers to continue playing in the SPL.
“As we have stated previously, there is a binding contract between ourselves as administrators and Charles Green, who is leading a consortium to acquire the Club.
“As soon as the CVA proposal is formally rejected, Mr Green’s consortium will move towards completion of an acquisition of the business and assets of The Rangers Football Club plc. That transaction will be completed within a few days. The sum payable to creditors will be £5.5 million, most of which has already been paid over to us by the Green consortium.
“We would like to thank the staff and supporters at Rangers for their great determination and professionalism during a very difficult period for the Club. While the Club will continue to face difficulties in the short term, it will survive and continue to play at Ibrox.”
I think I understand what Mr Clark was saying. The club and the company are different things. It just happens that one was inside the other, rather like Russian dolls?
Even though the company was in administration and headed to liquidation, this did not matter because it has a separate identify and existence. Then, Now, Forever, as the slogan puts it.
I looked before at the Scottish football definition of a football club. It does not really extend beyond “a club that plays football”! There is no clear definition to satisfy the proponents of each view.
However UEFA do have a definition, and this is contained within the Financial Fair Play Regulations.
A “Licence applicant” is defined as:-
Legal entity fully and solely responsible for the football team participating in national and international club competitions which applies for a licence.
We then come to “Chapter 2: Licence Applicant and Licence”.
Article 12 – Definition of licence applicant
1 A licence applicant may only be a football club, i.e. a legal entity fully responsible for a football team participating in national and international competitions which either:
a) is a registered member of a UEFA member association and/or its affiliated league (hereinafter: registered member); or
b) has a contractual relationship with a registered member (hereinafter: football company).
2 The membership and the contractual relationship (if any) must have lasted – at the start of the licence season – for at least three consecutive years. Any alteration to the club’s legal form or company structure (including, for example, changing its headquarters, name or club colours, or transferring stakeholdings between different clubs) during this period in order to facilitate its qualification on sporting merit and/or its receipt of a licence to the detriment of the integrity of a competition is deemed as an interruption of membership or contractual relationship (if any) within the meaning of this provision.
Finally we have a definition of a football club!
- a legal entity
- fully responsible for a football team
- participating in national and international competitions
- a registered member of a UEFA member association and/or its affiliated league or
- has a contractual relationship with a registered member.
A company is a legal entity. An ethereal “spirit” of a football club is not.
By the UEFA definition therefore Rangers Football Club PLC, now RFC 2012 PLC (oldco) was the legal entity [a company] responsible for a football team [Rangers] participating in national and international competitions and which was a registered member of the SFA.
Oldco was a football club until 14th June at which time it sold all of the assets and business to Sevco. As the August report by the Administrators says:-
The sale of the business and certain assets included the sale of the Company’s right, title and interest in its SPL share and SFA membership. Following the sale of these assets, the sale of Ibrox and Murray Park and the transfer of the Playing Staff to Newco the Company was no longer in a position to meet the criteria for membership of any of the Football Authorities and therefore no longer operates a Football club.
What about “Rangers”, the football team?
It is not a legal entity.
It might be argued that it fulfils the remaining criteria, but it fails to get over the first hurdle. It is not a legal entity.
Now we have the Rangers Football Club Ltd, formerly Sevco Scotland Ltd or newco.
It fulfils the definition above too, at least now, as it is a legal entity responsible for a football team.
However, it was not a member of the SFA until 3rd August. Therefore newco was not a football club within the UEFA definition until then.
The question arising from this definition is how the football team, Rangers, operated by a football club, oldco, can still be the same team now operated by a different club, newco, where there was a hiatus of almost two months during which time there was no “football club” responsible for Rangers!
Article 12(2) helps I think.
- The membership must have lasted – at the start of the licence season – for at least three consecutive years.
- Any alteration to the club’s legal form
- or company structure (including, for example, changing its headquarters, name or club colours, or transferring stakeholdings between different clubs)
- during this period in order to facilitate its qualification on sporting merit and/or its receipt of a licence
- to the detriment of the integrity of a competition
- is deemed as an interruption of membership or contractual relationship (if any) within the meaning of this provision.
The Article gives the circumstances where a change in a club means there is a continuation of it for footballing purposes, even though the same changes prevent a licence to play European football being acquired.
Was there an alteration to the club’s form? No, unless administration and liquidation, the latter of course occurring when oldco is no longer a football club, count as an alteration to the club’s form.
Was there an alteration to the company structure? Helpfully UEFA give us some examples of changes to a company structure. They are “changing its headquarters, name or club colours, or transferring stakeholdings between different clubs”. This list could be described as illustrative, not exhaustive. The only one remotely applicable is the transferring stakeholdings between different clubs. We did not have that here either, as there was no transfer of “stakeholding” and even if there was, it was from a football club (oldco on 14tyh June) to a company which did not become a football club until August.
But, let us return to the argument by Rangers fans to the effect that the team, or club, is different from the corporate entity. That the memories and experiences of the fans, and the sight and sound of trophies being lifted and great matches being won by great players is what makes up the essence of the club, not corporate paperwork at Companies House. As I mentioned, I have sympathy to some extent for that view.
There is a problem though, emphasised by the comments further up the page.
Rangers supporters, and others such as Tom English on Twitter, are keen to make the following point. They make much of saying that fans of Celtic (and I should add a great many others too) think that Rangers ceased to exist as a result of the financial shenanigans which are well known. The belief that the history of old Rangers still exists, subject to any disciplinary decision the SPL Independent Committee might make, but the new Rangers has started with a clean slate is ridiculed. The comment is made that, if people think old Rangers no longer exists, why do they want new Rangers punished for what the old did.
That, for now, ignores the fact that newco has, as a condition of entry, accepted responsibility for the sins of oldco.
The people who hold the above view are criticised for apparently holding two diametrically opposed opinions on the same issue simultaneously.
Look though at the argument, as detailed above, that the corporate entity and the club are not the same.
Now look at Mr Green drumming up business for his share issue. As he said, “until we got admitted to the [Scottish] FA and got admitted to the league, we wouldn’t have been sure what we were floating on the stock market.” I assume he meant that he did not know if he was floating an SPL, SFL1 or SFL3 team.
If the argument about the separate nature of the club is accepted, then what the fans are being invited to buy into is NOT the club. Instead it is the holding company, or corporate structure, which holds the club, as in the Russian doll example.
The logic of that position, when applied to ownership, is that no one “owns” the club, but the shareholders of the company own the corporate structure containing the club. In this analysis, the suggestion that it is the fans that constitute the club in fact has greater resonance.
Mr Green however is advertising the club for sale.
The RST statement said the plan was, “to bring about a significant stake in Rangers FC by way of investing in the club as a collective and helping to secure the club’s long-term future.”
It added, “Despite all the troubles of the past six months, the Rangers Family will hopefully soon have an opportunity to invest in, and have a real say in the future of, the club we all love.”
So again the sale is of shares in the club, not the corporate structure.
Can’t they just make up their minds?
If Rangers FC is a still existing, and never ending entity, standing apart from the legal make up of the corporate owner, then keen fans and investors can never own anything of the club legally, although they can give money to Mr Green for the privilege of having him run the company.
The “official” Rangers view came from Andrew Dickson on the Rangers website. He used the “Kit-Kat” analogy.
He said, in part, the following:-
Factually, it’s the Rangers supporters who are correct in the debate over whether it is a new club or not. It’s not, even if it is owned by a new company.
That was confirmed when the Light Blues’ assets – the stadium, training ground, car park, staff and players – were transferred from the old business in June. Also moving from one to the other was Gers’ history, thus ensuring it continues seamlessly under the latest parent firm and doesn’t grind to an abrupt halt.
The SFA’s granting of a transfer of membership to the new company – rather than the issuing of a new one entirely – highlights too that the club itself carries on as before.
Last night’s wonderful, vociferous support of 38,160 – mostly Gers fans – will agree. They were there to cheer on the side they’ve always backed, not a new entity yet to win something.
Nowadays, in corporate terms at least, the team you all know and love is called The Rangers Football Club thanks to its parent company’s recent name change from Sevco Scotland Ltd. On a day-to-day basis, and especially when it plays, it is known simply as Rangers, just as Heart of Midlothian plc is known as Hearts, should you require an alternative example.
The team still plays at the home it has occupied for more than 110 years with Ally McCoist carrying on as manager like he has done for the last 13 months or so. It has the same club crest and even the same strip as the one worn in last season’s friendly at Linfield, when Rangers Football Club was owned by The Rangers Football Club plc.
Plain and simple, it is the same club.
A Kit Kat was still a Kit Kat when Rowntree’s was bought over by Nestle and production of the chocolate bar continued. It used the same ingredients and tasted exactly the same, thus nobody talked of it as a new product. In effect, the same thought process applies to the Rangers case. I still enjoy Kit Kats the way I did when I first tasted one as a child and they were made by Rowntree’s.
An interesting analogy by Mr Dickson, but flawed, I think.
The Kit Kat is the product. I think Ibrox fans would be upset to see the team they love described as a “product”.
You can buy a Kit Kat. However, no matter how many Kit Kats one buys, Nestle still manufacture them, and if they decide to stop production, or cover them in cheese rather than chocolate, or sell them for twenty pounds each, all the “consumer” can do is refuse to purchase the new version.
Kit Kat Then, Now and Forever only works if Nestle keep the recipe the same and sell it in the same way. The only people who decide that are Nestle because they own the brand.
The emphasis by the supporters that Rangers = the club and not the company makes the process of flotation very interesting. If we accept the argument that Rangers Football Club Ltd happens to be the corporate entity within which the club rests just now, that means that the assets and business of the club can be sold, in the same way as the administrators sold them to Sevco.
The problem is as follows. If Mr Green floats the company on the Stock Market, then the eager fans will be buying shares in the company. If the Board of Directors decide that they can make a profit by selling the assets and business to someone else, then the shareholders will still own shares in the corporate entity, but not the club.
The following speculation is plausible. What can the fans do to stop it if it transpires?
Let’s imagine we are almost a year on from now. It is August 2013. A successful flotation has taken place. The fans own 49% of the shares, with the majority owned by the financial backers and investors. League reconstruction means that Rangers FC (which I use to refer to the team playing football) is starting off in SPL2. I suggest the following possible scenario.
1 Sevco own the assets and business of Rangers Football Club. (I am using the former name “Sevco” in this illustration to avoid confusion caused by a multiplicity of “Rangers”.)
2 The assets and business include the land at Ibrox and Murray Park.
3 Sevco is majority owned and run by businessmen who are not in the game for the love of football or Rangers, but for profit (which is perfectly legitimate).
4 An astute investor, with a substantial and successful football background, or else a person like Mark Goldberg, dazzled by the prospects of fame, and possibly fortune, decides to buy the team. We will call this person Mr X.
5 Sevco, being smart people, realise that there are many costs involved in running a team, and buying players to satisfy fans’ desire for progression. However, there is a value on owning property, especially where there would be a tied tenant.
6 Sevco sell the “assets and business” of Rangers FC, excluding Ibrox and Murray Park to Mr X. Mr X enters a long term lease with Sevco paying substantial rents. However, Mr X has acquired all of the players, history, goodwill etc of Rangers FC.
7 Sevco sells off the land at Murray Park for development.
8 Especially if the shares issued in the flotation are of a different class, with different rights to dividends, as is the case with Manchester United, the Sevco owners, and Founder Investors, reap the benefits of substantial dividend payments, with greatly reduced costs.
9 Mr X now owns the assets and business of Rangers FC, excluding Ibrox. The Rangers fans who purchased shares in the corporate entity are left owning a share in the company which rents Ibrox to Mr X. They can no longer have a financial interest in Rangers FC.
10 Mr X could then decide, in a year or two, to float his company which acquired the assets and business of Rangers FC. He would sell the shares to the fans as being an overseer of the club who would not sell off the business, and would respect the fans’ ownership.
11 And so the great circle of life turns again…
I am not suggesting that this is the plan. However, if it was, how can the minority shareholders stop it? This would not be an acquisition of the shares in Sevco by Mr X where he would need to achieve consent of the shareholders to sell to him, but sale of the assets and business, which, as we have seen, allows the club to continue, “then, now and forever.”
You might ask why anyone would buy a team and not buy the ground. The reason I mentioned Mark Goldberg is because he did precisely that. He bought Crystal Palace from Ron Noades in the late 1990’s for £25 million. Mr Noades retained ownership of Selhurst Park. Mr Goldberg lost his fortune and was bankrupted.
My question then is this, for any reader, but especially for Rangers supporters who would consider investing their hard-earned cash in shares in “their club”.
What are you buying, if the “heart and soul” of the club can be sold by the “corporate entity”, and there is nothing you can do to stop it?
Posted by Paul McConville