The number of talking points arising from Mr Green’s proclamation earlier this week means I have not been able to finish my all-encompassing analysis. Instead I am putting up comments on parts of the statement.
Today’s deals with the following words by Mr Green:-
“To make it crystal clear, the new owners purchased all the business and assets of Rangers, including titles and trophies.
“Any attempt to undermine or diminish the value of those assets will be met with the stiffest resistance, including legal recourse.”
Charles Green, CEO of the Rangers FC Ltd
Let us remind ourselves what these assets consisted of, shall we?
|The SPL Share||
|The SFA Membership||
|Player Contracts & Registrations||
|Subsidiary Companies Share Capital||
|Plant & Machinery||
Now, as is well known, the value of something is not necessarily what someone pays for it. Assets too can appreciate, whether by change of circumstances, supply and demand, or some work being done to improve the value.
Here we have the collection of assets of Rangers FC, purchased by Sevco (used to refer to newco and not as a disparaging term, for the avoidance of doubt) for the grand total of £5,500,000. Mr Green, as a wise and prudent, though not always 100% successful businessman, wants to protect his assets.
Therefore he threatens the SPL, and indeed anyone else, to take their figurative tanks off his lawn. He will take action to prevent diminution of value of his assets.
He says this in the context of the SPL Independent Commission, and the calls not to strip titles from Rangers. One would think that these assets, being the titles, history and the rest, were worth huge sums, especially considering the extent to which the Rangers supporters go on about the issue, and the unfairness of it.
So how much did Sevco pay for these assets, which Mr Green will defend with the utmost vigour?
He might be talking about the players, but he is already having that fight over the players who “walked away” thus depriving Sevco of many millions of pounds Mr Green thought they were due (and for which they paid the grand total of just under £2.75 million.)
Nor is anyone taking about attacking the value of Murray Park, the Albion Car Park and Ibrox Stadium itself (bought for a grand total of £1.5 million.)
No one is seeking to attack or diminish the value of the Plant and Machinery either.
So we are left with Goodwill, the SPL share, the SFA membership, Leasehold Interests, Stock and Subsidiary Companies Share Capital.
In this liquorice allsorts collection is found the “history” of Rangers, the world-record breaking titles and honours, the trophies, as well as the trademarks and intellectual property comprised in the Rangers name, symbols, logos and the rest. Indeed this package of assets also included the money due to Rangers FC as SPL prize money – a sum in excess of £2 million!
Let’s ignore that for now, as it is patently ridiculous that in an open and above board sale of assets the price paid for the assets would be 0.0005% of the cash value of one of the assets, said cash being due and payable within two or at most three months of the purchase.
So how much was paid for these assets which, according to Mr Green, there is this clamour to devalue?
Yes – ten of your British pounds.
So if someone is seeking to diminish the value of the goods, or even eliminate it, then we are looking at a very Small Claim indeed!
However Mr Green clearly does not believe that these assets are worth only Ten Pounds. He believes that they are worth millions, and indeed when they are all taken into account, they undoubtedly are. If Mr Green pulls off a fantastic business deal whereby he buys millions of pounds of assets, for the price of two Broxi Burgers, then he can only be entitled to acclaim and praise, can’t he?
Well, that is the normal situation, and, as long as there is nothing nefarious or underhand, and there is no such suggestion here, the courts would not intervene to protect a business from a bad deal.
However, this was not the normal situation. The sale was carried out by Duff & Phelps, administrators of Rangers FC PC (as it then was). Their primary responsibility was to the creditors. Quite how the sale of millions of pounds of assets for TEN POUNDS satisfies that obligation I do not know, but I am not wise in these matters clearly.
For now I am ignoring the issue of the heritable assets, valued in the last accounts at over £100 million, and sold, unencumbered by debt, for £1.5 million!
Why is this of importance?
We come back to the phrase “gratuitous alienation”. A liquidator, as BDO will soon become in relation to oldco, can challenge any transfer of the assets of the now liquidate company. It is then for the purchaser to establish that the sale was for “adequate consideration”.
Section 242 of the Insolvency Act 1986 reads:-
(1) Where this subsection applies and—
(a) the winding up of a company has commenced, an alienation by the company is challengeable by —
(ii) the liquidator; …
(2) Subsection (1) applies where—
(a) by the alienation … any part of the company’s property is transferred or any claim or right of the company is discharged or renounced…
(4) On a challenge being brought under subsection (1), the court shall grant decree of reduction or for such restoration of property to the company’s assets or other redress as may be appropriate; but the court shall not grant such a decree if the person seeking to uphold the alienation establishes—
(a) that immediately, or at any other time, after the alienation the company’s assets were greater than its liabilities, or
(b) that the alienation was made for adequate consideration …
Provided that this subsection is without prejudice to any right or interest acquired in good faith and for value from or through the transferee in the alienation.
In Lafferty Construction Ltd v McCombe 1994 S.L.T. 858 Lord Cullen considered the application of Section 242.
“In considering whether alienation was made for “adequate consideration”, I do not take the view that it is necessary for the defender to establish that the consideration for the alienation was the best which could have been obtained in the circumstances. On the other hand the expression “adequate” implies the application of an objective standpoint. The consideration should be not less than would reasonably be expected in the circumstances, assuming that persons in the position of the parties were acting in good faith and at arms length from each other. In the present case the defender, apart from the bare statement that adequate consideration was given for the payment and delivery has made no attempt to place any quantification, however broad, against any of the possible considerations. …
As I have already noted the defender’s argument was that it was enough for her to rely on the fact that the parties acted at arms length and that there was no suggestion of fraud, dishonesty or connivance. I observe in passing that the defender’s pleadings do not in terms rely on these matters. However, the more fundamental objection to this approach is that it seems to me to fail to address the need to establish that the consideration was, in an objective sense, adequate. The defender’s averments, if proved, would in my view not be sufficient to enable the court to determine that the payment and delivery were for adequate consideration.”
Previously Mr Ahmad, the director of Sevco, said that, on a bad day, the company was worth £50 million.
Now we have the CEO threatening hell, fore and damnation on anyone seeking to reduce the value of the assets.
What response is Mr Green going to give when BDO write to Green’s company asking for return of the assets, or for Sevco to pay “adequate consideration” to retain them? It seems hard to see how he can proclaim, on one hand, the value of the assets, whilst on the other state that an “adequate” price was paid.
And, in the event that the liquidators take the matter to court, it is not for BDO to show that the price paid was inadequate, but for Sevco to show that it was. As matters stand the first two witnesses for the liquidators will be Mr Green and Mr Ahmad!
So the choice for Mr Green is quite simple – either ten pounds was an adequate price for all these assets, or they are worth millions more, and Sevco needs to pay the liquidators an “adequate” price for them. Mr Green – what’s it going to be?
Posted by Paul McConville