Many thanks to mick who reminded me of a very interesting snippet reported on STV.tv on 27th June, which I had previously discussed here.
“A spokesman for Rangers confirmed that there had been a transfer of assets between one newco and a second separate newco. He told STV: “For the avoidance of doubt, Sevco 5088 Limited bought the assets of the Rangers Football Club and then transferred them to Sevco Scotland Limited so that all the assets would be in the Scottish registered company that is Rangers FC.”
The Rangers CVA Proposal defined “Sevco” in the following terms in paragraph 4.17:-
“ … an offer was made by Sevco 5088 Limited (Sevco) …”
Para 4.19 stated:-
“Consequently, on 12 May 2012, the Joint Administrators agreed and signed an offer letter with Sevco (the Offer Letter) and granted Sevco exclusivity to complete a takeover of the Company or a purchase of the Company‘s business and assets by 30 July 2012. Sevco made a payment of £200,000 to the Company for such exclusivity.”
Para 4.23 stated:-
“In the event that either this CVA is not approved, or the other Conditions of the loan are not satisfied or waived by 23 July 2012, Sevco is contractually obliged to purchase the business and assets of the Company for £5,500,000 by 30 July 2012. All further terms of that sale have been agreed in advance and are confidential.”
So, it was all nice and simple. Sevco 5088 Ltd was to acquire the assets of Rangers Football Club PLC (RFC) from the administrators. The assets though ended up in the hands of Sevco Scotland Ltd, a separate company. As far as the title to the land goes, it is common for missives to be concluded in the name of the purchaser or its nominees, and therefore Sevco 5088 Ltd could acquire the assets and instruct the seller to transfer title to Sevco Scotland Ltd.
It seemed the issue had been resolved and clarified.
However, a look back at what Duff & Phelps later said is enlightening.
In their Report to Creditors in July Duff Phelps Report July 2012, Sevco is defined as follows:-
“Sevco Scotland Limited of Ibrox Stadium, Glasgow G51 2XD (Company number SC425159)”
The Report goes on to say, at para 4.1:-
“The Club continued to trade under the control of the Joint Administrators up to the date of the sale of the business and assets of the Company to Sevco on 14 June 2012. During this period, the Club was able to complete all of its remaining SPL fixtures and achieved second place in the final SPL standings for the 2011/2012 season.”
Para 5.47 stated:-
“As discussed in Section 6 below the CVA Proposal was rejected by creditors at the meeting held on 14 June 2012 and a sale of the business and assets of the Club completed shortly afterwards to Sevco.”
Para 5.48 stated:-
“… the Joint Administrators confirmed that a binding contractual agreement with Sevco had been reached and the business, history and assets were subsequently transferred from the Company to Sevco.“
The Rangers – Progress Report – 24 August 2012 to Creditors by Duff & Phelps defines the “purchaser and newco” as:-
“The Rangers Football Club Limited (Formerly Sevco Scotland Limited) of Ibrox Stadium, Glasgow G51 2XD (Company number SC425159);”
Para 4.6 states:-
“As part of a wider agreement with the Joint Administrators which was finalised prior to the CVA meetings, Newco was obliged to purchase the business, history and certain assets of the Company should the CVA fail. Accordingly a going concern sale to Newco completed shortly after the meetings, which has resulted in the Joint Administrators achieving the second objective identified on the previous page, as a better result for creditors has been achieved than if the Company had been wound up without having first being in Administration.”
Para 5.2 states:-
“Following the sale of the business and assets of the Company on 14 June 2012, the responsibility for maintaining all trading operations passed to Newco which continues to operate Rangers Football Club.”
“Under the SPA, Murray Park transferred to Newco on 14 June 2012. The SSC‟s security over Murray Park has been assigned to Newco.”
What does this mean and why might it be important?
D&P seem very clear. The assets were transferred to Sevco Scotland Ltd. They do not say that they transferred them to Sevco 5088 Ltd, even though that was the earlier plan.
The Rangers spokesman quoted at the top of the piece makes the position quite clear:-
“For the avoidance of doubt, Sevco 5088 Limited bought the assets of the Rangers Football Club and then transferred them to Sevco Scotland Limited.”
Why do D&P say differently? Surely the Rangers spokesman would, not get this wrong?
The relevance arises in the event that BDO, the soon to be appointed liquidators of RFC, seek to invoke their powers under s242 of the Insolvency Act to reduce any alleged gratuitous alienation by the administrators. (In answer to Duplesis’ question, I have no doubt that they have that power as liquidators, even where the sale was by administrators, and I might, if time permits, write in moiré detail about that soon.)
If the position is, as indicated by the spokesman, that the assets went from RFC to Sevco 5088 Ltd and thence to Sevco Scotland Ltd, this potentially gives the ultimate owner, Sevco Scotland Ltd, now The Rangers Football Club Ltd, an extra defence to any court action seeking the restoration of the property to the liquidated company for the benefit of the creditors. (I will continue to refer in this piece to The Rangers Football Club Ltd as “Sevco Scotland Ltd” not to offend anyone but for clarity.)
As I have discussed before, it is for the purchaser of the assets to establish that an “adequate consideration” was paid for the assets.
If the party in ownership of the assets is not the original transferee, there is an extra defence, stated in s242(4):-
“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.”
Therefore, Sevco Scotland Ltd can defeat a claim of “gratuitous alienation” by showing that “adequate consideration” was paid.
If the Rangers spokesman is correct, Sevco Scotland Ltd can also do so by showing that it acquired the assets from Sevco 5088 Ltd in good faith and for value from or through the transferee in the alienation.
This applies whether in fact there was to be a transfer to Sevco 5088 Ltd but Sevco 5088 Ltd told the seller to put the assets in the name of Sevco Scotland Ltd. It also applies if the assets did become the property of Sevco 5088 Ltd and then were sold to Sevco Scotland Ltd.
The questions which would clarify this matter and save me wittering on about it are as follows.
For Duff & Phelps:-
With whom did you enter a binding agreement to sell the RFC assets? Was it Sevco 5088 Ltd or Sevco Scotland Ltd?
Did the transfer of assets take place to Sevco 5088 Ltd or to Sevco Scotland Ltd?
If the transfer of assets was to Sevco Scotland Ltd, was this as nominee for Sevco 5088 Ltd or was it a direct transfer of assets to Sevco Scotland Ltd as the transferee?
Who paid the purchase price – Sevco 5088 Ltd or Sevco Scotland Ltd?
For Mr Green (who, if you remember, in early July said that he would answer all questions within seven days – however, he did not mention which seven days – it was presumptuous to assume that he meant the next consecutive seven days perhaps):-
Who originally acquired the RFC assets from D&P – Sevco 5088 Ltd or Sevco Scotland Ltd?
If it was Sevco Scotland Ltd, was this as a principal or as nominee of Sevco 5088 Ltd?
Who paid the purchase price – Sevco 5088 Ltd or Sevco Scotland Ltd?
If Sevco 5088 Ltd acquired the assets, what consideration was paid to it by Sevco Scotland Ltd?
If Sevco 5088 Ltd had the assets transferred to Sevco Scotland Ltd as its nominee, what financial arrangement was there between the two companies?
The answers to these questions would go a long way to establishing the battleground should BDO seek to reduce the transfer.
For example, if it is the case that there was not “adequate consideration” paid by Sevco 5088 Ltd, but, if Sevco Scotland Ltd paid Sevco 5088 Ltd, or ultimately had paid D&P, for the assets, then they would simply require to show they had acquired them “in good faith” from the original transferee.
It would turn out to have been a remarkably fortuitous event, or a sign of the undoubted business prowess of Mr Green if it turned out that the assets acquired in good faith for £5.5 million were actually worth nearly ten time as much, as stated by Mr Ahmad, Director of Sevco Scotland Ltd, and this “on a bad day”.
Imagine buying a plot of ground from an administrator of a bankrupt company and, a few days later, being lucky enough to discover that the ground is now needed by a supermarket chain to give access to its new multi-million pound store! It seems to be the case that something similar has happened here – the assets of RFC have been acquired for what D&P considered a fair price, and it is only upon taking ownership that the ultimate purchaser realised the value of what it had bought!
As I have said before, Mr Green is in pole position for Scottish Businessman of the Year 2012!
There is a lot to be written about what “good faith” means here, but that is for a later post. However, no one should take from the above any implication that Sevco Scotland Ltd were in mala fides. The answers to the questions I posed would help clear up the matter once and for all.
Posted by Paul McConville