The ever assiduous BillyBhoy68 has sent me on a couple of documents which could have a bearing on the kerfuffle about Sevco 5088 Ltd, Sevco Scotland Ltd and who bought Rangers. It might also give some circumstantial evidence about the involvement of Mr Whyte.
Finally it answers some questions about the creation of the 22 million Rangers shares, and suggests that keeping paperwork in order is a major problem, even for such experienced and successful businessman as Mr Whyte Green.
One of the documents will be familiar to keen-eyed readers of the blog who have long memories!
Part of what I wrote at the time appears below:-
The ever assiduous BillyBhoy68 has brought to my attention a juicy morsel from Companies House. It is a Special Resolution “dis-applying Pre-emption rights” in the shares of Sevco 5088 Ltd.
You can see it here. Sevco Resolution Disapplying Pre-emption Rights
I will confess that the full significance of this is not totally clear to me, but I am sure a reader can explain it for me.
Pre-emption rights are dealt with by Part 17 Chapter 3 of the Companies Act 2006.
The Act provides that a company proposing to allot shares may not allot them for cash to any person unless it has previously offered them on the same or more favourable terms to its existing shareholder.
These are known as pre-emption rights and are intended to protect shareholders from having their shareholdings diluted by the issue of more shares. These rights can be disapplied by the company provided it follows the correct procedure.
The pre-emption right is only triggered by a proposed allotment of relevant shares (excluding subscriber shares and bonus shares) and rights to subscribe for or to convert securities into relevant shares.
Relevant shares mean all the shares in the company except:
- Shares which carry a right to participate only up to a specified amount in a distribution of a dividend or capital, i.e. shares such as non-participating preference shares where the right to income and capital is fixed
- Shares allotted (or to be allotted) under an employees’ share scheme
A company can disapply the pre-emption rights of existing shareholders in relation to either of a specified allotment or to allotments generally.
Pre-emption rights in relation to a specific allotment can only be disapplied by passing a special resolution of the shareholders of the company at a general meeting. The resolution must be proposed to the shareholders, in advance with sufficient notice, by the directors who have to set out their reasons for making the recommendation, the amount of payment for the shares being allotted and the directors’ justification of that amount.
As a result of these cumbersome requirements, it is unusual for a company to disapply the pre-emption rights in relation to specific allotments. Normally, the directors are given general authority to allot shares and at the same time the company can disapply the provisions of the CA 06 in relation to allotments made under that general authority. This general disapplication must:
- be contained in the articles of association of the company; or
- be effected by way of a special resolution passed by its shareholders.
So what does this tell us about Sevco 5088 Ltd?
At that date the sole director and shareholder was Mr Green. He owned two shares, being the only shares issued.
He therefore would have been entitled to have any new shares allotted by Sevco 5088 Ltd to other parties offered to him first on the same, or better, terms.
The blacked out section of the Resolution will be the part setting out the director’s “reasons for making the recommendation, the amount of payment for the shares being allotted and the directors’ justification of that amount.”
Therefore shares in Sevco 5088 Ltd were being allotted to someone other than Mr Green, and the Resolution prevented them having to be offered to him first.
As at 23rd May, being the date of the resolution, Sevco Scotland Ltd had not yet been formed. If it was the intention all along, as a Sevco spokesman said, to have the Ibrox team owned by a company based in Scotland, then why use Sevco 5088 Ltd, a company incorporated in Wales, and whose Registered Office was moved to London?
What happened between 23rd May, when the Resolution passed, and 29th May when Sevco Scotland incorporated? Is it the case that the investors put their money into Sevco 5088 Ltd so that it could buy the assets and immediately on the purchase being effected, the assets were switched to Sevco Scotland Ltd?
There might be nothing in this issue at all, but it seems odd, and until there is “transparency and clarity” then people will see shadows.
Back to the present day, and the narrative we are now being fed about the purchase of the assets, it is noteworthy that the Resolution is dated 23rd May 2012, but was only received at Companies House on 12th June 2012.
If, as we are led to believe, the decision was made that the assets had to be held by a Scottish company (and 5088 was not a Scottish company) then why did anything need to be done with it at all! Or did the decision to make it a Scottish company only come about between 23rd May and 29th May, when Sevco Scotland was incorporated?
If, as Mr Green’s spokesman said in July 2012, and as was repeated in the Sun last week, 5088 bought the assets and transferred them to Sevco Scotland immediately thereafter, where did the money come from to do so? Who lent the cash to a 2 share company with only one office holder?
The second page of the Resolution indicates the legal advisers of the Company to whom the response to the Resolution should be sent.
It is Field Fisher Waterhouse. This major and prestigious London firm has been Mr Green’s English solicitors throughout this process.
The coverage over the last few days suggested though that he went to them because Mr Whyte had already got the ball rolling with them. As Mr Whyte and Mr Aidan Earley had FFW acting in connection with previous deals of theirs, this makes perfect sense. After all, better to use lawyers with which one is familiar and who have done a good job.
But, is it not a little odd that Mr Green, who, he tells us, was simply stringing Mr Whyte along and who was simply using him to “save Rangers”, used and uses the solicitors chosen by Mr Whyte?
There is no suggestion of any conflict of interest on the part of FFW at any time although, in light of the verbal explosives being exchanged by Messrs Green and Whyte now, FFW might be checking its terms of engagement letters to see if there is now a conflict.
On the piece of mine from July, Joseph McGrath, one of the regular commenters here, noted the following:-
I see Christine Phillips is listed as one of the legal advisors. She is listed on her company website as dealing with international / cross border transactions. Is this about transferring shares to the middle east or Asia?
Bearing in mind where some of the shareholders have come from, Joseph’s speculations might well not be far off the mark!
Turning now to the second document, this is a Resolution of Sevco Scotland Ltd (now Rangers Football Club Ltd). As we are aware, this is the company which is owned by Rangers International Football Club PLC, and which itself owns the “assets and business” of Rangers.
It can be read here Sevco Scotland Ltd – Resolution re Division of Shares
You will see that it is a Resolution dividing up the share capital of Sevco Scotland Ltd. Each £1 share is divided into 100 shares of 1p each.
The Resolution also allows the Board to allot shares up to a nominal value of £100 million.
The Resolution was passed by Sevco Scotland Ltd, signed by Mr Green, as the “eligible member” on 29th May 2012. That was the date the Company was incorporated.
The Resolution was only received by Companies House on 1st December 2012, over six months later.
Back in October 2012 I wrote a piece from which the following is extracted, regarding where the 22 million shares to be allotted actually were! (I apologise for the lenght, but I think it is needed to ensure a full analysis.)
The website Rangersshareoffer.com talks about “Rangers Football Club” looking to sell shares. There is no mention I saw of either Sevco 5088 Ltd or Rangers Football Club Ltd. The latter company was originally Sevco Scotland Ltd.
Regular readers will know that the administrators announced that there was a binding agreement to sell the assets and business to Sevco 5088 Ltd, a company incorporated in Wales.
It is of note that the Registered Office has been changed to 35 Vine Street, London. That is the address of Field, Fisher, Waterhouse who have been acting for Mr Green and who, entirely coincidentally, have previously been involved acting as solicitors in connection with a business deal involving Craig Whyte and Aidan Earley. The change of Registered Office was made in May 2012.
Mr Green is the only recorded Director of that company.
It appeared though that Sevco 5088 Ltd did not acquire Rangers. Instead Sevco Scotland Ltd did so, presumably as nominee of Sevco 5088 Ltd. A Rangers spokesman stated previously that Mr Green wanted Rangers owned by a company registered in Scotland, as Sevco Scotland/Rangers Football Club Ltd is.
The application to the Register of Scotland to take title to Rangers’ fixed assets was in the name of Sevco Scotland Ltd.
That therefore seems simple – as Sevco Scotland Ltd, as it then was, now owns all the assets and business of Rangers, it is that company in which shares will be offered.
But is it?
The share offer site does not say that the shares to be offered are in the former Sevco Scotland Ltd. As it was that company which applied for, and ultimately received membership of the SFA and admission to the SFL, it would be unfortunate if now Mr Green suggested that it was not in fact the owner. In addition, as part of the “fit and proper” person test, Mr Green had to produce details of the ownership of the club/company to the SFA.
All of which leads me to my next point.
I previously confused myself thinking about the statement that, apparently, there are now 22 million shares in Rangers Football Club Ltd issued. The original company, when floated, had two shares issued. I was under the impression that the public records only needed to be updated at the time of the Annual Return. However, I was wrong.
Where a private limited company, as Rangers Football Club Ltd is, allots new shares, then this must be recorded in its register and more importantly notified to Companies House.
The relevant sections of the Companies Act 2006 are to be found here.
The ever-helpful Companies House guide to the Life of a Company, which I recommend highly, explains the process in plain English.
6. Allotment of shares
A company may increase its share capital by allotting additional shares. Shares are ‘issued’ when a person is registered as a member in the company’s register of members.
7. Authority to allot
‘Allotment’ is the process by which a person acquires an unconditional right to be issued with shares. Directors allot shares on the company’s behalf, but either the company’s articles or a resolution of the company needs to authorise them to do so.
(An exception to this is that a private company incorporated under the 2006 Companies Act, that will only have one class of shares following the allotment, does not need any prior authorisation from the company to allot shares unless there is a specific restriction in the articles. Private companies incorporated before this date will need to pass an ordinary resolution to qualify for this exemption, provided there is no specific restriction in their articles).
8. Payment for shares
Payment for shares in a private company can be in a variety of ways including cash, goods, services, property, good will, know-how, or even shares in another company.
Generally, people can pay for shares in a private company;
- wholly for cash;
- partly for cash and partly for a non-cash payment; or
- wholly for a non-cash payment.
Payment for shares in a public company must, in most instances, be for cash. However, if shares are allotted in a public company for a non- cash consideration, the consideration for the shares is subject to an independent valuation in most cases. You must send a copy of the individual valuation report to the proposed allottee for the share(s) and to Companies House when registering the Form SH01.
9. Notice of allotment
Within one month of the allotment of shares, a limited company must deliver a return of allotment, on Form SH01, to Companies House. You must complete a statement of capital as part of this form.
If you are a limited company and the person pays for the shares in cash, you must include in the return details of the actual amount paid or unpaid.
If the company allots shares fully or partly for a non-cash element, you must show the extent to which the company has treated the shares as paid-up on the Form SH01 and you must also include a brief description of the non-cash payment for the shares.
You can notify a series of allotments on the same Form SH01, but you must send the form to Companies House no later than one month after the date of the first allotment. If you do this, the statement of capital should reflect the company’s position following the ‘last’ allotment.
The company must notify the allotment of bonus shares to Companies House on Form SH01. It should show the amount paid on each share as ‘nil’ or ‘0.00’ and the shares as paid up ‘otherwise than in cash’.
Under Section 554 of the Act, a company must register an allotment of shares within two months of the allotment. Failure to do so constitutes a criminal offence by the company and every officer of the company who is in default.
Under Section 555, a company must report the allotment to Companies House on Form SH01. This must be within one month of the allotment. Failure to do so is a criminal offence by every officer of the company (Section 556). This form also discloses if the shares have been paid for, or if not in cash, what consideration has been given for them.
Neither Sevco 5088 Ltd nor Rangers Football Club Ltd are disclosed on the Companies House website as having had anything more than the initial shares to the subscribers allotted. On the basis of Mr Green’s public statements about investors, it would appear possible that there has been an oversight on someone’s part and, through inadvertence, the public record has not been kept up to date.
Of course there are lots of reasons why a person would not want it to be known what they had paid for their shares, or what consideration had been treated as equivalent to the value thereof. For example, Mr McCoist, said to have 1 million shares, may have paid for them in cash, or might have been allotted them in recognition of his performance as manager. However I have no doubt that delay in reporting the allotment is simply an oversight. After all, Mr Green and his fellow directors are all very busy people.
Until the allotment is registered therefore, there might still be some mystery about precisely which company is being floated.
We therefore have the following facts.
- It is unclear which company owns the assets and business of Rangers.
- It is unclear exactly who the shareholders are in the company which owns Rangers.
- It is unclear in which company Mr Green intends to sell shares.
- Neither Sevco 5088 Ltd nor Rangers Football Club Ltd has reported to the Registrar of Companies the allotment of more shares (22 million more!)
- Rangers Football Club Ltd has not passed a resolution Disapplying pre-emption rights.
- Sevco 5088 Ltd has done so.
- In the presentation to potential investors in May, Mr Green laid out a plan of having two companies involved in running the football club. There would be a PLC, and as a subsidiary of that, a “football company”.
- This structure is not uncommon and indeed is that presently in operation at Celtic. The shareholders invest in the PLC, one of whose assets is the limited company which operates the football club.
- This structure allows creativity in inter-company transactions.
- Mr Green has given no indication publicly of the structure of the company post-flotation.
All of the above leads me to deduce the structure of the planned flotation as follows (and I accept I may well be wrong).
Mr Green is floating Sevco 5088 Ltd, and not Rangers Football Club Ltd.
The disapplication of pre-emption rights prevents any difficulties with the allotment of shares vis-à-vis the original investors.
I would imagine that the plan would be for Sevco 5088 Ltd to change its name, perhaps at the same time as the float, to Rangers Football Club PLC. (The former company of that name, presently in administration, is now called RFC 2012 Ltd.)
Therefore we would have a structure where the PLC Board would have the Zeus Capital representatives on it, as was envisaged in May. Mr Stockbridge is and Mr Ahmad was on the football company Board as representatives of Zeus Capital. The presentation envisaged a non-executive director on the PLC Board from Zeus Capital, as well as the Chief Financial Officer, which is the role of Mr Stockbridge. The presentation suggested that the CFO would sit on both boards, as would Mr Green, as CEO.
There would then be the separate and distinct Rangers Football Club Ltd, owned by the PLC.
Such a structure would, for example, permit the fixed assets to be owned by the PLC and leased to the football company or structured in some other way which proved to be advantageous to the group in terms of tax liability.
Of course that means that the club could be sold out from under the PLC shareholders, although that is obviously an issue in any football club where we take the view that the club and the company owning it are separate and distinct.
One would imagine that, prior to floating, the company would have to ensure that all regulatory requirements had been complied with. In such a circumstance we should expect imminent notification to the Registrar of Companies of the allotment of 22 million shares. That will make clear exactly which company is being sold off.
How will the fans who are the main target market take the issue of the shares, if I am correct, in the company which owns the company which owns the football club?
We shall see.
Apart from getting the wrong company as being the “football club” company, I got much of what I said right, including that of the structure – lucky guesses!
So the paperwork regarding the new shares, which had long been allotted by that stage, only made it to Companies House just before the float. Clearly an oversight amongst busy people, rather than any attempt to shroud matters in mystery, which it would be a vile calumny to suggest.
Mr Whyte had a very unfortunate run with official paperwork, as this site and others have shown repeatedly. If it wasn’t that forms were filled in with the wrong names, or the wrong dates of birth, they were misplaced in the post, or maybe misfiled in an office somewhere.
Strangely enough, the Companies House records do not, as far as I can see, disclose any paperwork, other than the Resolution above, having been lodged regarding the allotment of shares.
EDIT – Thanks to easyjambo for clarifying what does not seem to appear on Companies House for me.
He helpfully posted this in the comments:-
Paul – The above is incorrect. RFC Ltd (Sevco Scotland) did lodge a couple of SH01 forms on 7th December.
The first covers the period to 17th August and shows:
19,225,200 purchased at £0.01p
1,000,000 at £0.50p
8,825,000 at £0.99p
290,000 at £1.00
for a total of 29,340,200 shares
The second covers the period to 31st October and shows a new total sold at £1.00:
3,325,000 at £1.00
and a total of 33,415,200 shares
It therefore remains an official mystery, for now at least, as to how all of the shareholders in Sevco Scotland Ltd (now Rangers Football Club Ltd) managed to get their hands on their shares, which were then of course transmuted, as if base metal into gold, into shares in RIFC PLC.
A failure to lodge the relevant paperwork regarding allotment of shares does not invalidate the allotment but is a criminal offence by the Company and its officers.
I am sure though that, as with Mr Whyte, these lapses are merely matters of admin not being 100% perfect.
Posted by Paul McConville