Carl31’s Guest Post on How a Failing Football Team Would be Dealt with in the “Real World”

Carl31 posted this as a comment on a piece earlier this week. Unaccountably I missed it when going through comments and thought others might have done so too.

Carl started by quoting a section from my post, shown in bold below, before adding his own comments.

“One of the perennial issues about penalising football teams relates to what happens after a change in ownership. The argument goes that, if the team is sold off, why should the new owners and the innocent fans pay for the wrongdoing of the incompetents or worse who formerly owned the club?

That however simply ignores the nature of corporate entities. If that interpretation was allowed to prevail, then a football club could commit the most heinous rule breaches, and then have its assets sold to another company before the disciplinary process concluded. Thus the “club” would be innocent and all the fault would lie on the old owners. This would be the case even where the assets were sold by one company to another owned by exactly the same people!”

—————————————————————

Paul,

In the commercial world, this happens and doesn’t seem to be an issue for most. When a company folds, unable to pay its creditors, the new company that takes on the assets is not held responsible for the misdemeanors of the previous owners. If the new owners are the same owners as the old owners they fall foul of laws on ‘phoenixing’.

Why should some new application of rules be applied for football clubs? Why not just simply apply these insolvency rules in a similar fashion instead of the legal-ish semi-logical acrobatics of the authorities in the football world?

Lets say, just as a for instance, that the ‘Extinctionist’ argument is followed by the footballing authorities in a way that mirrors company and insolvency law, and under the powers available from the existing rules … (in brief)

1. Once the Club goes bust, then that is the end of that Club. A separate financial/commercial side to the club (a Clubco) from the sporting side (clubFC) is a fallacy. The Authorities then officially recognise the end of the insolvent Club. They would also be free to also recognise, if applicable, the new Club as the ‘inheritors’ of the history of the old Club, and praise the continuing loyal fans as the true carriers of the ‘spirit and ethos’ of the old Club. This would incentivise club boards that care about the long-term wellbeing of their Club (consider, in the Rangers scenario, guys like John Greig or John McLelland) taking an active role on the board in protecting the ongoing sustainability of their Club.

2. New owners are not responsible for the actions of the owners of a different Club – the old Club. They are responsible for the actions of the new Club. That seems fair enough to me. The new owners of an undertaking that trades/operates as a recognised entity that traded previously are not responsible for misdemeanors of the previous incarnation.

3. The fans are penalised by the end of the Club they hold dear, which acts as an incentive for them to properly ‘police’ those who run the Club in the first place. If the consequence of spending at unaffordable levels is the ultimate demise of the Club, and this is anathema to the fans, then it is up to the fans to pressurise those in charge to act responsibly. This would be better for the long term stability and continuing life of the Club, as well as better for the long term good of the game in Scotland, since it incentivises that fans be on guard against irresponsible owners.

It seems fair to me for fans, who are happy to bask in the associated glory of success of their Club (gained whilst it spends too much and racks up heavy debts – spending far more than opponents) without enough concern for its long term wellbeing, to have to face the consequences that might arise. If a blind eye is turned by the fans to financial mismanagement, then they will ultimately suffer, as will their Club. Fan power is genuinely a powerful actor in events such as this. They are not toothless.

This is not only fair, IMO, it incentivises proper diligence of fans via their organised groups such as supporters’ trusts.

4. The owners of the old club ‘get away with it’. Well, as I see it, this mirrors the commercial sphere. Financially they could get away with it, but their reputation is damaged. Is this enough? IMO, in the football world – especially the world of football in Scotland (and to an extent the UK) this reputational damage is greater since there is a greater public/media focus. This greater focus compared with the commercial sphere generally, is even greater still for the high profile Clubs. If the profile of the Club is high enough in UK terms, maybe Uefa terms, then a reputation could be severely damaged – and that reputational risk could extend to the general commercial arena. So, despite maybe financially ‘getting away with it’, they would be far from scot free – reputational damage would be severe.

5. “This would be the case even where the assets were sold by one company to another owned by exactly the same people!”

Whilst this could be true, it can be guarded against and prevented. The footballing authorities have powers to impose sanctions on individuals. They have done so with Craig Whyte. This could extend to a ban sine die on involvement in any football Club (as not a ‘fit and proper person’). This would preclude those who might have committed ‘the most heinous rule breaches’ from being the owners of the new Club – but agreed this would require the extraordinary occurrence of the footballing authorities simply applying their own rules in both spirit and letter. Cooperation of various countries’ Associations would see Clubs protected against the unscrupulous across Europe and beyond, depending on how far the cooperation went.

Only 5 steps to pretty much cover off the issues that face such an insolvency situation … relatively simple compared to … the ‘Alternate’.

The Alternate is something akin to the almighty omnifuckupcarcrash (copyright Carl31 :) ) where:
• the football authorities deem it wise to make rules on the hoof,
• they try to perpetuate the fallacy of the continuing Club (IMO, for commercial reasons) – even though they apply a number of their rules (such as those re ‘cup entry stage’) as though the Club were new,
• they state strange and perverse interpretation of existing rules as part of an inadequate Commission charging the perpetrators under the, at best, legally cloudy premise of a separate Clubco and clubFC
• consequently, rulebreaking is incentivised, since retrospective ineligibility is deemed not allowed for in the rules
• similarly, concealment of any rulebreaking is also incentivised
• Financial fair play is disincentivised, since despite running the ‘Clubco’ into the ground, the ‘clubFC’ continues unscathed – history and all intact but creditors stuffed via blatant debt-sheddery
• As an addition to this, non-payment of social taxes during the death throes of the old Club may also be incentivised in some way (since the ship is going down anyway)
• Further issues are stored up, via various precedents, for the future and how other SFA Clubs should be treated should they become insolvent

(all of which is pretty much the current situation).

The actions of the current football authorities is driven by commercial imperatives. This is evidently damaging the game of Association Football in Scotland. Should the ‘Extinctionist’ ethos and argument be applied by the Scottish Football authorities, using existing rules both in spirit and letter, then there would be adequate or satisfactory justice applied to the whole saga, and the integrity of the sport in Scotland would be protected. The long term interests of the game would also be protected since proper, not perverse, incentives would be applied pour encourager les autres.

Posted by Carl31

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33 Comments

Filed under Football Governance, Guest Posts, Insolvency, Rangers

33 responses to “Carl31’s Guest Post on How a Failing Football Team Would be Dealt with in the “Real World”

  1. Kenny Campbell

    Too much like common sense.

  2. charliedon

    Imran Ahmad in the Sun today, on the subject of Whyte’s £137.5k in his mum’s bank account;
    “We don’t even know if that money is from Craig Whyte. We’ve spoken to my mother’s bank and they say, ‘Sorry, we can’t say’. He’s been asked to recall it so many times. However, he is not returning anyone’s phone calls or emails.”
    Good grief. That is so full of holes I don’t know where to start. Do these guys think we’re all completely stupid? This even makes Green’s utterances sound plausible!
    Did the person Ahmad spoke to not think to remind him he sent a text to Whyte “£137.5 received with thanks”?
    And Imran, could you not get your mum to ask the bank for the details?

    • renfrewdave

      so lets get this correct..
      chuck, ahmad and the MBB all have a wee private chat about setting up new newco with the MBB still on board of the newco.
      they all agree that the MBB cant be seen to be involved in the newco and that he HAS to pay money money in to the newco so they argee that mrs ahmad snr has to receive money from the MBB and give it to her son so he can give it to chuck.
      ahmad sends MBB a text saying “thanks for the dosh but shhhhh” some might think of harry and his dog here.
      and doesnt really try that hard in giving the money back from what i can see and we are meant to believe that 8months (?) later that its not classed as payment received and payment accepted.
      and how does this series of money transfers get round money laundering / tax rules as when i have paid in cheques recently into my own bank its the 3rd degree and takes up to 15mins to process so they can check it out to and im told its part of the money laundering rules the banks need to follow.

    • portpower

      Do a moonlight flit Mrs. Ahmad.

    • The Roon

      The problem trying to get to the truth is that we have, on both sides, people who appear to be able to spout nonsense without blinking an eye (although Green does a fair bit of extra blinking in his stv interview!). I’m not sure if even they can distinguish between fact and fiction.

      I’m not 100% convinced the texts (CW & IA) are legitimate as after the first alleged message from Imran, CW states “This is my new number.” Why would he tell imran this if he already knew the number to send the earlier text?! Having said that both sides appear to be agreed that Imran’s mum received £137.5k from Whyte (or from someone under his direction).

      That alone should set alarm bells ringing about Green and Ahmad in terms of them being legitimate businessmen. I’m not sure what the criteria is for the SFA’s “fit and proper person” but being involved in money transfers with CW (using bank accounts of family members) cannot be regarded as normal conduct befitting of a CEO and company director. In anyone’s book such transactions can, at best, be described as dodgy.

      Such a dodgy transaction, alone, raises serious questions but the fact that money was flowing from CW’s camp to Green/ Ahmad is, in my opinion, the thing that defies any logic. If green (as he has admitted) was prepared to do/ say anything in his dealings with CW then why was money flowing from CW and not towards CW. This must be the first sting in history where the person being conned out of something that they have also had to pay for the pleasure of giving it up!

      Logic dictates that money would flow to CW and not vice versa. The fact that CW only used £1 of his own funds to acquire Rangers from SDM then what would possess CW to part with £137.5k and a further £25k to relinquish his shares and/or rights of ownership of assets? This suggests that there is much much more to the dealings with Green than has been aired in the press recently.

      With regard to the claims of Green and Ahmad that they have tried many times to pay the money back then, if true, evidence should exist of these many failed attempts. Ahmad’s mother’s bank must be able to identify the bank account details from which the £137.5k was sent and therefore it would take only minutes to set up a transfer of the same amount back to its original source. Unless that bank account has been closed then there is no reason why the funds could not have been winged back to where they came from.

      The quotes attributed to Ahmad in the sun today are amazing. First, he states that he is not sure that the money is from CW then he goes on to say that CW has been requested to “recall it so many times”. 2 apparent major inconsistencies with this: (1) If he does not know it is from CW then why try to get CW to get money that might not be his? (2) unless I am misinformed, money cannot be taken out of a bank account without the bank account holder authorising such a withdrawal. It is amazing that the Commercial Director of a company considers that a third party can unilaterally withdraw money from another bank account.

      I have no affiliation with Rangers but at the same time I feel sorry for all the loyal Rangers supporters who have to stand back and witness (one after another, including D&P) apparent less than scrupulous individuals become involved in their club for their own self gain without any apparent genuine good intentions for the long term benefit of the club.

      • coatbrigbhoy

        have you ever changed a phone number,then confirmed to someone, CW sends text to IA giving him the new number,….yes,THIS is my new number, in other words,this is the number to contact me on in the future, don’t use any previous numbers as i am having trouble taping the calls on the old number.

  3. Monti

    Imran Ahmad also claims The The Rangers are the most financially stable club in the U.K.? Mmmm…losing over 1.5m per month, no European football for the next few years at least? Surely there must be a change of their club crest in some sense? What about the media being punished for referring to them as Rangers without the The? My only hope is that BDO declare this deal null & void & sell of the Asbestos dome & dodgy Dave park to TESCO or ASDA! There is no Rangers!

    • Monti

      As an alternative to the current ( no pun intended…ahem.) the the Rangers club crest, I wish to offer an example of a Chang they could easily make, why not an Emerald Green background with a white harp incorporated onto a gold football……just saying….

  4. Hi, having got as far as the first paragraph and tried to understand the implications of said paragraph,could the writer please explain to me why he believes that the long term well being of the club (be it in the hands of legends and great administrators) would override the get out clause of going bust and coming back as the same club( eventually and legally recognized etc,). What incentive would the “clubco” have to be prudent and run a tight ship if the easy way and legally free way is to dump all moral responsibilities by liquidation?.
    Does the writer believe that any establishment bank or business would even think of loaning or allotting financial credit to the “Clubco” in that that scenario?
    When I get time and some patience I will return and finish the the post.

    • @bri Nail on head. Thank you. ….. wrote about transparency, suppressed data, identity disguise and optimal markets …. elsewhere.(guess what the connection was ….)

  5. charliedon

    Now that Imran says his pal Green is definitely not a racist, that should no doubt be enough for the SFA to clear him. See, his best pal says so….
    I also note with amusement the tactic of providing the Sun with a photo of Charles Green with Imran’s baby. When was the photo taken – yesterday?
    Chico will be standing for Parliament next. He’ll fit in well.

    • Maggie

      @charliedon
      Is that not the John Terry / Ashley Cole defence……”see,here’s my black/Asian ( delete as appropriate ) mate,he’s got no problem with my
      “jokey banter”….. Imran Ahmad should be ashamed of himself for
      accepting that form of “banter” from his friend.
      I’d love to know what his family and friends REALLY think of it.

  6. Monti

    Off topic: Noticed that Dunfermline Athletic have been banned from playing in the Scottish cup, until payment in full has been made to Hamilton Accies, from when the teams met in this years Scottish cup. Will the SFA now impose a similar ban on the the Rangers fans from entering charity shops, until Charles Green pays the Dundee utd share of gate receipts, from the sides meeting earlier in the Scottish cup this season….to err Charity?? P.S. Reference to the the Rangers fans shopping in charity shops has been used in the context of analogy & obviously doesn’t happen…..P.P.S. Well done to the pars for gaining full administration & avoiding liquidation, thus maintaining their proud history & heritage, as well as making an attempt to pay creditors….now that’s DIGNITY!

  7. ecojon

    I think the most important thing that Imran reveals is that he has been doing deals with Green for 10 years and has known him for 15. I might be wrong but I formed the impression way back last year that they only became involved with each other over Rangers and that Zeus Capital was the catalyst for the sparking the relationship.

    Imran also says he became involved with Whyte in 2007 when he was billed as a wunderkind turn-around expert. Seems strange then that Imran knew nothing about Whyte’s disastrous Rangers experience and that he was ‘banned’ from Scottish Football. All the stranger because Imran and Green were the prime movers in buying Rangers but it is clear financial negotiations and transactions were taking place between the three of them and Imran’s mum. All very strange and frankly unbelievable.

    Was this long relationship with Green reported to the SFA? What earlier deals were Green and Imran involved with and was Green involved in any of these earlier deals.

    CW denies knowing Imran since 2007 and says he only met him last year – of course that means that they could have texted, spoken on the phone, emailed each other or sent carrier pigeons for years before this.

    What a bunch of ferrets and the sooner they are secured in a sack the better.

  8. ecojon

    TYPO 3rd last par

    ‘Was this long relationship with Green reported to the SFA? What earlier deals were Green and Imran involved with and was Green involved in any of these earlier deals’

    Should read:

    ‘Was this long relationship with Green reported to the SFA? What earlier deals were Green and Imran involved with and was Whyte involved in any of these earlier deals’

    And I will add – I wonder if Imran played any part in Panceltica with Green.

    • @Eco ….. only speed read, but ….. was it not the case that CW actually confirmed knowing Imran 4 years prior to events …. taking us to 2007
      When I get some time I will review again …..

  9. Maggie

    @Carl 31
    “omnifuckupcarcrash”
    Armando Iannucci will be getting you on speed dial. That surpasses his
    “omnishambles”
    Off out to live my real life,I’d better not miss loads of good stuff 🙂

  10. JimBhoy

    Morning all… Looks like the new sponsors have sent a broadside to Chico over his racist remarks, that is never a good thing in a new relationship, anyone think they will be looking for the exit clause…

    Need to go read Imran’s comments about Rangers being the most financially stable in the UK.. Is it his turn to be a proper Charlie?? 🙂

  11. arb urns

    Nah….. the fewer ‘business practices’ attaching themselves to sport……….the healthier the SPORT in my view.

    Imran……. ” sorry we cant say” …… might be code for ‘this deposit has been reported for money laundering purposes’……… £137.5k x 4 = £550k = 10% of £5.5m…. might be code for ‘a deal between four people.’

  12. Should there be legislation preventing a new business reassembling the components of a discredited bankrupted concnr? It would horrendously complicated to legislate, but yes there should. Especially when there is not even a backwards glance to the previous business’s creditors? It seems there’s no morality in business. Walking away from the wreckage caused by unpaid debt & starting again under a slightly altered name ( but retaining the brand) is unacceptable. Regardless the nature of the business.
    Fans A R E responsible to a significant extent for the running of their club. The Rangers fans exulted in the swaggering arrogance of Sir David Murray, they cheered & greeted without question the arrival of Whyte, and bought his “front loaded” war chest for not so super Ally. Until recently they were dancing with joy over Chicos grandstanding outbursts against the SPL, and anyone else he considered a barrier to Sevco’s progress. Their childish refusal to accept that the previous club no longer exists, leaves a particularly bitter taste in the mouth. Carry on regardless, ignoring the mayhem caused, without significant penalties.
    The question is would others including Celtic fans behave the same? I can’t see it. I remember well the widespread horror of Celtic fans when John Reid was appointed to the board. There was a healthy suspicion when Fergus arrived & it remained until he delivered. There is & always has been a mistrust for authority at Celtic park, which as it turns out has served us better than the Rangers ethos of deep admiration for towering figures of authority. Sevco fans are starting to wise up. A major cultural shift is hopefully taking place at the Asbestos Arena. Hopefully on more than just one front.
    I’ll still be PMSL when it goes pear shaped for the 2nd time though.

    • robertg

      Is the problem here not that commercial law is there to deal with normal circumstances where nobody would seek to resurrect such a toxic corpse?

      In any normal case nobody would touch it with a barge pole.

      In this case it is like somebody trying to revive the Jimmy Savile brand.

  13. Monti

    The ‘ MOST HAUNTED’ team have been asked to do a ‘visit’ to Hampden park…Yvette fielding goes on to explain ” Mysterious figures & strange noises have been increasingly heard coming from the shredding room, the noise of shredding is said to intensify whenever an investigation into a former football club Rangers, is being carried out.” Witnesses have seen a faceless figure,dressed in a suit coming out of the shredding office carrying bundles of shredded paper” ‘ Most Haunted’ investigates this strange phenomena, known around these parts as The faceless shredder”…..

  14. robertg

    The SFA and the League are members’ clubs (ha! club again) where you apply for membership so a condition of continuing membership should be that a change in ownership doesn’t wipe the slate clean and you agree to the defined punishments / sanctions for malfeasance. if the history of the good stuff continues, then you take the bad stuff as a condition of continuing.

    So, in the case of Sevco, you would say, “Company might be bust, but the club can continue as long as you settle x, y and z. If you don’t the club is a goner as well as the company.” That way you can draw a line under the bad stuff with the “known” and not leave it unable to move because of having deal with new claims.

    Therefore you could say – you benefitted (as yet untested – LNS wasn’t asked to assess that as I understand it) by avoiding this amount of tax. We know what it is because there is a judgement, so if the enw entity agrees to settle that, we move on. if there is more coming out the cupboard, then that’s a company thing to be dealt with in the liquidation.

    Of course that might be cobblers.

    Hard day. But not as hard as Chuckles’s I’d guess.

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