We almost seem to be having déjà vu when it comes to Rangers, yet again! A tweet from @Corsica1968 prompted me to have a look at Section 216 of the Insolvency Act 1986.
It looks as if that section would potentially be enough to prevent the involvement of Dave King in Rangers for 5 years from 5th November 2012 onwards. It would also prevent John Greig, for example, from re-joining the Board.
The section relates to the re-use of a company’s name where it has gone into insolvent liquidation. The mischief the section is designed to stop is that of companies “dying” and leaving its debts with the oldco only to be resurrected a couple of days later as a newco but under the old trading name and with the same directors in charge. It can be legitimate to do so after a process of administration – but not when being “pre-empted” by the directors.
The section reads, in part, as follows:-
216 Restriction on re-use of company names.
(1) This section applies to a person where a company (“the liquidating company”) has gone into insolvent liquidation on or after the appointed day and he was a director or shadow director of the company at any time in the period of 12 months ending with the day before it went into liquidation.
(2) For the purposes of this section, a name is a prohibited name in relation to such a person if—
(a) it is a name by which the liquidating company was known at any time in that period of 12 months, or
(b) it is a name which is so similar to a name falling within paragraph (a) as to suggest an association with that company.
(3) Except with leave of the court or in such circumstances as may be prescribed, a person to whom this section applies shall not at any time in the period of 5 years beginning with the day on which the liquidating company went into liquidation—
(a) be a director of any other company that is known by a prohibited name, or
(b) in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of any such company, or
(c) in any way, whether directly or indirectly, be concerned or take part in the carrying on of a business carried on (otherwise than by a company) under a prohibited name.
(4) If a person acts in contravention of this section, he is liable to imprisonment or a fine, or both.
So “Rangers Football Club” would be, I suggest, a “prohibited name”. It is a name by which the company has been known. It is much harder to find the corporate title on the official Rangers website than to find numerous references to the “Club”.
The winding up order for Rangers was registered at Companies House on 5th November 2012. The restriction affects directors for the 12 months before that date.
So Craig Whyte, Andrew Ellis, Dave King, Phil Betts, John McClelland and John Greig would all fall foul of the section and, if they wanted to play a role as director or shadow director would require permission from the courts. This would involve the airing of even more of the Ibrox dirty linen as presumably the directors seeking permission to serve would need to explain what happened and how they were unaware of the issues, but at the same time were of course fulfilling all of their duties to the company and its shareholders. It can be a difficult tightrope to walk. Suggesting that one was “duped” might lead a court to wonder what would prevent history repeating itself.
In addition there is the issue of the “mythical” SFA “fit and proper” test where a factor is being a director of a football club which goers bust within a period of 5 years after the director ceasing to be one (as well of course as the director still being one when the shutters come down).
For all of the talk about “phoenix companies” none of that was applicable as long as the directors of newco were totally unrelated in business terms to those of oldco.
But if there was to be an overlap, then it could be seen as a phoenix company.
Hopefully, if Mr King is returning to take up a major share, he will have considered all of these issues before he puts pen to paper. It would be a major embarrassment if, having come back in a Tolkien-like fashion (“The Return of the King”) he found out that the courts precluded him from taking his seat in the Blue Room again.
Now the “Old Guard” of Martin Bain, Alastair Johnston and Paul Murray are unaffected by this restriction. They left the board over a year before liquidation.
Whether any of them would want to come back, or indeed if the customer base would welcome them, is an entirely separate matter.
Finally, and for completeness, the liquidators can, as part of their investigation into the insolvency, suggest that proceedings be taken against directors where it is felt that their conduct fell below that expected of a steward of a public company and for the court to consider whether they should be disqualified.
That is a very long process however and of course there has been no suggestion of any such behaviour from any of the directors.
Posted by Paul McConville