How Section 216 of the Insolvency Act Could Prevent “The Return of Dave King” to Rangers

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

 

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57 Comments

Filed under Insolvency Act 1986, Rangers

57 responses to “How Section 216 of the Insolvency Act Could Prevent “The Return of Dave King” to Rangers

  1. Hail Glorious

    An enlightening interpretation of the possibilities of actions which could be taken under the terms of The Insolvency Act 1986.
    It appears that the liquidators “can suggest that proceedings be taken” – but suggest to who?
    Is there anyone in our wee country with the balls to take action?
    (Don’t suppose the big boys from the City of London would be interested.)
    Ah well, back to same old.

  2. Steven Brennan

    When does all this come in to play? I always thought that the team shouldnt be playing with the same badge and name after going into liquidation.
    Or does it only apply when the liquidation process is finalised?
    When they are asked to change name etc the sevconians will still say same club.

  3. Steven Brennan

    Only wish it was section 111 of the act

  4. @gortchomhor

    Interesting area to give emphasis to, Paul, amidst the swirling chaos of legal issues being churned up on a daily basis.

    It puzzles me that Rangers are not straightforwardly considered a Phoenix company and dealt with accordingly. They flagrantly argue that they are the same company when it suits them, and they’re adamant on that.

    From say HMRC’s perspective, this company Rangers FC is being liquidated and it owes them a lot of money — was it 15 millions, not counting the BTC? As if that’s not bad enough, the company pops back up in an almost identical form: same name, same grounds, same song sheet, same everything really. But not the same debts.

    If my name was on that list of creditors, I’d be raging at this and feel totally robbed and let down by the business legal system. It seems to all suggest you can run a company into the ground, leaving a trail of debt and creditors, and just reconfigure. We all know the argument.

    We should be looking into where all the millions the EBT system saved them actually went too. It looks to me like the EBT system has great potential as a cover story for funnelling money out of a company.

    • robertg

      Where the money went is fairly simple. Piss poor deals for overpaid players. And the money that went to Minty in his EBT (the other EBT’s to non players were rel;atively small beer.

      There are many things one might accuse them of, but I doubt money laundering is one of them. But hey, we’ve had just about everything else….

      • @gortchomhor

        To be clear, I’m not accusing them of money laundering.

        But, hypothetically speaking, when you think about the mechanics of an EBT system run properly — the discretion, the non-contractual, etc — it leaves a lot of room for fraud.

        For example, what’s to stop someone in a company where an EBT system is in place paying someone much more than they ought to pay them for a service? Running an EBT correctly means there is no contract as such so, in essence, it would be difficult to gather any evidence of this.

        In such circumstances, I can only imagine how easy it would be to convince your own accounts department that so much money needs to be paid into the trust fund. They can hardly question it, can they?

        Without a contract, a lot is left to nods and winks.

        In actual fact, the internal accountants would be breaking the law if they discussed it in any detail because they would be giving weight to the potential claim that it was contractual and not left to the discretion of the Trusts if they did. In a sense, it’s critical that they are kept in the dark.

        In this way, the EBT system essentially pits key company personnel against (or at odds with) their own internal accounts department.

        Add to this the fact that most of the transactions and banking are handled in off-shore accounts where scrutiny is basically impossible once the money leaves the company account, and you have what could only be described as a perfect cover story and mechanism for funnelling money out of a company (tax free).

        I’m not suggesting this is what happened at Rangers, of course: we all know Rangers was run by honourable men. But, on the face of it, the EBT system seems to facilitate such behaviour.

        • We know, from the documents revealed in the FTT and the analysis of these forensically by Dr Poon in the dissenting opinion, that the MIH contribution into the MIH Trust equalled (almost exactly) the payouts to sub-trusts and then onwards.
          But was the EBT set up in a way where contribution could have come from elsewhere? Was the system open to abuse?

          If so, its just this type of set up that the rules on third party payments is meant to prohibit.

          • robertg

            I guess, technically, it could lead to inflated payments but they would be to employees rather than for services. In general there would be a governance committee to decide what went in to the trusts. At the end of the day, they are a tax efficient way of paying what is in effect a discretionary “bonus” but in the form of a loan that nobody is going to ask for repayment of rather than salary.

            The tax case issue was that the payments seem to be pretty much a contractual entitlement and substitution for income, rather than discretionary.

            This was proven in a number of cases but not in others.

            Overpaying employees and directors isn’t (generally) a crime. it’s maybe a bit dumb if you are doing it when you can’t afford it, and is a lot more questionably if doing so while the employer is insolvent, but that’s a diff3erent debate.

    • Ed Paisley

      I think it was millions being funnelled out of MIH to support Rangers since Murray bought them in 1988. Many more millions funnelled out of MIH into Murray’s family companies. Murray says “I never took a penny out of Rangers”. I’m sure that is true, but equally he never put a personal penny into Rangers. Any money “he” put into Rangers is now sitting in the books of MIH as a massive Lloyds loan (currently £650m).
      In the end, what has Mr Murray’s contribution to the UK economy been and what has his contribution to Scottish football been. A knight of the realm indeed!

      • @gortchomhor

        Rangers had their own accounts, if you care to look. The accounts show money coming in and money going out; the difference between what came in and what went out was the reason for them going into administration.

    • Fraser

      I don’t think there’s anything that puzzling about it. Imagine a restaurant, The Bluenose Steakhouse, owned and operated by Craig Shyte. Mr Shyte is a bit wide and gets into financial difficulty and the restaurant, despite running well to the enjoyment of a loyal band of diners, doesn’t pay its bills and the business is placed in administration. The administrator keeps the kitchen going while looking for a buyer, but nobody comes up with enough cash to satisfy Hector the butcher who is owed thousands. Company is liquidated and the restaurant closes briefly, but straight away an opportunist businessman by the name of Charlie Cream offers a few quid for the property and fittings and the company’s trademarks and has his offer accepted by the administrator. Mr Cream appreciates that there is a solid customer base who love the Bluenose steak menu, so he reopens the restaurant with the same name (“under new management” on the sign), re-employs the chef and most of the front of house and is up and running with the same menu as before, and is soon raking in the cash. Hector the butcher has no gripe with Mr Cream because he had nothing whatsoever to do with the debts run up by Mr Shyte, and indeed Mr Cream begins to buy lots of steak from him, so at least he hasn’t lost a customer.

      This essentially is what happened to Rangers. Legally there’s no problem because none of the old owners or directors are involved. It’s a new company, pure and simple.

  5. JohnBhoy

    Paul, Dave serial-tax-dodger King, who is about to concede his property in Joburg to the South African Revenue Service in compensation for the R2billion he owes, will not be returning to Rangers. That bastion of tax dodging and subterfuge – albeit a natural home for crooks and spivs – no longer exists.

  6. duplesis

    I take it no notice was or still can be given under rule 4.228 of the Insolvency Rules 1986 then?

    If not, couldn’t he just apply for leave under s.216(3) of the 1986 Act?

    • Greg72

      As we are talking about a Scottish-registered company, it is the Insolvency (Scotland) Rules 1986, Rule 4.80, which would apply. Assuming that the notice referred to there hasn’t been given, I think it is too late now, as there seems to be a 28 day period within which notice has to be given. In addition, I don’t think any of the ‘suggested’ directors were being thought of then!

      • duplesis

        true, of course – I didn’t check the extent of the 1986 rules, and it would be the Scottish version which applied.

        Nonetheless, whats to stop an application for leave under 216(3)?

        • Greg72

          Fair point! I think Paul, in his post, suggested such an application or applications might cause further embarrasment by ‘dirty linen’ being aired in Court.

  7. Ed Paisley

    I see your reference to shadow directors Paul. Aren’t shadow directors prohibited by CA86? If Chico attempts to pull the strings behind the scenes then he is breaking the law. Hellishly difficult to prove of course.
    Seems to me that practically everyone associated with Sevco should be dragging a ball and chain and wearing a suit with arrows on it.
    Am I correct in saying that in the early 70s, Rangers had a no facial hair policy! Now they all have rap sheets and a maze of dodgy companies (what the f is Abcdefgh Ltd)?

  8. Raymilland

    The game’s up. If that any football club wishes to continue to play football at Ibrox, with any feasible financial stability, then that club cannot be called The Glasgow Rangers.

    TRFC currently has a burden of debt that would sink a battleship.

    The potential ‘footballing debt’ from the UTT Tribunal would prevent any rescue of the holed ship.

    TRFC is too much at risk as to be licensable to play.

    The only option is to call it quits, apply for admission to the third division as ‘The Teddy Bears FC’, blue strips/Ibrox, and hope that the fans will turn up.

    • Ed Paisley

      Hi Ray Milland
      I loved you in The Lost Weekend BTW. Cam says it wouldn’t matter if the Sevco Blues were called the Mighty Morphen Power Rangers because the fans would still roll up.

      My feeling is that ordering a change of name would have symbolic importance to the cheated creditors. Perhaps the fans would continue to roll up, but the stain on the club’s character would be always apparent. Maybe eventually they could return to the old name – I see even Thomas McCulloch the axe murderer has found redemption.

      • ecojon

        @Ed Paisley

        Let’s hope he doesn’t find out how easy it is to buy a brand-new shining axe in B&Q – I’m afraid that leopard won’t be changing any spots.

    • Niall Walker

      Morning Ray,

      I may be talking to the trees but I cannot think of the ” footballing debts ” that would be associated with an UTT decision reversal, surely if Rangers oldco loses then the unpaid tax would be a PAYE-NIC debt owed by the oldco to HMRC, and form part of their tax liabilities, nothing to do with newco.

      • Raymilland

        Revenue may pursue individuals in relation to EBT’s

        http://scottishfootballmonitor.wordpress.com/2013/04/13/scottish-football-and-the-case-for-a-bismarck/comment-page-64/#comment-48665

        “You will also recall that the 5 way agreement supposedly binds the current administration at Ibrox to paying the “footballing debts”! Can there be a more obvious footballing debt than the wages and financial obligations due to the players who played for the club under valid and legal registrations?”

        • Niall Walker

          Cheers Ray, interesting read and I see where you are coming from, here are my thoughts.

          I believe the UTT will rule against Rangers, and lets assume as in the case of JP Morgan they may pursue the individuals for outstanding tax.
          So the key area is the nature of the debt, and does a letter of indemnity make it a footballing debt ?

          In the link provided it mentions this:

          ” However, what does not seem to have been sufficiently stressed in the HMRC argument and/or picked up at FTT level, is the argument that whatever these trusts and loans were ( legal and real or not ) they were only funded by Rangers PLC as a result of players and others entering into a contract of employment.”

          If the loans cannot be proven to be conditional on employment then the players are onto plums, its not a footballing debt, it was a personal arrangement one that by accepting a letter of indemnity had risks attached.

          The very fact HMRC did not stress the link between EBT and employment suggests there is evidence against it being a condition of employment, and this makes the debt personal and nothing to do with football or the SFA.

          However if a player had a letter from Rangers that the loan was a condition of their employment then the pendulum would swing back to it being a football debt, but was there not an investigation that stated no such letters existed ?

      • Carntyne

        Exactly the point being made Niall.

        The Sevco Zombies want nothing to do with the old club when it comes to debt, but claim they are the same club when it comes to titles and history.

        DimDummies.

        You sound more like a Zombie every day.

        If you keep it up East Fife will simply be a forgotten memory.

        • Niall Walker

          I simply asked a question, kindly await on the answer before you jump to any zombie conclusions, if you keep this up your tedium will not be a forgotten memory.

    • gortnamona

      Ray
      ” The only option is to call it quits, apply for admission to the third division as ‘The Teddy Bears FC’, blue strips/Ibrox, and hope that the fans will turn up.”
      Or
      “The Broxi Bears FC”

  9. Niall Walker

    It seems to me the law is there as a deterrent to prevent either negligent or fraudulent directors from benefiting from or repeating their actions. It is fairly obvious no directors were rewarded for the liquidation of Rangers since their shareholding became worthless and there are no indications of any directors rewarding themselves for the 12 month period prior to liquidation.

    This leaves negligence, and in my view the negligence was in financial governance, this points fingers at the directors responsible for the financial governance of Rangers. I don’t think it is realistic to hold every director responsible just the ones who are responsible for the finances of Rangers.
    In both cases it seems neither Dave King nor John Grieg were involved in any financial decision making, and on this basis I cannot see how the court could object to their directorship of a phoenix company.

    Usually it is the CEO, the finance director and the Company Secretary that carry the can for improper financial governance, and I would doubt any of these3 would get past the courts.

    • Niall are not all portfolio directors responsible for the financial good behaviour of a company. It’s only non exec directors who cam claim “I knew nothing”. That’s the theory, but I accept the reality is different.

      • Niall Walker

        Mac.

        If you are a director in charge of engineering then your financial responsibilities are to do with engineering, I fail to see how anyone who does not have access to the accounts can be held responsible for their governance.

        • gortnamona

          Niall why don’t you check before posting? Its no difficult.

          Responsibilities of Directors

          11. Does it matter if I don’t get to see management accounts and other information?

          “Yes. Without the right information, it will be difficult for you to fulfil your responsibilities as a director, and therefore protect yourself from claims. Your responsibilities include the requirement to exercise an acceptable degree of care in your actions as a director.

          In many companies, individual directors take primary responsibility for particular areas, such as the finance director for financial matters. Even so, every director would normally expect to see management accounts and any other important information regarding the overall position of the company. If the company gets into financial trouble, so that directors’ actions are scrutinised by a liquidator or administrator, each director, whether financially literate or not, will be expected to have given their attention to the accounts, queried any aspect that they did not understand and pressed for appropriate remedial action.”
          http://www.lawdonut.co.uk/law/ownership-and-management/the-board-of-directors/your-responsibilities-as-a-director-20-faqs

          • Niall Walker

            gort,

            I stand corrected, any executive director who does not insist on seeing management accounts is neglecting their responsibilities, my only excuse is I have never had any other directors in my companies( except my wife) and never had any reason to consider it.

            The fact John Greig resigned for this very reason should have alerted me to this fact, I also discovered Dave King was not an executive director of Rangers, only a non-executive director and he doesn’t have the same responsibility.

            Gort 1

            Niall 0.

        • Ed Paisley

          We are talking about a plc with Rangers. With a private company all you need is one director – no need for a Financial Director or a Company Secretary. All governance duties and responsibilities can be vested the one director.

    • Monti

      Morning Milk tray……

  10. Monti

    Morning Paul, Gripping stuff as usual. I will post in time, at the moment I’m getting my replica 1967 European cup sized bowl & heading for the freezer for some Paddy McCourts Ice cream, I just can’t get enough! 😀 hhaaahhhaaahhgaaa lol….aaaaaaaaa…Carson…aaaahhhhaaaaaa

  11. Monti

    Q. When the Huns sing of ‘Derry’s Walls’ are they referring to Walls Ice cream?…..just asking?….. Carson have you taken Chisel out for a walk this morning, he’ll be barking at the door. Come on Carson get up Hammer needs a wee…….:) ……can you get a ’67 ice cream? If not a 99 will do, come on Carson get up, there’s a guy outside your house with a 1998 rangers shell suit on, cheap gold bling & has a pit bull with him called Chisel…he has your crystal meth baggie. 😀 ……remember to put your tooth in before you answer the door, or he’ll no understand you! There is no rangers,they are gone!

    • Carntyne

      Monti
      May 8, 2013 at 10:17 am

      Q. When the Huns sing of ‘Derry’s Walls’….
      =================================

      Shouldn’t that be Londonderry’s Walls?
      They seem quite picky normally.

      • gortnamona

        Carntyne

        ” Who are you to tell the people what they should be singing about?”

        From a debate in the Bear’s Den on the very same song. I kid you not.

  12. Geddy Lee.

    I hope the liquidators allow the new club to continue to have the word rangers in it’s name. As a fan, I have had my “pound of flesh” as far as punishment for the club is concerned.

    The sevocs have been hit hard enough, time to let them get on with it.

    As for the “Fit and Proper test” Regan admits that is a “myth” . Regardless of King’s past, I believe all “the rangers” have to do is say he’s fit and proper, and that will do nicely for the SFA/SPL.

    I’m reasonably sure that would apply to all clubs. I think if the Cardigan flounces out that would be a serious blow, leaving no more “rangers men” in the boardroom, especially if Murray is booted out.

    Corperate law however could be problematic.

    Has he made any “pledges” ala Green yet?

    Training schools across South Africa perhaps?

    A shop in JO-BURG Airport?

    A few moon-beams is all it will take to have them eating out of his hands. LOL

    • Carntyne

      Geddy Lee.
      May 8, 2013 at 10:34 am

      I hope the liquidators allow the new club to continue to have the word rangers in it’s name.
      As a fan, I have had my “pound of flesh” as far as punishment for the club is concerned.
      =====================================================

      I won’t have had mine until they are extinct.

    • Monti

      What punishment have they received Geddy? I don’t agree with you mate, only when Ibrox is demolished will I be satisfied,……only then!!!!

  13. Monti

    What a wonderful day out, fantastic decision by the Glasgow city fianna, I mean council, to allow the greatest club in the world to expand the area around Celtic park, Brother Walfrid will be pleased by this,Celtic are blossoming & growing. 125 UNBROKEN years, & we can take satisfaction that Rangers died during this period! HAIL GLORIOUS ST.PATRICK!

  14. JimBhoy

    Off on a tangent as usual… IMO these guys are useless. I have seen blatant pens right in front of these officials and they do nothing. I cannot remember any time they added value….

    http://www.bbc.co.uk/sport/0/football/22440422

    ps Who switched the sun off today…?

    • Budweiser

      JimBhoy.
      What they need is video technology, like rugby, and also ‘goal line technology’. Unfortunately there is no money for this.

  15. cam

    As i said yesterday an organised bunch of internet bams totally concentrated on one thing.They have different methods,and different specialities.
    Its like the Starship Trooper movies where the bugs are being controlled by a central brain 🙂
    Mobile Infantry will prevail,,,Citizens of Ibrox are guarding the walls!

    “The bugs are not like us. The Pseudo-Arachnids aren’t even like spiders. They are arthropods who happen to look like a madman’s conception of a giant intelligent spider, but their organization, psychological and economic, is more like that of ants or termites; they are communal entities, the ultimate dictatorship of the hive.”
    ― Robert A. Heinlein, Starship Troopers

    • gortnamona

      Poor sad Cam

      I have given you a TD to cheer you up. Niall won’t out distance in that department if I can help it. Though I have to admit that his ability to post pompous nonsense is quite astonishing.

      Arb Urns seems to have a high opinion of Duplesis and I see he has returned to the fray, so I suggest you return Niall to the bench and make sure he does his homework, if he ever hopes to rejoin the first team.

    • Fergie

      You talk a lot of shite m8

  16. @Thanks Paul.
    For people out there who know company law, backwards! you have clearly explained why buying the assets from a company going straight to liquidation, was not a viable option for Chicco.
    Thus proving that the shares of wee Craigy, were vital to open a path to a CVA., from which they could then be purchased, and allow a team in blue to play at Ibrokes.

  17. cam

    Get up in the morning checking my twitter sir
    so that every loon can be fed
    poor them the McConvillites

    the bums on the green seats they pack up and leave me
    they are just too ugly to be seen
    poor them the obsessovites

  18. JimBhoy

    http://www.scotsman.com/sport/football/sfl-division-three/walter-smith-may-quit-over-malcolm-murray-ousting-1-2923057

    Suggestions Wattie is walking, hardly surprising, a lack of leadership IMO or maybe chico still around still pulling strings.. He got the rangers men in to encourage investment and now they are surplus to requirements..

  19. Geddy Lee.

    Cam, would you like to see King or Green back at the helm, or are you waiting to see what “Leggo”
    has to say on the matter before forming your “opinion”.

    Attempt to respond seriously, and not just with one of your increasingly unfunny “Scenarios”.

    Quality over quantity please.

    ps I apologise for asking you a direct question about “the rangers”. I know how much you detest that. LOL

  20. Geddy Lee.

    JImBHoy, one thing about “Walter”, you could never accuse him of being loyal. LOL

  21. In fact if the liquidators are concerned over the conduct of directors, they can look at all directors in post at any time in the 3 years prior to the date the company went into administration/liquidation.
    They are required to make a report to the DTI if they feel there are sufficient grounds and disqualification could follow.
    So Paul Murray and Martin Bain are far from being unaffected.
    Additionally HMRC have some exceptional powers to recover both paye and nic from directors in certain circumstances. Those powers have historically been little used but recently there have been 3 cases to my knowledge where the powers have been invoked.
    In straightened times, all sources for recovery of tax avoided may be pursued.

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