Tag Archives: Financial Assistance

Rangers + Ticketus – Part 3 – Loans, Sales, Financial Assistance and Unjustified Enrichment

On Friday Lord Hodge issued his decision in the application by D&P for “Directions” in connection with their handling of the Rangers administration.

Prior to going into the bulk of my post, can I suggest a visit here for another, but different, legal perspective on why a Rangers “fire sale” is the most likely outcome?

Back to the regularly scheduled programming –

From Lord Hodge’s judgment I have extracted the following section:-

[16] The administrators’ legal advisers have challenged the enforceability of the STA (Season Ticket Agreement). It envisaged that Rangers would use the payment for the first tranche STA tickets to effect the repayment of its debt of about £18 million to Bank of Scotland plc. It was also proposed that Rangers would lend £16 million to Wavetower Limited (now called The Rangers FC Group Limited) to enable that debt to be repaid and that the bank’s debt and its securities would be assigned to Wavetower Limited (Schedule 19). The administrators’ legal advisers have asserted that the STA is illegal on the ground that it was an agreement for the giving indirectly by Rangers of financial assistance for the acquisition of its shares contrary to section 678 of the Companies Act 2006. The existence of this challenge is not however relevant to the directions which I have to give as I must assume at this stage that the Ticketus agreements are valid.

As I mentioned in my last post, this discloses (a) that Rangers lent, or it was proposed that it should lend, Group £16 million and (b) Duff & Phelps are trying to strike the Ticketus deal down on “financial assistance” grounds.

 

What Chance Do the Administrators Have of Striking Down the Ticketus Deal as Illegal “Financial Assistance”?

Slim.

OK – I’ll explain. My “workings” are shown below but, put simply, it looks as if, even if the loan from Rangers to Group was “financial assistance” the sale to Ticketus is a normal and legitimate business transaction. Whilst it might be argues that the sale is “tainted” by illegality in the loan deal, the two transactions can be separated.

However, even if the Ticketus “sale” is struck down, Ticketus would have a claim against Rangers for return of the money on the grounds of “unjustified enrichment”. Ticketus will either have a valid contract or will be creditors. They will not, to coin a phrase, be walking away!

Continue reading

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Filed under Administration, Football, Rangers, Ticketus

Rangers’ Administration – Lord Hodge’s Decision re Ticketus – Part 1 – New Information

 

Yesterday Lord Hodge issued his decision in the application by D&P for “Directions” in connection with their handling of the Rangers administration – [2012] CSOH 55.

 

New or Extra Information from the Case

 

1                     Rangers Football Club PLC (Rangers) was and remains unable to pay its bills as they fall due.

 

2                     The application for the Administration Order referred to a £9 million liability to HMRC.

 

3                     The administrators (D&P) want either to rescue Rangers with a share issue, or to sell off the assets of the company, in either event with a CVA.

 

4                     D&P wanted the court to give them carte blanche to breach the Ticketus deal, without fear of legal action by Ticketus.

 

5                     D&P based their original sale prospectus on the Ticketus deal being void, but had to amend this to include the possibility of it staying in place.

 

6                     “Ticketus” is a combination of two Limited Liability Partnerships, Ticketus LLP and Ticketus 2 LLP, both consisting of a large number of companies under the Ticketus umbrella.

 

7                     The Ticketus agreement was with Rangers, not with Rangers FC Group Ltd (Group) or anyone else.

 

8                     The agreement was signed, and first payment of £20 million made, on 9th May, 3 days after the takeover.

 

9                     It was proposed that Rangers would lend Group £16 million.

 

10                 A second payment of £5 million was made six days after Martin Bain was granted a court order freezing sums in the Rangers accounts.

 

11                 Notwithstanding any other argument D&P have, they are trying to have the Ticketus deal declared unenforceable on “financial assistance” grounds.

 

I aim to discuss the new information revealed in this case below in more detail.

In later posts I want to explain some of the implications of the case for Rangers’ future and potential sale of the Club.

Finally, it is also the case that the decision could have serious consequences for the Scottish finance sector, which I will try to address. As always, I am happy to be educated and corrected by those wiser than me.

 

Do We Learn Anything New From The Decision?

Yes.

This case and Lord Hodge’s decision are the first public acknowledgement of many issues which have been causing confusion since the Rangers situation started to deteriorate.

The relevant, and in some cases, newly revealed facts are as follows:-

Rangers Insolvency

As we know D&P had to go back to the court on the basis that their original appointment by Rangers was defective, because of a failure to notify the FSA. When Mr Sellar (D&P’s QC) asked the court to grant an administration order backdated to 14th February, this confirmed (a) that Rangers accepted that it had been insolvent as at 14th February and (b) that D&P accepted that Rangers remained so on 19th March when the retrospective administration was dealt with.

Mr Sellar referred the court to a debt of over £9 million to HMRC. That is assumed to relate to the unpaid VAT and Income Tax accrued by Rangers whilst under the control of Mr Whyte, or more correctly of his companies.

 

How Do D&P Aim to Get Rangers out of Administration?

D&P have come up with two alternative ways of achieving the purposes of administration. They are laid down in the Administration Rules. The primary purposes are, in order, to rescue Rangers as a going concern, which failing, to achieve a better result for the creditors as a whole than if it was wound up without first being in administration.

D&P have identified, and told the court, that they see two realistic options.

Option one is a “subscription of new shares in Rangers and a sale of the present majority shareholding combined with a Company Voluntary Arrangement (CVA) between Rangers and its creditors”.

The alternative is “a sale of the business and assets of Rangers, again combined with a CVA”.

I will come back to these later. Continue reading

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Filed under Administration, Bain v Rangers, Companies Act 2006, Craig Whyte's Companies, Football, Insolvency Act 1986, Rangers