Admin cases

[ValeMadrid87]

Ok I was just looking for Teams that have been in admin and how there cases were resolved and what they had too do.. Quite interesting..

 

But there is alot of info here so only start reading if you have plenty of time on your hands lol

 

 

Leeds United Football Club

 

To start there will be a summary of how Leeds United Football Club (LUFC) got into administration.

 

LUFC was held in a limited company called ‘Leeds United Association Football Club Ltd' (LUAFC). In the 2002/03 season the club had debts of £79 million. This forced player sales and the club were relegated from the Premier League in 2004 with debts of £103million. In 2004/05 Elland Road, the club's stadium, and the club's training ground were sold. This was not sufficient to alleviate the financial position and in the 2005/06 season Ken Bates bought a 50% stake of LUFC for £10million and became the director of: Leeds United Football Club Ltd (company number 05334247); LUAFC; Leeds United Stadium Ltd; Leeds United Retail Ltd; and Leeds United Investments Ltd. On the 28th April 2007 Leeds' relegation to League One appeared certain. On 4th May 2007 administrators KPMG were appointed as the administrators of LUAFC by the directors out of court under Insolvency Act 1986, Schedule B1, paragraph 22. LUFC were docked ten points and were relegated to League One.

 

 

The administration process of LUFC will now be examined in detail.

 

The administrators KPMG were appointed on the 4th May 2007. They were appointed by the directors of LUAFC. The administrator quickly agreed to sell the business, for an undisclosed sum, to a newly formed company called Leeds United Football Club Ltd (company number 05765697) (Directors – K. Bates, S. Harvey and M. Taylor). The administrator had received bids from other parties but had decided that Bates' offer was the best option for the creditors and LUFC. The administrators proposed a CVA based on this offer and called a creditors' meeting in which the creditors would consider the offer and decide whether to approve it or not. If the CVA was approved this would comply with the FL's insolvency policy which states that a football club which is in administration must exit administration via a CVA.

 

On 1st June 2007 Bates' offer was narrowly accepted at a stormy creditors meeting. Bates needed 75% of creditors in value of the creditors present, in person or by proxy, and voting to accept the proposed CVA. He received 75.02%. A recount was ordered due to the extremely narrow acceptance. There were no reports of a meeting of the clubs members being held.

 

The CVA proposal was approved by the recount as 75.2% of creditors had voted in its' favour. Therefore as long as there were no challengers to the CVA acceptance in the statutory 28 day period and the FL approved the sale, the sale would be complete. The FL's approval was required in order for the ‘football share' to be transferred back to the new company which would hold LUFC.

 

On the 3rd July 2007, one hour before the end of the 28 day period to challenge the CVA, HMRC lodged a challenge to the CVA “based on procedural matters relating to the way which KPMG conducted the creditors' vote”. As a result of this, the administrators announced that they would be putting the club back up for sale on the 6th July 2007. This was due to the fact that the legal challenge would have stretched into the pending football season and LUFC may have been prohibited from starting the season whilst the club was in legal turmoil. The CVA challenge of HMRC was avoided due to the club being put back up for sale.

 

The Football League announced that Leeds could start the new season (the 2007/2008 season in the FL League One).

 

On the 8th of July Bates stated that he would take legal action if the club was sold to a rival bidder.

 

On the 11th July 2007 the administrators announced that they had sold the club to Newco (Bates' consortium) for an undisclosed sum. It was unknown how much of the club's debt Bates intends to pay off. The club's administrator stated “The approved deal represents the best result for creditors in the circumstances and we believe provides the club with the best chance of survival”.

 

On 3rd August 2007 the Newco was transferred the ‘football share' for LUFC by the FL, allowing LUFC to start the season. However, the FL gave LUFC a fifteen point deduction as they had failed to come out of administration via a CVA. LUFC appealed, but their appeal was rejected on 9th August 2007 by the FL chairmen at a meeting in London. However, LUFC did not accept this decision and decided to issue the FL with a High Court writ claiming that the FL acted ‘outside of their jurisdiction' in handing LUFC an additional fifteen point deduction. LUFC accepted an offer from the FL of a three man independent arbitration hearing in private. The matter is still ongoing.

 

I will now summarise the main facts of LUFC's administration.

 

The administrators KPMG where appointed on 4th May 2007 by the directors of LUAFC and an administration order was obtained. The club was sold to the Newco on July 11th 2007. This means the club was in administration for nine weeks and five days.

 

A CVA was agreed but was discarded after a challenge brought by the Inland Revenue. The club was subsequently sold without a CVA.

 

The Football League's Insolvency policy was not followed, therefore LUFC were deducted fifteen points from the next season (2007/2008) as well as the original ten points from entering administration. However, LUFC have appealed against the deduction of the additional fifteen points and have agreed to a three man arbitration in private to decide the issue. This issue is still ongoing.

 

 

 

Wrexham Football Club

 

To start there will be a brief account of the circumstances that led to the financial difficulties and ultimately the administration of Wrexham Football Club (WFC).

 

WFC was held in the limited company Wrexham Association Football Club Limited (WAFC). In May 2004 the property developer, Alex Hamilton, took over as chairman of WFC after acquiring its stadium, the Racecourse Ground through his company Crucialmove Limited, in June 2002. In August 2004 the club revealed it had debts of over £3 million. Then in October 2004 the Inland Revenue, as a creditor of the company, issued a petition to wind-up the company compulsorily. Hamilton also resigned as chairman of the board of directors, but remained the owner of WFC. On the 3rd of December 2004, with debts of over £4 million WAFC were placed in administration by the High Court after the company's directors applied for an administration order to protect the club from liquidation. The club became the first to be deducted ten points under to the Football League's rule change.

 

There will now be a detailed examination of the administration process of WFC.

 

On the 3rd December 2004 WAFC were placed in administration after being granted an order by the High Court. The administrators, Begbies Traynor were appointed.

 

In June 2005 the administrators of WAFC began legal proceedings to seek an order from the court that the legal and beneficial ownership of the freehold to the Racecourse Ground be vested in the club. Ownership was vested in Mr. Hamilton's company, Crucialmove Limited. This could be done as the administrator of a company is given the status of an officer of the court. This enables the administrator to attack transactions which took place prior to his appointment on the grounds that “they amount to transactions at an undervalue, preferences, extortionate credit transactions, vulnerable floating charges or transactions defrauding creditors”. It is not clear under which of the grounds was brought against Crucialmove Limited. Crucialmove Limited had 28 days to defend itself in the proceedings.

 

In September 2005 the Surrey property developer Andy Smith and a consortium headed by Wrexham car dealer Neville Dickens emerged as possible buyers for the club.

 

On 20th October 2005 the administrators of WAFC announced that they had won the battle to regain ownership of the Racecourse Ground. A judge at Birmingham High Court found against the club owner, Hamilton's company Crucialmove Limited stating that they should not have bought the freehold to the stadium as the evidence was clear that Crucialmove Limited, the buyer of the Racecourse Ground, had notice that a director of the company was making the sale in breach of his fiduciary duty and without WAFC's informed consent; the buyer was therefore not acting in good faith and so could not rely on the common law rules or statutory provisions protecting third parties in such situations. The sale of the WAFC was now clear to go ahead; however, £300,000 of the proceeds from the sale of the assets of WAFC must be given to Crucialmove Limited. This was the amount which Crucialmove Limited originally paid for the Racecourse Ground.

 

On 19th December 2005 Crucialmove Limited won the right to appeal against the Birmingham High Court's decision.

 

The 14th March 2006 saw Crucialmove Limited lose their appeal and the Racecourse Ground remained under the control of the administrators.

 

The administrators of WAFC offered the company's assets, including WFC for sale. The administrators made a proposal of a CVA and arranged meetings of the company's creditors and members. WAFC's creditors unanimously backed the takeover bid by Wrexham Football Club (2006) Ltd (the Dickens consortium) on 30th May 2006. The creditors agreed a £3.25 million deal. In a separate meeting the company's members voted in favour of the takeover.

 

In June 2006 the FL Board voted to accept that the accepted CVA, which saw WFC(2006) takeover WAFC, had satisfied the FL's insolvency policy. There was some question as to whether the CVA had been approved inside the eighteen month deadline. Therefore the FL would grant WFC their ‘football share'.

 

On 3rd August 2006 WFC(2006) took over the assets of WAFC.

 

The main points of the administration process of WFC will now be summarised.

 

On 3rd December 2004 WAFC were granted an administration order requested by the club's directors and the administrators Begbies Traynor were appointed. The club was sold to WFC(2006) on 3rd August 2006. This means that the club was in administration for twenty months. This is longer than the FL allows, however, the League was satisfied that the deal was in place in time.

 

The Club was sold via a CVA where the clubs creditors unanimously voted in favour of the proposal of WFC(2006).

 

 

Bradford City Football Club

 

To start there will be a brief account of the circumstances that led to the administration of Bradford City Football Club (BCFC).

 

BCFC were held by the limited company Bradford City AFC (1983) Ltd (BCAFC), who went in administration on 16th May 2002. A CVA was proposed and agreed by the clubs creditors and members at their respective meetings and implemented on 1st August 2002. BCAFC exited administration on 31st January 2003. However, BCAFC defaulted on its payments to its creditors under the accepted CVA. Therefore, on 27th February 2004 the clubs creditors applied for an administration order and BCAFC was placed back in administration.

 

The administration process of BCFC will now be examined in detail.

 

On the 27th February 2004 BCAFC were placed back into administration after the club's creditors filed for a court order.

 

Neil Brackenbury and Mike Moore of Kroll's Corporate Advisory and Restructuring Group were reappointed as the administrators of BCAFC. One of the administrators stated that the club had to “seek the protection afforded by administration” while it attempts to solve its current financial situation. The administration was a result of the club failing to make the repayments of their CVA.

 

BCFC began to fear that their effort to save the club was under threat as the Inland Revenue had challenged a similar rescue package for Wimbledon Football Club Ltd.

 

The administrators put together a proposal of a CVA which would see Bradford City Football Club Limited (Newco) buy the assets of BCAFC which included BCFC. On 5th May 2004 a proposed creditors meeting to discuss a CVA proposal was postponed one week to the 14th May 2004 as the club felt that it could gain the majority vote but would struggle to satisfy the other essential requirements of the proposed CVA.

 

The proposed CVA was withdrawn on 12th May 2004. This was due to the fact that the club was not on a “sound financial footing”. Therefore the creditors meeting on 14th May was cancelled.

 

On 29th July 2004 the administrators of BCAFC announced that the FL had given BCFC permission to play in the FL the subsequent football season. This was required as a club loses it's ‘football share' in the FL when it enters administration and cannot take part in the FL without the FL's permission.

 

The CVA presented to the creditors of the company on 19th August 2004 was approved by 78% in value of the club's creditors. The CVA would see the Newco purchase the assets of BCAFC, including BCFC. However, the acceptance was subject to a “number of conditions with must be fulfilled”. The actual amount was undisclosed.

 

On 30th of September 2004 the Inland Revenue announced that it would not appeal against the CVA.

 

Julian Rhodes completed his purchase of BCAFC on 10th December 2004.

 

The main points of the administration process of BCFC will now be summarised.

 

BCAFC went into administration on 27th February 2004 as the creditors of the company got an administration order granted. The previous administrators and supervisors of the defaulted CVA, Kroll's Corporate Advisory and Restructuring Group, were reappointed as the administrators of BCAFC. The club exited administration on 10th December 2004 as J. Rhodes bought the club via a CVA through the Newco. This meant the club had been in administration for nine months and thirteen days.

 

 

Carlisle United Football Club

 

To start there will be a brief account of the circumstances that led to the administration of Carlisle United Football Club (CUFC).

 

The directors of Carlisle United Association Football Club (1921) Ltd (CUAFC), the company which held CUFC, sought the appropriate professional advice and filed an application to appoint an administrator, by court order, to manage the company's affairs immediately after a winding up petition was presented to them by the Inland Revenue. The Directors' petition was granted on June 6th 2002 by the High Court.

 

The following is a detailed examination of the legal processes involved in the administration of CUAFC.

 

On the 6th June 2002, on the application of the directors of CUAFC, an administration order was granted by the court and the company went into administration. The administrators BKR Haines Watts were appointed at the request of the company's Directors. The administrators stated that the purpose of their appointment was to rescue the company as a going concern.

 

The administrators of CUAFC proposed a CVA which offered creditors a full 100% reimbursement of their debts. The creditors were offered a full reimbursement as at the time the current owner and chairman of CUFC, Michael Knighton, was trying to sell his 93% shareholding in CUAFC. This left CUAFC in turmoil and the creditors of the company pushed for the full reimbursement of their debts. This would be considered by the creditors and members in their respective meetings which would be called by the administrators. The creditors' meeting to decide on the proposed CVA was scheduled for the 2nd August 2002.

 

It was announced on 26th July 2002 that Irish businessman John Courtenay had had an offer accepted by Knighton. The offer was for Knighton's full 93% shareholding in CUAFC. However, the offer was subject to the proposed CVA being accepted.

 

On the 2nd August 2002 Courtenay gained Knighton's 93% share in CUAFC as the proposed CVA was accepted by the required majority at a meeting of company's creditors.

 

Courtenay put £500,000 of his own money into CUFC to help repay the Club's outstanding debts.

 

CUAFC came out of administration on the 15th October 2002. The company was cleared to come out of administration at a High Court hearing. At the hearing the administrators were discharged and full control was handed over to the new owner John Courtenay and the Directors. However, David Elliot, of the administrators BKR Haines Watts remained as supervisor to “ensure the creditors of the club are paid as agreed by the CVA”.

 

CUAFC exited the CVA on 29th October 2003.

 

I will now summarise the main points of the administration process of CUFC.

 

CUAFC entered administration on 6th June 2002 after the Directors petitioned the High Court for an administration order. This was done as the Inland Revenue had presented the company with a winding-up petition. The administrators BKR Haines Watts were appointed by the directors. The company exited administration on 15th October 2002 after a High Court hearing cleared them to come out of administration. However, one of the administration team remained as a supervisor to the uncompleted CVA. The Club was in administration for five months and nine days.

 

The company's creditors accepted a CVA on the 2nd August 2002 and were entitled to receive 100% of their debts. The CVA continued after the club had exited administration and ended on 29th October 2003.

 

 

Concluding Comments

 

This chapter has considered the administrations of four companies in a particular industry in light of the relevant, current law considered in chapter one. The industry considered is that of the modern football club. The administrations of: Leeds United Association Football Club Ltd (LUFC); Wrexham Association Football Club Limited (WFC); Bradford City AFC (1983) Ltd (BCFC); and Carlisle United Association Football Club (1921) Ltd (CUFC).

 

The main problem with the administrations of limited companies which hold football clubs centres around the fact that the FA and FA have a policy which states that all of the ‘football creditors' must be paid in full. This is known as the ‘super creditor rule'. In many circumstances this rule has led to challenges to the CVAs of the limited companies which hold football clubs by unsecured creditors. This is due to the fact that the full payment of the ‘football creditors' substantially reduces the amount available for the repayments of the debts of unsecured creditors of the companies. The HMRC challenged the proposed CVA of Leeds United Association Football Club Ltd. There were also worries about possible challenges to the CVAs of Wrexham Association Football Club Limited and Bradford City AFC (1983) Ltd.

 

There were also formations of phoenix companies. This is to be expected in this particular industry as football clubs change their names very infrequently and the limited companies which hold the clubs usually have a similar name to the club.

 

Their seemed to be no trend in the durations on the administrations of the four companies considered.

 

The information gathered in this chapter will be used in the next chapter where the main areas of legal difficulty that the companies encountered will be examined in detail.

 

Chapter 3 – Areas of Legal Difficulty Encountered by Football Clubs that are Companies Whilst in Administration

 

The previous chapter considered the administrations of four football clubs that are companies. The main problem areas identified were: problems with the ‘super creditor rule'; problems concerning challenges to the CVAs of the companies; and concerns over phoenix companies being formed.

 

This chapter will discuss some of the legal problems encountered by the four clubs which were highlighted in the previous chapter. This chapter will strive to show that a large proportion of the problems are the result of a conflict between the relevant legal practices and statutes that relate to company insolvency and the FA and FL's insolvency rules.

 

 

The ‘Super Creditor' Rule

 

The ‘super creditor' rule (SCR) states that ‘football creditors' (these include the FA, the Football League, players, etc) must be paid in full as part of any CVA entered into by the club. In effect this gives the ‘football creditors' preferential status over the other unsecured creditors.

 

There has been much criticism levelled against the SCR, however the FA and the FL have continued to back the rule for a number of reasons. In a document entitled ‘Current Insolvency Policy' the FL sets out principles to guide companies which hold football clubs that experience financial difficulty. Their justification of the SCR begins with the opinion that no club should gain an advantage over their competitors by not paying their creditors in full. The document classifies the creditors into football creditors and non-football creditors. In relation to the football creditors, the FL states that it is ‘not tenable' for the club to retain its ‘football share' if football creditors are not paid in full.

 

This issue is also addressed by the FA in a 2004 Financial Advisory Committee Report. Reviewing the previous season's problems, this report stated that the Football Authorities have “good arguments” in favour of the SCR. It states that the rule does not “encourage the preference” of one group of creditors over the other. They claim that the Rule merely states which creditors must be satisfied in order for the club to retain its' sporting status. It also says that the SCR helps to avoid the “domino effect” of clubs defaulting on one another and thus endangering the financial status of other clubs.

 

Subjecting this to analysis, it seems that the main objective justification for the SCR is that it functions to maintain competition and fairness between the insolvent club and its competitors. In turn it ensures that clubs “cannot overreach themselves on players' pay, sack them and wipe the slate clean”. If this practice was allowed to occur players would think twice about joining a club who were experiencing financial difficulties. The players would choose not to join a club that was in financial difficulty as there would be the possibility of them not being played if the club's problems worsened. The ability of the club to attract better players could allow the club to avoid insolvency altogether. This is due to the fact that better team performances can easily result in the club gaining more money from gate receipts and competition prize awards.

 

The report also admits that a previous report by the Independent Football Commission in 2003 recommended a review on the ‘current relevance of, and justification for, the football creditor rules'. It seems that the recommended review was not performed, or at least the results were not satisfactory, as insolvency experts have recently predicted that spate of football club collapses could force the Government to take action on the SCR as they would be continually losing out on tax.

 

The SCR has also been criticized on the basis that it has been a “constant thorn in the side” of the administrators of insolvent football clubs. One of the problems faced by the administrators was seen to be the fact that the SCR leaves the administrator dealing with two sets of contradictory rules, the business and tax law, and the SCR. This situation makes it difficult for the administrator to achieve the objective of administration and delays the sale off of the business in administration given difficulty of gaining approval of necessary majority of creditors.

 

The Rule has also been criticized by a Member of Parliament. In a meeting with her fellow MPs, Dawn Primarolo expressed her doubts about football's insolvency rules. Primarolo argued that the SCR conflicted with Government efforts to put all creditors on an equal footing.

 

There have been several legal challenges concerning the SCR by HMRC. These challenges have increased since the Enterprise Act 2002 abolished the Crown Preference Rule.

 

The case of IRC v Wimbledon Football Club Ltd saw the Inland Revenue apply to the High Court under the Insolvency Act 1986, s 6 for an order to revoke or suspend Wimbledon FC Ltd's CVA, which had received the required majority in a creditors' meeting. Here the Revenue's debt was preferential as it was before the abolition of the Crown Preference Rule. However, the Revenue still contended that it was unfair that the ‘football creditors' got 100% of their debt paid back whist they had to settle for a 30% return.

 

 

The Revenue challenged Wimbledon FC Ltd's CVA on two grounds.

 

They submitted a challenge on the grounds that the Insolvency Act 1986 s 4 (4) (a) was infringed. This section provides that a meeting shall not approve a CVA under which “any preferential debt of the company is to be paid otherwise than in priority to such of its' debts as are not preferential debts”. The Revenue was arguing that the payment of ‘football creditors' in full infringed this section as, at the time their own debt was preferential and they could only be expected to receive 30% of what was owed to them. The Revenue can no longer make a challenge under this section as their debts are no longer considered to be preferential. Mr. Justice Lightman held that s 4 (4) (a) did not preclude payment of non-preferential creditors ahead of preferential creditors by a third party's free money and not from company assets. This was due to the fact that the new buyer of Wimbledon FC Ltd, under the terms of sale and purchase agreement relating to the business, agreed to pay the ‘football creditors' from his own personal monies. This is due to the fact that the full payment of these ‘football creditors' was seen as a commercial necessity to the buyer of the club. The judge recognized that these of cases required “careful scrutiny” to ensure that the right judgment was made and the purposes behind the relevant provisions of the legislation were maintained.

 

The Inland Revenue also challenged the CVA under the Insolvency Act 1986 s 6. Under this challenge the Revenue argued that the CVA was unfairly prejudicial to their interests. This challenge also failed. The sale of the club could only go ahead if the ‘football creditors' were paid in full. The Judge commented: “I cannot see how the imposition on the Buyer of an obligation to do what commercially the Buyer has to do in any event can imbue the Arrangement with any unfairness…”. In other words, the buyer was only doing what was necessary for a beneficial sale. The Judge also commented that the obstacle imposed by the FL on the buyer may be objectionable, but it “exists, by common consent is legal and has to be surmounted”. The Judge went further than this. He mentioned that, even if he was satisfied that there were grounds to revoke the sale under s 6, he would not have exercised his discretion. He believed that to do so would be damaging to the Club, the Buyer, the administrator and it would confer no benefit on the Inland Revenue. This is because the only other option for the club other than this CVA was liquidation. The Inland Revenue would be worse off in a liquidation than it would be under the CVA.

 

It is “important to recognise that the League was not a party to the application and that no direct challenge was made to the legality of the football creditor rule”. However, this was an important case in terms of seeing whether a challenge relating the SCR would survive a court case. The decision here led to the Inland Revenue dropping a similar appeal against Exeter City FC.

 

Phoenix Companies

 

A ‘phoenix company' is a company which is formed from the remnants of a company which has recently gone into liquidation (Oldco). The new company usually has the same, or a very similar name to the Oldco. The choosing of a name which is the same, or very similar name to the Oldco is usually an attempt to hide the fact that the Oldco has gone into liquidation. This could enable the new company to enjoy the goodwill of the old business.

 

LUFC experienced some legal problems in this area. In order to examine the anti-phoenix provisions of the Insolvency Act 1986 s 216 in relation to LUFC it is necessary to outline certain facts that occurred in the insolvency of LUFC.

 

Ken Bates was a director of the old company, ‘Leeds United Football Club Ltd' (“Oldco”) from 17th January 2005 until 7th March 2006. Oldco went into compulsory liquidation on 6th March 2006. Bates was also a director of ‘Leeds United AFC Ltd' (“AFC”) from 20th January 2005 until 4th May 2007. Since 21st January 2005 he was director of ‘Leeds United Stadium Ltd' (“Stadium”), ‘Leeds United Retail Ltd' (“Retail), and ‘Leeds United Investments Ltd' (Investments). ‘Stadium' and ‘Retail' went into compulsory liquidation on 27th June 2007.

 

When ‘oldco' went into compulsory liquidation Bates had been a director of Stadium, Retail, Investments and AFC for more than twelve months. The ‘third exception' of Insolvency Rules 1986 rule 4.230 applied here. This enabled Bates to continue to act as a director of those companies without having to apply to the court for permission. However, ‘investments' had been dormant at some time during the twelve month period before ‘Oldco's' liquidation. The ‘third exception' does not apply to a company that has been dormant at any time during the twelve month period. Therefore, unless Bates applied by the 13th March 2006 for leave to act as a director of ‘Investments', and was given leave before 17th April 2006, making use of the ‘second exception', he would be in breach of Insolvency Act 1986 s 216. This would mean Bates could be subject to criminal penalties.

 

Bates became a director of Leeds United 2007 Ltd on 1st May 2007 and Leeds United Football Club Ltd (together the “Newcos”) on the 3rd May 2007 shortly after AFC went into administration. Bates needs to have obtained the leave of the court to act as a director of Newcos or he will be in breach of s 216. It was reported that KPMG, AFC's administrators, think that an application to court was made by Bates. However, HMRC believed that Bates did not have the courts permission to act as a director of Newcos. It was also noted that the Insolvency Service had no notice of any relevant application. The ‘first exception' under r4.228, notifying creditors when a new company acquires the business from an administrator or other appointed insolvency practitioner, could not apply in this case as Bates was already a director of ‘Newco'. If Bates did not have the courts permission he may have been liable for ‘Newco's' debts up to 6th March 2011.

 

On 20th October 2007 it was reported that Bates, and the two other directors in question, were allowed to continue to remain on as a director of Leeds United the Newcos as a High Court judge had granted his application. It was suggested that the court gave retrospective leave for the three men to act as directors of Leeds. If the court had not given leave Bates and the other directors could have been disqualified as directors of the companies. Bates was the chairman of the board of directors of LUFC and one of the companies in question was the company which holds LUFC. If Bates and the two other directors were disqualified it would have has a serious effect on the club and the company which holds it. LUFC would be thrown into chaos and uncertainty.

 

The possibility of phoenix companies arising in this particular industry is to be expected as football clubs change their names very infrequently and the limited companies which hold the clubs usually have a similar name to the club.

 

 

Company Voluntary Arrangement Problems

 

The FL's insolvency policy states that clubs must exit administration via a CVA, except in ‘exceptional circumstances'. This became a problem in the administration of Leeds United Association Football Club Ltd.

 

Leeds United Association Football Club Ltd did not exit administration via a CVA, as the previous forty-one league clubs that experienced financial difficulties did. It was thought that LUFC were in danger of not being granted their ‘football share' by the FL and not being able to start the football season. However, the FL eventually accepted the sale of Leeds United Association Football Club Ltd to Leeds United Football Club Ltd without a CVA under the ‘exceptional circumstance' exception. This was done reluctantly and the FL stated that they could not allow the company to work outside their strict rules concerning administration and imposed a fifteen point penalty for the start of the next football season. LUFC appealed against this decision. Their initial appeal was dismissed by the chairman of the FL clubs. However, this appeal is ongoing and LUFC have recently accepted an offer made by the FL. Their appeal will be heard by a three man arbitration in private.

 

Another major problem associated with the CVAs of the clubs studied was challenges to them by unsecured creditors, namely the HMRC. These were mainly caused by the SCR.

 

On 3rd July 2007 HMRC lodged a challenge to the CVA of Leeds United Association Football Club Ltd. The HMRC's grounds for appeal were “based on procedural matters relating to the way which KPMG conducted the creditors' vote”. The legal challenge would have stretched into the 2007/2008 football season and Leeds may not have been able to start the season. This led to the administrators, KPMG aborting the accepted CVA and selling Leeds United Association Football Club Ltd to Bates' new company Leeds United Football Club Ltd.

 

Bradford City AFC (1983) Ltd was also given a scare by a proposed Inland Revenue challenge to their own CVA.

 

BCFC began to fear that their effort to save the club was under threat as the Inland Revenue had challenged a similar rescue package for Wimbledon FC Ltd and Exeter City AFC Ltd. However, the Inland Revenue decided not to challenge Bradford City AFC (1983) Ltd CVA as their challenge to Wimbledon FC Ltd's CVA was rejected by the courts.

 

Carlisle United Association Football Club (1921) Ltd had some problems with their own CVA. The creditors would not accept a CVA unless they received 100% of their debts. This was due to the fact that the CVA was proposed by the Board when Knighton was chairman. However, it was evident that a takeover was imminent. Under these uncertain circumstances the creditors were able to push for a full 100% repayment.

 

 

Concluding Comments

 

When reviewing the problems highlighted above the contradiction between the statutory provisions and the FA and FL's insolvency rules and policies is raised on numerous occasions. In fact the majority of the problems discussed above arise as a result of this. The main problem seems to be the SCR. Many of the legal challenges facing the studied clubs have arisen from the fact that this rule conflicts with UK insolvency law principles. There seems to be good arguments on both sides in relation to the SCR. The FL and FA justifications are logical and raise the important point that the Rule is required to protect an insolvent club's competitors and maintain trading within the game. However, the points raised by unsecured creditors are also valid. One can envisage that this conflict will continue, unresolved, unless the rule is changed or it conclusively survives a direct challenge in court.

 

The rule cannot be abandoned completely. It must remain in some form to maintain competition and trading within football as a whole. If the rule was abolished totally, without a similar provision being introduced, it could have a disastrous effect on the game. This is due to the fact that insolvent clubs not paying their debts to players would damage the faith that the players have in the systems imposed by the FA and FL. This could result in players demanding even more money and more complex contracts before agreeing to join a club and players would probably be very reluctant to join a club in financial difficulty under any circumstance. If insolvent clubs did not pay their debts to other clubs in full the other clubs could be drawn into financial difficulty and, in the extremist of circumstances, the whole structure of the football industry could come under threat.

 

It seems evident that the FA and FL rules and provisions acting as a private club's rules in conflict with legal principles make the administrator's task even more difficult when he is trying to achieve the purpose of administration for an insolvent football club.

 

The information gained in this chapter will be, along with the information gained in the previous chapters, used in the subsequent chapter in order to discover the extent to which administration, as a process which fosters corporate rescue, is effective for football clubs that are companies.

 

Chapter Four – Examination of the Extent to which Administration, as a Process which Fosters Corporate Rescue, is Effective for Football Clubs that are Companies

 

Chapter three discussed and analysed the legal problems encountered by the four football clubs that are companies. It discovered that the main problem was a conflict between UK law and the Rules and Regulations of the FA and FL which mainly concentrated around the ‘super creditor rule'.

 

This chapter will attempt to discover the extent to which administration, as a process which fosters corporate rescue, is effective for football clubs that are companies. In order to do this it will first look at the Cork Committee and examine the reasons for it introducing the administration process. Then there will be a discussion of the objectives, or purposes, of the administration process as it stands today. Following this there will be a discussion of the extent to which administration, as a process which fosters corporate rescue, is effective for football clubs that are companies. This will be done by comparing the four cases examined in chapter two with the purposes and the aims of administration discussed in this chapter and the other functions of the administration procedure discussed in previous chapters.

 

This chapter will express the opinion that administration is an effective procedure which fosters the corporate rescue of football clubs that are companies and that it is effective to a good extent. However, it will show that there are some problems.

[Robbie Earle's Perm]

Take a breath man!!

[butt lane vale fan]

****** hell I'll won't do a job all night if I read this one!!!! Lol

[cheeky]

You've got to love google and "copy and paste". I'm going to post my thesis on black holes and nebulae next.

[ValeMadrid87]

Its got some useful info in there, Some

Concerning Wrexham Directors...

 

judge at Birmingham High Court found against the club owner, Hamilton's company Crucialmove Limited stating that they should not have bought the freehold to the stadium as the evidence was clear that Crucialmove Limited, the buyer of the Racecourse Ground, had notice that a director of the company was making the sale in breach of his fiduciary duty and without WAFC's informed consent; the buyer was therefore not acting in good faith and so could not rely on the common law rules or statutory provisions protecting third parties in such situations. The sale of the WAFC was now clear to go ahead; however, £300,000 of the proceeds from the sale of the assets of WAFC must be given to Crucialmove Limited. This was the amount which Crucialmove Limited originally paid for the Racecourse Ground.

 

Dodgy... Bit like our directors eh

[ValeMadrid87]

You've got to love google and "copy and paste". I'm going to post my thesis on black holes and nebulae next.

 

Yes amazing isn't it.........

[Megavaliant]

May I suggest that you forward this to Pete Williams SC very in depth and informative sure it will be of great interest......maybe Joan Whalley as well mind you it will probably take her a week to read it===

[Mow Cop Valiants]

Its got some useful info in there, Some

Concerning Wrexham Directors...

 

judge at Birmingham High Court found against the club owner, Hamilton's company Crucialmove Limited stating that they should not have bought the freehold to the stadium as the evidence was clear that Crucialmove Limited, the buyer of the Racecourse Ground, had notice that a director of the company was making the sale in breach of his fiduciary duty and without WAFC's informed consent; the buyer was therefore not acting in good faith and so could not rely on the common law rules or statutory provisions protecting third parties in such situations. The sale of the WAFC was now clear to go ahead; however, £300,000 of the proceeds from the sale of the assets of WAFC must be given to Crucialmove Limited. This was the amount which Crucialmove Limited originally paid for the Racecourse Ground.

 

Dodgy... Bit like our directors eh

 

maybe a court would rule the £277k loan as illegal and make fatty pay it back from his own pocket as he was the only one that knew about it ======

[Birches Head Fred]

maybe a court would rule the £277k loan as illegal and make fatty pay it back from his own pocket as he was the only one that knew about it ======

 

They've got to find him first, then get him back to the UK.......

[Fosse69]

Who owns the freehold on the Vale pitch? A group of fans appear to hold Chelsea`s, and if they move grounds would have to change thier name. What happened to the Port Vale FC company that Jackson and Bratt setup to protect the Vale name?

[sutto]

You've got to love google and "copy and paste". I'm going to post my thesis on black holes and nebulae next.

 

Pmsl funny

[Santa]

I was going to post something similar the other day but Wikipedia was down.

[Chopper Harris]

I m taking the day off work tomorrow to read this one.

[ValeMadrid87]

I m taking the day off work tomorrow to read this one.

 

It would be advisable mate :)

[berty1876]

Oh my days.. Like you lot ill have a look tomorrow lol