Wings Over Scotland

The fallout from HMRC’s rejection of the Rangers CVA has, of course, only just begun. Journalists and bloggers, us included, will be spending a considerable amount of time speculating wildly about the likely outcome of the club’s now-inevitable liquidation. So let’s quickly take stock of what’s fact and what’s guesswork.

(Please bear in mind that Wings Over Scotland is not a lawyer, and that your house may be at risk if you don’t pay tax on it for 20 years.)

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MYSTERIES WRAPPED IN RIDDLES WRAPPED IN ENIGMA

Will creditors now receive any money?
As things stand, no. If Duff & Phelps are allowed to sell the club’s assets to Charles Green’s consortium (Sevco), the £5.5m price will be entirely swallowed up by D&P’s fees and legal costs, leaving not a penny for any of the creditors.

Will there be a newco Rangers playing football next season?
In theory. The creditors, however, may mount a legal challenge to the fixed-price sale to Sevco, in an attempt to force the assets – chiefly the stadium and training ground – to be sold on the open market in the hopes of obtaining a better return. As the creditors have literally nothing to lose (see above), this seems a likely outcome, particularly as Duff & Phelps don’t appear to have any authority to act as liquidators (as opposed to administrators) in the first place.

Any challenge to the sale of the club’s assets to Green will – at the very least – greatly slow the process of forming a newco, almost certainly beyond the start of the 2012-13 season. And in such circumstances the assets might be bought by a new owner for purposes other than running a football club.

One thing IS known – under the CVA document, Green’s purchase is conditional on Rangers continuing to play in the top division of Scottish football. Since the failure of the CVA and the liquidation of the club means that no such guarantee can be in place by Thursday, the “binding obligation” on Green to complete the purchase seems meaningless. This would open the way to previous bidders, such as the “Blue Knights” group, to attempt to form a newco, as well as to potential non-football purchasers such as property developers.

Would a newco Rangers be admitted into the SPL?
Nobody knows. Recent comments from other SPL chairmen suggested a hardening of the other clubs’ attitude towards a newco Rangers entering the league, as a result of the club appealing its transfer ban at the Court of Session and feedback from angry supporters. However, it’s been speculated that Charles Green will negotiate a vote in favour in return for an alteration of the SPL’s 11-1 voting rules, enabling the smaller clubs to secure a greater share of revenues both from TV contracts and gate receipts.

The attraction for the other 10 clubs is obvious – they get to keep the lucrative Sky/ESPN deal, but get a bigger share of the money, and still get most of the benefits of Rangers being expelled because the newco will be enormously weaker than the existing club. Any such deal would be chiefly to the detriment of Celtic, but the Parkhead club could be outvoted.

(Trivia fact: the oldco Rangers would still hold an SPL share, and would therefore get a vote in whether or not to accept their replacement by the newco. An 8-4 majority in favour is required.)

What happens to the Big Tax Case?
As far as the football club goes, the BTC is effectively dead. HMRC’s press statement says that the CVA was rejected specifically to better enable the pursuance of action against those responsible for Rangers’ tax evasion, which is bad news for David Murray, Craig Whyte and the other members of the Rangers board over the last decade or so.

What happens to the SFA’s dual-contracts investigation?
Theoretically, the same would apply. Since Rangers FC will no longer exist, there’s little point in the SFA continuing with its probe. However, this could depend on the terms of acceptance of any newco Rangers into the Association. Most pundits are saying that a newco’s admittance to the SFA would be conditional on it accepting punishment for dual contracts if found guilty, but it also seems well within the realm of possibility that the SFA could accept the newco Rangers with a clean slate, as those responsible for any wrongdoing would not be part of the new club.

And the Appellate Tribunal’s new sanctions on the disrepute charge?
See above.

Is the £5.5m Charles Green wants to buy Rangers’ assets with a loan, to be paid back by the new company?
Nobody seems to know. As the £8.5m he was providing for the CVA was a loan to be repaid with interest, it seems likely the same would apply to the £5.5m.

What? So he was essentially planning to buy the club with its own future revenues rather than putting up any cash of his own? In that case, can I bid £100m on the same basis?
It’s hard to see why not. Give it a try!

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KNOWN FACTS

Would any newco Rangers be banned from playing in European competitions for three years?
Yes. This is a non-negotiable penalty under UEFA rules for clubs which undergo liquidation, and new clubs cannot enter UEFA without three years of accounts.

Would the playing staff be automatically transferred to a newco?
No. Players’s contracts are terminated by the liquidation of the employer. They CAN switch to a newco club which might arise, but they are free agents who can walk away if they choose to. It’s hard to imagine why any would voluntarily move to the newco, given that it would be financially stricken, unable to pay their previous wages (though technically it would be legally obliged to), and offer the players no prospect of European football.

Could a newco Rangers retain its history and honours roll?
On the face of it, absolutely not, even if the SFA wished to allow it. Insolvency law expressly forbids any “phoenix” company* from passing itself off as the old company, and retaining Old Rangers’ league titles and cup wins would plainly appear to be implying that the new and old clubs were in fact one and the same. For the same reason, it could not – despite what both Duff & Phelps and Green are currently claiming – be allowed to compete under the name “Rangers”, although related names such as “Glasgow Rangers” might well be permitted.

Also, as touched on above, treating New Rangers as a continuation of Old Rangers would force the SFA to continue the dual-contracts investigation, and were the club to be found guilty (as seems overwhelmingly likely) the SFA would have little option but to expel New Rangers from the Association. In the meantime, of course, it would also have had to impose whatever penalty the Appellate Tribunal laid down for the disrepute charge, which is likely to be at least a suspension, effectively killing the newco at birth.

* As not-lawyers, the one thing we’re not entirely clear about with regard to the naming of a phoenix company is whether the rules apply if the directors of the new company are completely different to those of the oldco. Anyone better informed than us, feel free to clarify.

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Any questions we haven’t covered? Feel free to ask below and we’ll do our best to answer them. Anything we’ve got horribly wrong? Point it out and we’ll fix it.