Some big headlines are being made this week in the arena of Football Finances and Insolvency. Yesterday, Old Firm giant Rangers confirmed that they had taken steps to appoint administrators.
The problems appear to have evolved over a disputed tax bill, in so far that the club is awaiting a tax tribunal decision which could result in liabilities and penalties exceeding £50m, which, Rangers said it cannot pay.
The case relates to the use of employment benefit trusts (EBTs) to pay players, which HMRC argue Rangers have misused to avoid paying tax. HMRC have stated that they will appeal the decision if it goes against them, leaving Rangers exposed to prolonged financial uncertainty.
Chairman Craig Whyte also points to inherent problems with the financial structure at Rangers as a further reason to call in Administrators. He has stated that the move to administration is “the most practical way to safeguard the long-term future of the club is to go through a formal restructuring process”.
With the threat of a HMRC winding-up petition, Rangers will likely seek the protection of a moratorium against such action through entry into a Company Voluntary Arrangement (CVA) with its creditors. It has also emerged that Criag Whyte is the club’s main secured creditor, by which, he could look to secure Rangers’ future by entering the Company by which the club is incorporated into a pre-pack administration to satisfy the clubs debts to him personally. Either way however a move into administration is likely to lead to extensive cost-cutting with potential job loss.
This is a big development in the world of football insolvency where the icy chill of taxation continues to blow. With Portsmouth also taking steps to enter administration yesterday and the thorny issue of the Football Creditor Rule (where uniquely, debts owed as transfer fees and player wages are paid in priority to other creditors) still subject to court action, Football’s Finances could be said to have never been so turbulent. Click here to read more.
Ben Ashworth is a Commercial Dispute Resolution Solicitor specialising in Debt Recovery.
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Posted by SA Law at 2:35 pm on February 14, 2012.
Categories: Ben Ashworth, Insolvency
Tags: administrators, avoid paying tax, business restructure, Company Voluntary Arrangement, Craig Whyte, creditors, CVA, EBT's, employment benefit trusts, financial structure at Rangers, financial uncertainty, HMRC, insolvency problem, insovency, rangers, rangers in administration, restructuring process, tax