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How will Rangers FC survive liquidation?

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14th Jun 2012
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Sports finance specialist Alex Miller looks back over the Rangers FC case to analyse what went wrong and what will happen next at the Glasgow club.

Glasgow Rangers are heading for liquidation after HMRC rejected the company voluntary arrangement proposal made by prospective owner Charles Green.

Green hoped dominant creditors would vote in favour to avoid the assets being sold off. However, HMRC - which confirmed to AccountingWEB it was owed approximately £21m by the club - rejected the offer, based on its general principle of “not agreeing to a CVA where there is strong evidence of non-compliance by a company with its tax liabilities”.

HMRC considered the proposal of a best-case scenario of eight to nine pence in the pound, but decided the club’s combined debts of £55m to unsecured creditors listed in the CVA made it unacceptable.

The rejection of the CVA was not connected to the looming employee benefits trust tribunal case between HMRC and Rangers. It is estimated the club may have to pay the taxman an additional £50m in back taxes if it loses.

HMRC is continuing to take an increasingly aggressive stance with the football industry and is under pressure from the government to increase tax take. The ultimate sanction against Rangers effectively confirms that football clubs not paying their taxes will now be punished.

Rangers will continue to operate, but within a new company structure. Under the terms of the deal struck by Green’s consortium to buy Rangers, it will now acquire the business and assets of Rangers FC for £5.5m.

By doing so, Green will try to form Rangers as a “newco” that will have to seek the approval of the 11 other Scottish Premier League clubs to play in Scotlands top tier.

It is yet to be confirmed whether the current playing staff will be required to remain, or whether the new club will have the right to lay claim to the prestigious history of the once proud Glasgow giants.

If Rangers fail to remain in the Premier League, there are conflicting views on the financial implicatinos for Scottish football. Some observers question whether the SPL in its current format can be considered a financial success anyway - the current TV deal does not deliver mega riches to any Scottish club as it stands.

Without Rangers, other clubs may enjoy bigger attendances and the last time Rangers were in ‘crisis’, Scottish football thrived. Aberdeen and Dundee United regularly shared the spoils with Celtic during the early and mid-1980s.

Former Ibrox owner Sir David Murray, who owned the club from 1988 to 2011, oversaw the club’s disastrous decline. Under Murray’s ownership the club won 15 League Championships and 26 Cups and invested in the development of the Ibrox Stadium, raising the ground's capacity by 7,300.

On the pitch, Murray had big ambitions for Rangers to be successful in Europe, fuelled by unprecedented expenditure that saw the club’s debts increase. Anticipated television revenues failed to materialise and the club’s income failed to offset the growing cost of transfer fees and player salaries.

Craig Whyte, who assumed ownership from Murray last year, must also be held accountable; he has already admitted waiting too long to put the club in administration.

Replies (5)

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By mikewhit
14th Jun 2012 14:29

What's in a name ...

"Rangers will continue to operate, but within a new company structure"

How about calling the new club Phoenix Rangers ?

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Replying to carnmores:
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By carolbishop
15th Jun 2012 10:58

 
Debt Rearrangers?

 

Debt Rearrangers?

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By billy dixon
15th Jun 2012 11:43

The Rangers FC

Murray must be held accountable as he must have known he was for trading whilst insolvent (as did Whyte no doubt, who just didn't pay anybody) and as such may face criminal charges.

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By johnporter
15th Jun 2012 12:11

Rangers FC

Why did HMRC not  claim Ibrox & Murray Park reportedly worth £100m  & sold off to Tescos or otherwise for greater figure than £5.5m most of which goes to Administrators for 5 months work! 

Also surely the players could have been sold on for £10m + 

Yes the poor old Tax payer gets shafted again after the Banking scandal re Bonuses etc.now finding they have benefited  rich footballers with EBTs or whatever 

Time to simplify the Tax system me thinks to many loopholes for the Companies,the rich etc to hide behind. Probably first should be that Managing Directors personally become laible for Unpaid PAYE etc when Company continues to Trade insolvent or without confirmation form HMRC.

And the government wonder why they have no monies to fund Health Service, Pensions etc 

Note

If it had been a self employed/partnership business they would have been lucky to be left with only their undies to stand up in.

 

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By david5541
09th Jul 2012 12:43

being rescued?

Two Glasgow businessmen are preparing a bid to take control of Rangers.

Housebuilders and property developers Allan Stewart and Stephen McKenna plan to bid about £11m for the club.

They hope to run Rangers for two to three years before floating the company on the Stock Exchange and handing the club over to the fans.

The pair plan to meet current owner Charles Green, who bought the club's assets for £5.5m, in the coming days.

The Glasgow-based company being used for the takeover is called ALEFTAV but Stewart and McKenna are land developers.

A source close to the bid said: "The money is in place, it's now up to the owners.

"I believe people who know Scottish football should be in charge of the club. The plan is to run Rangers for a few years before handing the club and the stadium back to the fans."

Meanwhile, a new document released by administrators Duff & Phelps has revealed which parties voted for and against the ultimately rejected company voluntary arrangement proposal that preceded Green's consortium's purchase of Rangers' assets to relaunch the club.

Major creditor HM Revenue and Customs said in advance of the formal vote they would not support the proposal and, because the debt due to them represented more than 25% of the total amount owed, Rangers Football Club plc began the process of being liquidated.

The document states the total debt due to HMRC could be almost £95m, with the result of a recently concluded tax tribunal still pending.

However, another of Rangers' main creditors, Ticketus, voted in favour. The ticket firm, whose cash advance funded Craig Whyte's takeover of the club in 2011, are listed as being owed over £27m - another total still in dispute.

Several clubs understood to be owed transfer fee money are also listed with Arsenal and St Etienne voting in favour of the pence in the pound deal being offered and Orebro and Palermo voting against.

The total potential debt is listed as more than £124m.  

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