At the start of the week our man in Poland sent me a link to the Croatian outlet who interviewed Nikica Jelavic. I mentioned the player in an article yesterday and recalled his earlier comments, which I referenced as background information. This ‘news’ was subsequently carried by today’s radio and print outlets in Scotland.
It’s maybe a low blow to bring out the ‘Lazy journalism’ point on the day Scotland’s formerly-largest newspaper shed journalists, although the point is perfectly illustrated, but lazy journalism always found its place in the past. The real problem has little to do with the standard of journalism on offer, it’s about business models in the old media. News doesn’t pay unless you can tax consumers or bundle it with paid-for football channels, which is not a good thing.
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BobbyM
Whatever whyte/white’s plans are they are going down.
Celtic have a choice to make, they will have been guilty of financial doping, depriving us and all the other clubs, so the club must use this to lobby uefa as to an escape route.
The sfa will live up to their name and do sfa.
Any vote for a newco will finish football in scotland for good, an amature set will rise from the ashes.
There are many thousands who will stop going to the football, the club have the biggest decision they have ever had to make.
Lets not put any journalists on the list as the CQN server is struggling as it is
Walter Smith
Craig Levein
Mark Hateley
Andy Goram
Ally Mc Coist
Derek Johnstone
Derek Mcinness
Billy Dodds
Hail Hail
googybhoy ♥ Celtic in 2012 says:
6 January, 2012 at 09:49
I’m slagging hateley’s writing skils and i couldn’t even post this link lol.
http://videocelts.com/2012/01/blogs/kenny-millers-sky-sports-misery
Che – I would like to think UEFA would force the SFA to do something or at least ask the question but I have no confidence in UEFA particularly with the increased Scottish representation at fairly senior levels in their Swiss offices. UEFA have not to my knowledge involved themselves with Scottish Domestic football in order to force compliance with financial fair play rules. But who knows, maybe if the right question was asked of the right people and maybe if the non scots at UEFA started to notice that the advice they seek from their Scottish colleague always seems to favour Rangers and go against Celtic and to notice that the SPL and SFA have both made representation on behalf of rangers in the past but failed to do so when Celtic were in the dock – then maybe. But the funny handshake brigade extends beyond Hampden Park……
In short – I wouldn’t hold yer breath waiting on UEFA to act.
RogueLeader – my memory is suitable ‘jogged’. It is always worth remembering these little extras. Even if they win the tribunal (which they won’t) they then have to face a future in which a debt was paid off using future ticket sales rendering the main income of their club as nothing more than a debt repayment. Quite incredible that these ‘small’ details escape the mainstream press.
We really should just stop reading the old media as anything other than a comic strip trying to mould reality in to what they want it to be rather than what it actually is.
Right, time to take down the christmas decos and get back to porridge!
Hail Hail
ASonOfDan
The biggest crime syndicate in Zurich is within FIFA headquarters :)
ItaliaBhoy – that is the legal grey area though and one they need to get spot on. It can easily be argued that even though the debt is historic it was assessed and presented post 2003 therefore the rules at the time need to be applied. If they get it wrong, and HMRC as the major creditor contest the decision on what legislation to use, then that will be fun and games.
HMRC will probably want the post 2003 stuff applied…..
ANNOAN – cheers to that, and to everyone else for their good wishes.
Much appreciated.
Len Brennan:
You left out a striker and defender I posted about a few days ago.
Will check back at lunchtime.
Keep the Faith!
Hail Hail!
RogueLeader,
Cheers. I agree, this whole saga looks like it could be headed for the courts. Which is where the fun really begins because what on earth would be the status of RFC then…?
Rangers owner Craig Whyte says mistakes were made in the summer transfer window and is still to decide if the club will spend any money on new players in January.
The Ibrox club made a number of high-profile, unsuccessful attempts to sign a number of new players, including a succession of failed bids for Dundee United striker David Goodwillie and Anderlecht defender Roland Juhasz.
The summer window was the first under Whyte’s stewardship and, speaking to STV, he says there have been a number of lessons learned to take forward.
“We’ve certainly reviewed how we handled things in the [summer] transfer window,” said Whyte. “I think we’ll perform much better in how we handle it overall in future transfer windows.”
Manager Ally McCoist brought in six permanent signings in the summer, first signing Juan Manuel Ortiz for £500,000 before taking his overall spending to just under £4 million with the acquisitions of Lee Wallace, Dorin Goian, Alejandro Bedoya, Carlos Bocanegra and Matt McKay.
Whyte though insists he is yet to discuss with the coaching staff whether any money will be required to bring in additional faces in January.
“That’s something that Ally and I will be discussing over the months ahead,” he said.” We will see where we sit in the league at the time.
“At the moment, we’re sitting top of the league, we’ve got a great team and we’ve got players fighting for places.”
Whyte has also warned the club will embark on a significant cost cutting programme saying ‘tough decisions’ will have to be made to make savings.
“Costs have to be cut going forward,” he warned. “There’s no doubt we have got some tough decisions to make. We’ve got a business plan going forward which does involve significant cost savings.
morning buds.
anyone got a link to Grant fae Perth ?
i need to share with some friends returning to the workplace today.
thanks in advance.
ItaliaBhoy – Whyte may well regret playing silly buggers with HMRC over the “wee” tax bill as they will now be going over any legal move they make with a fine toothed comb. They will probably contest everything. I think the chances of him even getting a swift pre-pack resolution would be slim as HMRC would not doubt contest it.
I hope he has every i dotted and t crossed Luckily for Rangers fans Whyte is well known for his fastidiousness regarding paperwork and processes so they will have nothing to fear….
RL – I replied but it disappeared AGAIN. I agree – stupid skint huns.
RogueLeader 6 January, 2012 at 10:44
I think it’s the date of the floating charge that allows Whyte to use pre2003 receivership.
Kenny Miller= Ronald Villiares. ” Eh, ah dont dae sinks.”
The Honest Mistake at 11:02
It won’t be Whyte that uses receivership. The Bank of Scotland holds the floating charge debenture and they can use the law to call in a receiver who could sell the assets secured under the floating charge to get their money back. A document filed last year removed some of the assets including season ticket proceeds up to 2015 (IIRC) from the floating charge so receiver would have no access to these.
If the floating charge was created after 15 Sept 2003, the bank could only call in an administrator who would have to consider the rights of all the creditors.
Mort
The floating charge with the bank was created on 8 March 1999 so if the bank felt there was a chance they had enough assets covered by this charge, they could call in receivers.
I doubt this will happen but if Rangers go bust, the bank will be better placed than other unsecured creditors (including HMRC) to get their money back.
Mort
I just noticed that the RTC blog has over 6000 followers.
Not subscribers but followers.
Hail Hail
Not the ole CQN ‘floatin’ charge’ debate.
HMRC may flex its muscles to curb future pre-pack abuse
23 June 2010
Owners of recruitment firms who walk away from their debts and set up a new company in a pre-pack administration may find it more difficult to do so in the future, according to a partner at law firm Osborne Clark.
Kevin Barrow told Recruiter that HM Revenue & Customs (HMRC) had the power under para 4(2) of Sch 11 of the VAT Act 1994 to require owners of new companies to provide security if they think it necessary for the protection of the revenue. In certain circumstances, he suggested that HMRC might require the directors of a new company set up following a pre-pack administration to pay HMRC up to six months’ VAT in advance.
“They might exercise this power where the directors had allowed a company to go into administration with HMRC being the major creditor, and where they believed the directors had been reckless about HMRC being paid.”
Barrow said HMRC had hinted in meetings in the autumn that it might exercise this power. “It would make it more difficult for companies to ’do a phoenix’ if owners had been reckless about HMRC being paid. HMRC really gets annoyed if other creditors have been paid but not them.”
Tom Hadley, external relations director at the Recruitment & Employment Confederation (REC) told Recruiter: “Any action that acts as a disincentive to those who abuse the system in a systematic and tactical way to walk away from their debts and to make a fast buck is a good thing.”
However, he said that in many cases pre-pack administrations were used in a wholly proper and legitimate fashion.
Any action by HMRC to demand security also had to be balanced against the danger of stifling entrepreneurship, he argued. “The rules on pre-pack administrations were brought in to encourage entrepreneurship, and there will be times where a high percentage of businesses go to the wall.”
Hadley suggested that HMRC should use its powers to demand security only where directors had ’done a phoenix’ two or three times.
In April, Recruiter reported that at least 14 of the 23 recruitment agencies, which went into administration in the first quarter of 2010, were still trading in some form – often with the goodwill and assets of the company having been bought by the original management.
In a statement, HMRC told Recruiter: “The purpose of security is not to prevent businesses from trading but to protect risk to the revenue and encourage compliance; this is accomplished in most cases.
“It is a criminal offence to continue to trade without providing security. The taxable person and/or their company may be prosecuted resulting in a £5,000 penalty for each taxable supply made without providing security.”
Barrow added that while HMRC had the statutory power to require security, there was a requirement for them to act reasonably at all times and to comply with the principles of natural justice.
“HMRC is therefore likely to be wary of provoking legal action in this area. A recruiter trying to do a pre-pack might threaten such an action if HMRC acted in a way which appeared to be an arbitrary abuse of power.
“Indeed, recruiters might argue that provided they have not been disqualified under UK insolvency legislation HMRC has no right to take this sort of action.”
Apologies if already posted, here is link to live online coverage of Celtic U-19s, http://videocelts.com/2012/01/blogs/watch-celtic-youth-team-live-online-today . I believe it kicks off about 1500hrs
As the economy continues to stutter and businesses continue to fail, the taxman is turning his attention to the tricks of the trade.
Now experts at national audit, tax and advisory firm Crowe Clark Whitehill, which has offices in Kidderminster and Walsall, are warning that the pre-pack administration could come under increased scrutiny.
Paul Edwards, Tax Director at Crowe Clark Whitehill in the Midlands, said the method had only become a favourite over the last decade.
In a pre-pack, the insolvency practitioner has a deal in the bag before the business concerned goes down. Once everything is agreed the firm enters administration and its assets are immediately sold to the new company which, typically, continues to trade from the same premises, has much the same management and undertakes similar activities.
Mr Edwards said: “Critics maintain such ‘phoenix companies’ are simply ripping off creditors, a means of dumping their debts.
“They would claim there is no attempt to test the market for a higher offer and point out it can often cause further misery down the line among suppliers.
“Insolvency practitioners like pre-packs because they are quick, ensure a disposal, preserve jobs, avoid the risk of the business haemorrhaging customers, and put the concern back in the hands of people who know the sector.”
Very often though it is the taxman who loses out, traditionally the very last person a struggling business pays.
And increasingly that is beginning to annoy HM Revenue & Customs.
HMRC has sought to help businesses genuinely affected by the current economic conditions and, since the introduction of the Business Payments Support Service (BPSS) in November 2008, more than 300,000 deferrals totalling £5.2 billion have been agreed.
Nevertheless, the number of administrations in England and Wales has risen steadily as has the number of pre-packs.
Mr Edwards cautioned: “HMRC is becoming alarmed at the figures and suspects a significant proportion may be bogus – simply a means of evading tax.
“It is taking a much closer look at suspected abuse cases, and the activities of directors, particularly if sums appear to have been misappropriated from the company prior to insolvency.
“Indeed it may be tempted to go after directors in a bid to get money back.”
He believes it could lead to a jump in the number of directors facing disqualification periods.
“The Revenue is clearly fed up of allowing phoenix companies to be formed at the expense of the Crown.”
And, he added, HMRC was also scrutinising BPSS applications more closely.
“Given the parlous state of the public finances the Government wants to see as much tax raised as possible,” said Mr Edwards.
“However, there are those who believe the Revenue will never retrieve a significant proportion of the deferred tax. That could result in a much tougher attitude from the taxman and more BPSS applications being rejected.”
For more information about Crowe Clark Whitehill, please visit their website here: http://www.croweclarkwhitehill.co.uk
Mort – I thought I’d read on RTC that the floating charge had been lifted – that the bank had been paid their monies and that RFC now owe the debt to Whyte (disclaimer; this could be nonsense.)
So, Craig Whyte has told a group of rangers supporters that there is NO negotiating on Tax Bill with HMRC, Running costs must be REDUCED and players must be SOLD before anyone comes in. Aunt Sally will NOT get transfer cash generated.
Oh! and after all that there is NO cash flow problem and a Newco and the end of 140 years of club history will not be a disaster.
I wonder when the Laptop Loyal will report this…
HH
Mort (Kano 1000) 6 January, 2012 at 11:20:
Now I’m all very confused. We have been told that the bank doesn’t have any of their debt, that Craig Whyte (wavetower) took this debt on when he took over rangers. If wavetower don’t have the floating charge then how are they going to make anything out of liquidation?
Pre-pack transactions create an enormous number of ethical headaches; one of the main objections being that directors of a failed business can effectively “dump” debt and other liabilities and start afresh under a new company.
However, it’s not really that easy or simple. More frequently than not, if directors have given personal guarantees in relation to the ailing business, they may not be able to “get off the hook” that easily. The position is the same for members of ailing Limited Liability Partnerships, as the members of failed firm Halliwells LLP will be more than aware.
To add to the woes of directors and members considering selling via a pre-pack, HM Revenue & Customs (HMRC) are increasingly serving them with Personal Liability Notices (PLN). A PLN is quite simple: when sent to a director, it makes him or her personally liable for the company’s unpaid PAYE deductions and National Insurance contributions.
The PLN is not a new idea. HMRC’s powers derive from section 121(c) of the Social Security Administration Act 1992. As far as we are aware, given the present economic climate and the need to decrease the deficit; HMRC are now using their powers to issue PLNs on a wider basis.
Yet HMRC cannot simply issue a PLN on a whim. In essence a PLN becomes capable of being served if it appears to HMRC that the failure of the company to pay its tax liabilities is “attributable to [a] fraud or [any] neglect on the part of one or more individuals who, at the time of the fraud or neglect, were officers” of the company.
A director may be able to appeal a PLN in 4 circumstances:
1. the total amount claimed in the PLN is not covered by a relevant provision;
2. the failure to pay the tax liability was not attributable to any fraud or neglect on the part of the directors;
3. the director in question was not an officer at the time of the alleged fraud or neglect; or
4. HMRC have acted in an unreasonable manner.
As a result of HMRC making wider use of the PLN; directors and officers may exercise greater caution in settling claims brought by liquidators and / or administrators.
Terry O, you must not be able to contain yourself waiting for Guidi to be back on Snyde, will they give you the right of reply now RTC and Whytey have confirmed your point.
On the issue of the day I think given what has been reported from the meeting with Whyte and his followers, RFC are gone whether that is Admin, Insolvency, Liquidation or Hive down….etc., these mechanisims are only important in who and what creditors including HMRC will get paid or not. They are finished we as a support now have to discuss what the acceptable punishment will be for Newco.
For me there are 2 scenarios that seem to be emerging;
1) Newco apply for the vacant licence left by RFC and start off in the 3rd Division, quite straight forward and my preferred option.
2) Newco do a deal with the other SPL clubs and get re-entry into the SPL with suitable punishment, that punishment could be for instance, a 25 point reduction for this season followed by 5 years of a 20 point handicap at the start of each season. Also they would have to forfeit say 5 of the Championships and all the Cups they won since 2000.
Now option 2 could also be appealing as in my opinion Newco will suffer what ever the scenario and will struggle to attract players to the club they are at a very low base now in terms of squad. I think if Option 2 was agreed Newco RFC would be relegated if not in the first year then in at least in 1 of the years.
RFC and their “superiority” will be gone we as a support will have to start discussing and agreeing our strategy to put to our Board/CEO.
I think a meeting should be called by the various supporters groups that have met previously in the Supporters Club on London Rd.
We have a lot to discuss and this will be a really momentous moment for our club.
I know many others will develop options I have not mentioned but I thought I would throw my thoughts in to see what we can develop.
“We have started a new company after an administration – HMRC have demanded a security deposit. What does that mean?”
VAT Security Deposits – A Guide
When a company has been liquidated or the business has been sold out of administration or pre-pack administration, the directors of the new company set up to acquire and run that business should BEWARE of the ability of HMRC to demand a security deposit.
HM Revenue & Customs has the power to require a security for the payment of VAT and this can be used particularly when a business has gone through insolvency and been sold to a new company. This can have a major financial impact on the new company.
Security may be required in the form of cash, or through an approved financial institution such as a bank providing a guarantee.
Under paragraph 4(2)(a) of Schedule 11 to the VAT Act 1994, HMRC may require any taxable entity, to give security or further security for the payment of VAT that is or may become due in future.
Circumstances where HMRC will require a deposit are where it sees a risk of non payment of future VAT, where a person is or has been actively involved in an existing or previous business that has failed to comply with VAT obligations.
How much might the deposit be?
HMRC would take the previous business’ VAT debts into consideration and provided the new business is similar in size to the old one, HMRC would generally calculate 6 months of future VAT as being required (if the previous and new business pay quarterly) or 4 months if the previous or new business pays VAT monthly.
Will HMRC definitely ask for a security deposit from our new company?
No, but if the previous company or directors of both the old and new company have a chequered past with regards to non compliance with HMRC rules and have regularly not paid taxes on time, or have been involved in multiple business failures, then YES, the likelihood is HMRC will seek a security deposit.
What if we don’t pay the deposit (i.e. we cannot afford it)?
You must pay it or cease trading. Or if you seek to ignore the demand, it is a criminal offence to continue to trade without providing the required security and HMRC may prosecute if the deposit is not paid upon demand. Under section 37 of the Criminal Justice Act 1991 a magistrate may impose a fine of up to £5,000 for each taxable supply (ie each invoice) made without providing security.
There is a right of appeal to an independent review.
Summary:
If considering a pre-pack administration or purchasing a business out of administration the new company directors should carefully consider what impact this would have on its future working capital requirements. In some cases, this could throw a major spanner in the works where compliance has been poor in the past.
We suggest that directors, particularly with a chequered history with HMRC, take advice from any proposed liquidator or administrator before completing the transaction to buy the business back.
Is your company viable but struggling? Talk to us about avoiding this VAT security deposit! 0800 9700 539 or 01289 309431
Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the taxman, yeah, I’m the taxman
DBBIA and TBB
Were you looking for tickets v Falkirk at Hampden?
Goldstar10 was willing to pick up today.
BSR – could be, but I’m on the ole Cup ticket scheme, if that makes a difference.
grant fae perth link ………
anyone ……
please.
pretty please.
The Bridge that collapsed
by Rachael Singh
07 Sep 2011
THE RECENT COLLAPSE of Bridge Business Recovery came as a shock to the industry – that an insolvency firm would wind up in administration was unthought of. However, it wasn’t just Bridge’s demise that was shocking but the failure of its pre-pack – backed by the largest creditor.
In June, following the discovery of “significant irregularities”, the partners of Bridge Business Recovery (BBR) sought an insolvency process. The administrators felt a pre-pack offered the best option for creditors, as it would minimise redundancies and disruption to the business. However, a court would not give its seal of approval and BBR entered into administration.
What happened?
Colin Haig, lead insolvency practitioner, and Samantha Bewick, both from KPMG, were appointed joint-administrators on 1 July.
When called to the collapsed firm, Bewick and Haig set about trying to obtain the pre-pack administration.
As they did not have enough time and funding to market the business prior to it entering an insolvency process they wanted to obtain court approval.
“Attempting a pre-pack without sanction from the court would have been likely to attract negative comment,” said Haig.
The pre-pack proposal already had the backing of the largest creditor, HM Revenue & Customs, which was owed £1.3m, and the partners’ professional regulator ICAEW.
The plan was to sell the business to some BBR partners, which would ensure minimal redundancy and business continuity.
However, the judge sent Haig and Bewick packing as he felt it was only fair BBR was marketed properly before sanctioning a sale to the partners.
Unfortunately the administrators decided they could not fund BBR while seeking a buyer and entered it into administration.
Although no estimations were given on what a pre-pack would have returned, Haig said in the creditor meeting this week: “Essentially we are of the view the pre-pack would have achieved optimum value”.
Unsecured creditors are likely to receive less than 20p for every pound owed in the administration.
To pre-pack or not to pre-pack
The news of a failed pre-pack in the face of all the right backers has brought confusion to many insolvency practitioners, with some believing the judge and the court system might not have fully understood the positives of using this vital insolvency tool.
The stigma attached to the controversial insolvency procedure, with marketing taking place behind closed doors without creditor knowledge (in most cases), leaves a bitter taste for both the court and public perception.
In the BBR case, redundancies would have been kept to a minimum, the creditors would have likely received more money, and the administrators’ costs could have been less (as they would have needed to bill less time) if a pre-pack had taken place.
There are very successful pre-pack stories, such as music publisher and producer EMI’s pre-pack sale to its lender, Citigroup. In this case the company was valued at between £1.6bn and £2.3bn but owed its lender £3.3bn, essentially being insolvent.
There was no need to market the business as it was unlikely another buyer would pay over the odds for the company. The lender Citigroup reduced the debt to £1.2bn and made £300m in cash available to EMI – essentially saving the business from mass redundancies and severely damaging the brand if it were to enter administration.
The next step
The government has decided in future any pre-pack sale where a company is to be bought by a connected party, such as current managers or owners, notification must be given to creditors three days prior to the sale.
Although in theory this looks as though it creates further transparency into the procedure, it offers little time for creditors to protest a deal while slowing the rapid turnaround insolvency process.
The reform to pre-packs was due to be implemented across the profession before the end of the year. However, it has been delayed until April 2012 with many spectators believing this could be to revise it further.
If there is one thing the profession should take away from the lesson of BBR’s failed pre-pack and upcoming reforms, it is that insolvency practitioners must do more to explain the pros and cons about their decision in choosing a pre-pack – so judges and the public will no longer consider them an underhand tactic but instead a vital business continuity exercise.
Re Craig Levein making a plea on behalf of Alistair McCoist.
He is obligated to do this for a brother in distress.
Although Rangers fans remain generally deluded about the extent of their troubles, they do realise that they have recruitment difficulties.
There is an article on Rangers Media which seeks to use Social Media (Twitter & Facebook) to form a Brains Trust of fans in order to pool suggestions on how they should navigate this difficult future. I have copied and pasted some of their more comedic efforts (I have made some observations in bold )
“On Facebook, David Sim said that he wanted Rangers to “Win the league and cup!” Iain Dott issued a rally call to the players by saying; “remind the boys we weren’t miles ahead for no reason. Remind them that we have much more heart and fight than Celtic will EVER have”. I think Iain should be doing the team talks at half time in future!” I think Iain needs to review his meds
“Twitter generated a lot of discussion, ranging from players to sign and tactical improvements. One who thinks we can improve on the pitch is @divtait1 who said the team need to “press the ball higher up the park and pass the ball better as well as being a lot fitter”. With regards to transfer and scouting policies, @kylemcGarry thinks that we should “Bring in NEW young players and not previous players that will just leave ibrox again for the money”, referring to Kris Boyd in particular.” Bring back indentured slavery
“On twitter, @CallumMartin9 thought that signing David Templeton and Andrew Driver from financially stricken Hearts, would be a wise move.” Players and their agents will love moving from burning barn to burning house
“It is plain to see from all comments above, that there is a lot of work to be done, as Ally McCoist begins his first full calendar year in charge. One thing is certain, we do have the right man in the managers office.
We all have very strong opinions on the team we love, but Ally will be able to see everything we see. I know sometimes it might not seem like it on the pitch at times, but the pressure he will be putting himself under to succeed, will sometimes have an affect on the decisions he makes. As this year goes on, he will settle in to the job more and the shackles will come off, as he gets stuck in to improving all areas under his control.” This has not been Awe-Nawed
Honestly, the ranks of Tuscany could scarce forebear to piss themsel
Government sidesteps football insolvency intervention
by Kevin Reed
12 Oct 2011
DESPITE SYMPATHY FOR creditors that lose out due to controversial football insolvency rules, the government has stopped short of pledging to intervene.
The report from the Department for Culture, Media and Sport responding to an inquiry into football governance, said that the profession should be able to find a solution to its concerns over the insolvency rule.
The football creditor rule sees players, other clubs and manager to the front of the queue in terms of payment when a club enters insolvency. Other creditors, including the taxman, are paid with what is left in the pot after the so-called ‘super-creditors’.
“We have sympathy for those who described the consequences of the rule as ‘morally indefensible’. We understand and acknowledge the strong desire of the football authorities to protect the integrity of their competitions,” stated the report.
“At the same time, it should not be beyond the skill and financial resources of the professional game to find a solution that protects the integrity of the competition, incentivises financial prudence and due diligence, and offers equal protection to all unsecured creditors in any future insolvency event.”
The department said that despite an ongoing legal battle over the issue between HMRC and the football leagues, it would work with the football authorities to find an “appropriate and modern solution to this issue.
Bignan – McCoist probably asked for help here http://www.masonforum.com/viewthread/1418/
Football insolvency: A game of two countries
by Rachael Singh
24 Aug 2011
N THE WEEK that Samuel Eto’o is set to become far and away the highest-paid footballer on the planet, Spanish football is going through a financial crisis. Players are striking over the lack of salary protection in the event that their clubs collapse. However, British football has a storm brewing: players’ wages are too-well protected.
So which country has it right, if either?
Not all football players earn mega-bucks. In reality, for each player that has the capability to earn more than a small country’s GDP, dozens of footballers manage financially on a month-by-month basis.
For the players in Spain, more than half of the clubs in the professional league have entered into some form of insolvency in the last two years.
According to reports, 200 players are owed a combined total of about $70m ($42.57m) by their clubs, with many failing to be paid in the last year.
Now the Association of Spanish Football Players has taken a stand and its members are striking in an attempt to gain more protection in the face of their clubs’ insolvencies.
Spanish football clubs follow similar rules to UK companies in the event of a collapse. Lenders are paid first as a secured creditor and all other organisations know their place well, to be paid second as an unsecured creditor. Employees including administrative staff and footballers are paid as unsecured creditors.
Spanish footballers are calling for insurance, or a wage fund to be set up if their club enters an insolvency process.
UK football leagues have taken the issue a step further.
If a UK club enters administration, football creditors such as players, other clubs and managers are pole-vaulted to the front of the queue, and in most circumstances repaid in full. All other creditors are paid afterwards with what is left.
An example of this super-creditor status is the demise of then-Premier League side Portsmouth FC, which saw its players and managers paid in full and unsecured creditors likely to be paid 5p for every £1 owed over a number of years.
Another example is Plymouth Argyle, a club at which players were not paid for up to six months. The footballers continued to play for Plymouth, knowing that their wages were protected by the rule allowing the club to continue playing in the league.
Unlawful?
HM Revenue & Customs has labelled the UK football creditor rule as “unlawful” and has mounted a legal challenge in the High Court to be heard in November, calling for its abolition.
The Taxman is not alone in its argument that creating a super-creditor in football lies outside normal business insolvency rules and circumvents law.
HMRC now has a new ally in the argument: parliament. In a recent Culture Media and Sport Parliamentary Committee meeting, the idea that the rule should be scrapped altogether by any means necessary was kicked around.
The committee’s football governance report suggested that, if HMRC loses its legal challenge against the football leagues and the leagues fail to change, the government should legislate against the rule.
However, the government might be forced to think twice about the implications of canning the rule, such as how this will affect other clubs. If Spanish football is anything to go by, the key asset of a club – the players – could down tools.
The wider issue of why the industry is in turmoil might also need to be addressed before any changes to insolvency processes can be bashed out.
Clubs in Spain and the UK alike are functioning outside their means. As Manchester United’s chief executive David Gill pointed out, the rule is supporting a recent trend of allowing transfer fees to be spread out over several years rather than the previous de facto period of one year.
Failing to pay fees quickly could leave others out of pocket in the case of a club’s collapse. One insolvent club could drag others down.
This trend means, if one club enters administration, that it could end up taking two or three others with it if there was no rule, claimed Crewe chairman John Bowler.
Without the super-creditor status in the case of Portsmouth, it was very likely that several other clubs, including Watford, could have ended up on the administration block due to transfer fees owed to them all.
Spanish clubs are being crippled by transfer fees and player wages to the point that they are struggling to keep the club above water. Yet how can a club compete and gain vital television, merchandise and championship money, unless they pay the inflated costs?
Although this issue is due to rage on for some time – (some Spanish players have said they will sit out the entire season – it is worth noting that football, although a multi-billion pound industry, is unlike any other. It is not judged by its balance sheet but by its success on the pitch.
With this sentiment in mind, parliament, HMRC and the leagues will have to agree if they can meet each other on the halfway line, because the industry deserves to be judged by different rules of success.