Testing times for owners

Are you fit and proper? I’m not asking whether you have taken to the latest fitness fad, rather whether you think you would pass the Football League’s newly-named Owner’s and Director’s Test. Judging by recent events this may be easier than it sounds.

This week Portsmouth Football Club has been placed into administration for the second time since 2009. Further north, Glasgow Rangers have followed, albeit on a grander scale, with the same resulting 10-point deduction. In addition to the obvious inability to pay debts, both sets of supporters have justifiable concerns as to the capabilities and ethics of their owners.

Glasgow Rangers is a club steeped in tradition for 140 years. They hold a world record 54 domestic national titles and won a Scottish record nine consecutive titles as recently as 1997.

Their current plight is shrouded in mystery while fingers are being pointed at owners past and present. Sir David Murray acquired the club in 1988 and immediately dispensed with their tradition of refusing to sign Catholics by acquiring former Old Firm rival, Maurice Johnston. Despite achieving unparalleled success in the 1990s, he left this proud club in such a state of financial adversity that only nine months ago it was sold to Craig Whyte for £1 – and the repayment of an £18 million bank loan.

In this time Rangers appear to have fallen even further from grace with the apparent nail in the coffin being a legal action taken by Her Majesty’s Revenues and Customs (HMRC, the taxman for those who have not forgotten what that is having lived in the Gulf region for too long) for £24 million unpaid tax, £12 million interest and penalties that could rise to £15 million.

Some have suggested that going into administration is simply a ploy to restructure the debt to a more manageable level enabling Whyte to sell the club at a profit. Is this possible?

At the time of his acquisition of Rangers it was not widely known, but has subsequently been revealed, that Whyte had been previously banned for seven years from being a company director.

Since taking charge Rangers have been de-listed from the stock exchange having failed to submit audited accounts. Whyte has also sold four years advance ticket sales to a company for £24 million. There was no trace of these funds in the club accounts and it has subsequently been revealed that these have been paid into the accounts of the parent company.

The liability that has prompted the action from HMRC relates to £9 million that has been collected but not paid. Set against this income in the same period of in excess of £30 million from transfer fees, commercial rights and other revenues.

Rangers form one half of perhaps the greatest enduring rivalry in British football. The intervention of Scottish MP Alex Salmond has dragged Celtic into the discussion. The club has been forced to defend its own dealings and stress that, through a long-term strategy involving youth development, prudent financial management and seeking value from transfer dealings, they could survive even if Rangers were liquidated. When two tribes go to war.

Over to Fratton Park and there is a similar story with the serving of a winding-up petition by HMRC over unpaid taxes totaling £5 million. This action has led to bankruptcy protection and the freezing of Portsmouth’s accounts, meaning players and staff were not paid.

The owner that caused the current difficulties is Convers Sports Initiatives, a company that owns several sports franchises whose main financial backer is Vladimir Antonov. In a complicated and protracted saga he acquired the club in 2011 from reluctant owner, Balram Chainrai, who had himself only taken the reins by default having prudently secured his £17 million bail-out against the club itself. He could yet find himself back in charge as this secured debt remains.

Antonov was passed as ‘fit and proper’ by the Football League as the investigation into his alleged money laundering had been unproven, although the Financial Services Authority in the UK had denied a license to his bank.  Ironically, his Lithuanian-based Snoras Bank has been ‘put to sleep’ by administrators back home. Antonov was subsequently arrested for asset-stripping. The Football League claims to have been ‘misled’ in their initial investigation into Portsmouth’s takeover.

At least Portsmouth can rely on a £48 million parachute payment from the Premier League to help soften the landing from their relegation.

Are there any other clubs that could suffer the similar fate of administration? There are several, although the highest profile of these is probably Nottingham Forest following the death of their owner, Nigel Doughty.

While there are no concerns about mismanagement, his £100 million bankrolling of the former double European Cup winners has been listed as loans and it is not clear how this is dealt with in his estate.

So, for those of you believing Frankie’s advice following a trip to Hollywood, when Two Tribes go to War, particularly if you’re up against HMRC, its actually a 10-point deduction that’s the likely outcome, not a point to score!