Should Steven Vaughan be worried?
Posted by John Beech on November 18, 2009
Well, obviously he should about the future of Chester City, but I was thinking rather more of the implications of his signing an undertaking banning him from acting as a company director until the year 2020 (1). The specific implication is that “may no longer act as either an active or inactive director, or exercise control over an individual who is a director, of any company” according to Companies House.
Although Vaughan had been a director of Chester City Football Club Ltd, the company which went into Administration in May, he is not a director of Chester City FC (2004) Ltd, the company which now owns the club. He is, however, the owner of Chester City FC (2004) Ltd. We are thus moving into the shadowy world of what is known as a ‘shadow director’, defined as a person upon whose instructions the majority of the board of directors of a company are accustomed to act.
It is because of the potential existence of shadow directors that expressions like “exercise control over an individual who is a director” appear. Indeed, the FA Fit and Proper Person Test rules and regulations include the following within the definition of a director of a football club:
- a person in accordance with whose directions or instructions the persons constituting the management of the Club are accustomed to act; or
- a person who exercises or is able to exercise direct or indirect control over the affairs of the Club. For the purposes of this definition, a person shall be regarded as being able to exercise direct or indirect control over the affairs of the Club in particular but without prejudice to the generality of the preceding words if that person owns or is entitled to acquire 30% or more of the share capital or issued share capital of the Club or the voting power in the Club.
It was because of this last sentence that the FA has just required Vaughan to reduce his shareholding (2). It is the rather more open to interpretation first bullet point that there will be dispute.
A look at possible precedents paints a rather one-sided likely outcome.
I’ve blogged before on Spencer Day (formerly Trethewey), ruiner of Aldershot, convicted fraudster (six counts, plus one of obtaining credit while bankrupt), and now owner and team manager of Chertsey Town FC, and also on the brothers Muduroglu. Sami, disqualified from being a company director, used the cover of his brother Eren, who lived in Turin, as Chairman to run Fisher Athletic into the ground.
There are other examples of driving a bulldozer through the spirit of the Fit & Proper Person test. At Salisbury City, Peter Yeldon, who had been severely reprimanded and fined for malpractice by the Professional Standards Office of the Institute of Chartered Accountants in England and Wales (3), served as a director.
Reading through my files when preparing yesterday’s posting, I was reminded of the case of Mike Diamandis at Swindon Town. He “supplied management and financial support on a day-to-day basis” by the club’s own admission (4) and, in meetings with potential investors, was “at the forefront of these discussions” (5). He attended meetings alongside the board members (6). The BBC described him in december 2006 as “the man who – behind-the-scenes – has effectively run the football club for the last five years” (7). Diaminidis was not a director of the club – he had been disqualified from acting as a company director in 1992 (8), and had been “in breach of a director’s disqualification between 1997 and November 2004 which later became the subject of criminal investigations” (9). The authorities seemingly did not see him as “a person in accordance with whose directions or instructions the persons constituting the management of the Club are accustomed to act“.
Vaughan, it would seem from precedent, does not have much to fear. Once again, the Fit and proper Person test proves to be neither fit nor proper.
Perhaps the pressure has got to him nonetheless. The Liverpool Daily Post carrys a report that Chester City is in talks with a consortium interested in buying the club. This was revealed by Chairman Ian Anderson rather than the ‘presumably about to be ex-owner even if the consortium doesn’t buy the club’ Stephen Vaughan. He was, I would imagine, too busy arranging the transfer of shares, not that he is inexperienced in the procedures, having once famously and quite openly sold his Chester shares to a local painter and decorator and promptly bought them back again once a tie against Barrow had been played, Vaughan still being the owner of Barrow at the time (10).
This latest move against Vaughan is not really a scalp, maybe a short-back-and-sides, but definitely not yet a scalp.