Yesterday in court…
Posted by John Beech on February 11, 2010
Four clubs were facing winding-up petitions yesterday, and none were wound up or forced into Administration. In three cases the outcome was simply an adjournment.
The media focus was on Portsmouth because of its Premier League status. The club tried to make a case that the debt was in part to other clubs rather than HMRC, but, since this was for VAT which ultimately is HMRC’s, neither HMRC’s lawyer nor indeed the judge were terribly impressed. The total debt claimed by HMRC is of the order of £12 million which must have concerned the judge. She was more concerned by the fact that, in her opinion, the club was ‘trading insolvently’ that is, their revenues could not match their costs and/or their assets do not cover their debts.
A football club trading insolvently? Now there’s a surprise! By any conventional definition of ‘trading insolvently’ this is standard practice in the football sector. Against the law for the directors to do so, but rarely pursued. Clearly Portsmouth were to be the exception, no doubt because of both the size of their debt and their parlous financial state. They were ordered to produce a ‘statement of affairs’ (1) — a financial breakdown of their assets and liabilities. This has to be completed within seven days, HMRC then has two days two consider its implications, and the court will sit again on 19th February, the earliest possible court date. The period of seven days is harsh when compared with, for example, the 42 days grace given to Chester City. At least Portsmouth are solvent enough to pay their players even if it is repeatedly late, unlike Chester.
It has to be said that things look very grim, with Administration looking an increasingly likely outcome, which ironically is probably not the best outcome either for the club or for HMRC. The shortness of the seven day period effectively means that seeking new owners (now up to three possible candidates ) becomes a secondary task. The midnight oil will have to be burned at Fratton Park to build a case that the club is not insolvent under Balram Chainrai’s ownership, a bit of a diversion as he has made clear his intention is to sell.
The club’s statement is here.
Cardiff City were also granted an adjournement, but of 28 days. Spinmeister Peter Ridsdale doubtless wove his usual magic of tales of investors queuing up to invest in the club and the prospect of selling assets (within 28 days?). They had at least paid off £1 million of their £2.7 million debt.
Southend United also managed to secure a 28 day adjournment. The case against them is somewhat lower grade – a dispute over £200,000. Chairman Ron Martin has managed to restrain his usual anti-HMRC outburst, a confetti-free statement on the club website merely noting that an adjournement has been granted (3).
Best result was secured by Conference Noth Hinckley United, who had the petition struck out as they have paid their £190,000 debt to HMRC (4). Their transfer embargo has also been lifted (5). Exactly what has produced this turnaround in the club’s finances is unclear, Chairman Kevin Downes having banned contact with the local media (6). It seems unlikely that Downes has injected the cash as his own company, FE Downes Ltd, was wound up in December by, good heavens, HMRC (7). FE Downes Ltd was owed £250,000 by the club. If any reader can cast any insight on where the cash injection(s) have come from, and whether they are in the form of loans or share purchase, please get in contact.
Meanwhile in unrelated HMRC/Portsmouth cases in court today, Harry Redknapp and Milan Mandaric have had their cases adjourned to 14 April and have been released un unconditional bail (8).