Football Management

Commentary on the management of over 160 English football clubs by Dr John Beech, winner of the FSF Writer of the Year Award 2009/10 Twitter: @JohnBeech Curator of Scoop.it! Football Finance

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 [2]) 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).

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8 Responses to “Yesterday in court…”

  1. […] Yesterday in court… […]

  2. John Beech said

    SOUTHEND UPDATE

    Chairman Ron’s restraint has snapped. In an interview with the Southend Echo, he has come up with some gems, such as “Simply because [HMRC] represents a messed-up Government that is exerting pressure on companies, and football clubs in particular, in an effort to repair its own mistakes, does not make Customs either correct, justified or fair.” and “Customs are making mischief” (Click here for the full interview)

    Whether this line will prove helpful when the club has been described in court as a ‘habitual defaulter’ remains to be seen.

  3. John Beech said

    PORTSMOUTH LATEST

    Not from St Mary’s, but from the Portsmouth Evening News (1), which is reporting that Sulaiman Al Fahim is preparing a takeover bid, while Peter Storrie is working with a rival consortium. This really should be a sitcom.

    Meanwhile, the Premier League has declined to advance television payments to help the club (2).

  4. John Beech said

    SOUTHEND UNITED UPDATE

    Chairman Ron has ‘issued another blog’ (1). Among several issues, he writes of the dispute with HMRC saying “in 2006 the Club had an almost identical scenario where we appealed to HMRC over what we thought were inappropriate surcharges and WON that appeal“. For clarity he has “asked the Club’s media department to place on the website today answers to direct questions put to me yesterday by The Echo with my responses verbatim“; this they have done (2).

    In the latter Q&A piece, he again compares the current dispute with the 2006 one saying “This case is no different“.

    Almost identical? No different? Well, that’s cleared the confusion up, then. 😉

  5. John Beech said

    CARDIFF CITY LATEST

    An EGM has approved the sale of land to shore up the club’s finances (1).

    Meanwhile, a question has been asked in the National Assembly about Peter Risdale’s ‘misleading’ statements about the season ticket sales being used to buy players (2).

  6. John Beech said

    CARDIFF CITY UPDATE

    A report on the EGM has been published by WalesOnline (1) plus some further comment from those present (2). Some interesting details – “Some of those promises, in fact all of them, were false“, Ridsdale received a bonus of £100,000, etc. Well worth clicking through on the numbered links.

  7. John Beech said

    HINCKLEY LATEST

    Hinckley have been hit with a transfer embargo for the third time by the Conference (1) because they are late in making an agreed payment to HMRC (2 at around 1hr 32 mins).

    • John Beech said

      Hinckley have been served with a winding-up petition by HMRC, the club’s sixth winding-up petition (! What on earth are the costs of all these court appearances?) (a1). According to its website, the club “expects in the next 48 hours to receive monies to pay off outstanding debts to the Inland Revenue and any unpaid players. This will satisfy requirements laid down by the Football Association, Football Conference and HMRC.” (2)

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