Celtic Diary Tuesday November 14: Could Newco Directors Be Liable For Oldco Debts?
Yesterdays excellent piece by doc highlighted the transition of Politechnica Timisoara into a new club, and how they were prevented from carrying on as though nothing had happened.
It included a link to a Court of Arbitration for sport decision which clarified this.
Clarification. There’s a word.
What are the rules , in law, about this happening in Scotland ?
Could a company that has been incorporated with a football club, meaning they are indistinguishable in law, simply carry on and ignore its creditors ?
And you can’t set another one up pretending to be the original either.
Company Liquidation Services.co.uk says;
“The Insolvency Act of 1986 prevents the re-using of a limited company which has been entered into a liquidation process”
The restrictions put in place by the insolvency act cover the name itself, as well as other names which are so close as to suggest an association to the original company, as well as the directors and shadow directors which were involved. We know that liquidation is in no way the end of the road for many, but a way of resolving a company’s debts so that the directors and shareholders may move on and learn from their experiences. But suppose they do move on and want to keep the original company name, what are the exceptions to the insolvency act?
1. If you come into some money as a director you are able to purchase the company in its entirety (including any debt) from the insolvency practitioner who has been appointed as liquidator. If this path is taken, then all creditors must be informed and the information must be made public .
2. The other way to go if you want to reuse the name of a liquidated company is to apply for the name in court. You’ve got to be quick off the mark though – this application must be submitted within 7 days of the company going into liquidation. During the application process you are allowed use the name for up to six weeks or until the court has made its decision. This is of course a risky route to take as the court may rule against the use of the name so it’s important to weigh up the pros and cons.
There are exceptions, but there doesn’t seem to be any evidence to suggest the Ibrox entity meets these, or I’m sure we would have been told by its PR division..
If we add that simple rule to what we learned yesterday, then it really is unacceptable that the directors at Ibrox have been allowed to get away with what they have.
It is also unacceptable that the SFA and the SPFL have allowed this to happen, as it has meant that thousands are paying for something which isn’t what it says it is.
Actually, thats not the only rule being broken..
2. Regulations that affect advertising
Advertising to consumers
The Consumer Protection from Unfair Trading Regulations mean you can’t mislead or harass consumers by, for example:
- including false or deceptive messages
- leaving out important information
- using aggressive sales techniques
As we are all well aware, the Ibrox entity is guilty on all three counts, ably abetted by the media.
Advertising to businesses
Advertising to businesses is covered by the Business Protection from Misleading Marketing Regulations. As well as being accurate and honest, you must not make misleading comparisons with competitors, that includes:
- using a competitor’s logo or trademark, or something very similar
- comparing your product with a competitor’s product that’s not the same
Technically, Rangers are not a competitor of “rangers “, but the implication is the same. They are trading off the back of someone elses business. Albeit one that died.
Every time they harp on about anything that was connected with the original club, they are breaking rules on misinformation.
If i am sold a Celtic v Rangers ticket, then it’s a lie. It’s not Rangers.
Same if i take out a one day pass with Sky TV to watch Celtic v Rangers.
I’m being sold a pup.
As is everyone else.
Which is why there is no queue of sponsors in the corridors of Hampden desperate to be associated with Scottish football, and why until its all cleaned up and the restart button is pushed, there never will be.
Can you blame them ?
Why would they want to be associated with the tangled web woven around Scottish football, which obscures the deeds of more than a few with vested interests ?
Here’s a question.
If Rangers’ liquidators, BDO, discovered that another company was trading under the pretence of being the company in liquidation, and there is considerable evidence to suggest that there is, what can they do about it ?
The Reuse of a Liquidated Company Name: Section 216
If you are the owner, director or officer of a company which is either undergoing an insolvency procedure, such as an administration or liquidation or has recently undergone such a procedure, there are restrictions on your involvement with a new business which trades under the same or a similar name. This ‘similar’ name becomes a ‘prohibited name’ in law and was intended to prevent directors accruing debts and simply closing the company leaving creditors in the lurch, and starting up the next day with the same, or similar company name. This known as ‘phoenixism’ and contravention of this law is a criminal offence and can result in imprisonment, fine or both. This law is covered off under section 216 of the Insolvency Act 1986.
Ignorance of this law is no defence and directors who ignore this law either through ignorance or just do not care are headed for worse to come. Under section 217 of the Insolvency Act, the directors or even controlling managers can be made personally liable for the company debts and or the debts can be transferred across to the newly created company.
The use of the name it itself is not the only trigger as any insolvency lawyer will tell you – transferring employees across to the newly created company under some circumstances may provide evidence of a breach of Section 217. This is a very tricky area so do not second guess as mistakes at this stage can be very, very costly.
Transferring employees…thats something I’d forgotten about. Remember the fuss Charles Green made when he thought he owned the players ?
Well, there’s evidence of intent if nothing else.
You see, liquidation is liquidation.. and if there is a rule-see above-that allows the creditors to get their money back, even if its from the new company directors, who cannot possibly argue they are trading entirely without reference to the new one, then the liquidators must be made aware of it.
Its their job to make sure no stone is unturned in the pursuit of any revenue that can be used to pay off creditors.
The main objective of a liquidation order is to close a business down and cease all trading across the board. So companies aren’t usually given the opportunity to continue trading at this stage anyway, as a licensed practitioner will take over proceedings as the company is wound up (Clarke Bell, licensed Insolvency Practitioners)
Thats straightforward enough.
As is the bit about cheaply transferring assets and carrying on as though you hadn’t.
Though its nice to know the directors could be liable, but thats best left to the liquidators, BDO. As they have a job to do, they’ll be pleased to know that further money for the creditors might well be available.
Thats if they do know, of course, and you can make sure they do at this address..
Contact BDO: Joint Liquidators Malcolm Cohen and James Stephen –
You can ask them about the “Phoenix Company”
A phoenix company is where the assets of one Limited Company are moved to another legal entity. Often some or all of the directors remain the same and in some cases, the new company has the same or a similar name to the failed business. The phoenix company will operate in the same sphere as its predecessor.
And you can ask them if they have taken sections 216 and 217 of the Insolvency Act 1986 into consideration.
For clarification purposes, of course.
If I buy a ticket to see Celtic and Rangers, I need to be sure its Rangers I am seeing, or i want my money back.
You wouldn’t expect to see an Abba tribute band if it said Abba on the ticket, would you ?
Thats what we need.
From a legally minded chap.
Alright, another legally minded chap. This guy was too close to the action, yet oddly enough he has never been involved with the new club, which of course would have given it some credibility. One wonders why. as he was a big fan of the old club. And if it was the same club, he’d have been just as pleased as any other fan..
Wouldn’t he ?
Now , of course, none of this will appear in the mainstream media. Their neglect has been shameful, and along with other scandals, such as Resolution 12, the Five Way Agreement, the attempt to coerce the new entity into the top division and the lack if money coming into the Scottish game, they’ve chosen not to report on it.
Well, certainly no more than a sort of rounding up of a few facts that had already been freely available on the interweb.
All of those guilty of wrongdoing are still hiding their head in the sand hoping all of this will go away.
Celtic shareholders will be at the AGM tomorrow.
The board, and especially the CEO are well aware of the situation.
Won’t hurt to remind them though…
It’s time to crank up the pressure again.
On the SFA, the SPFL and on BDO.
Most of all, if they want to keep selling papers, or regain any respect, its time for the Scottish mainstream media to start asking questions.
Actually, a wee bit more than that.
They can start demanding answers.
What they must not do is underestimate the consequences of being , however loosely, tied in with the biggest fraud in British sporting history.