Rangers, HMRC & CVAs

[Frankie 8,217]

Well worth a read:

 

http://mlm-solutions.blogspot.co.uk/2012/05/rangers-fc-hmrc-and-cvas.html

 

Letâ??s examine HMRCâ??s conditions and in particular those conditions that may preclude HMRC from accepting any proposal delivered by Rangers FC.

 

A Company Voluntary Arrangement (CVA) can be an effective way of restructuring the debt of a company and, when successful, results in the companyâ??s survival.

 

A few months ago, CVAs were a relatively unknown effective business tool, particularly in Scotland. They have now been brought into the spotlight due to the situation at The Rangers Football Club plc.

 

A CVA requires 75% of a companyâ??s creditors to vote in favour to be successful. It is difficult to predict the attitude of creditors towards any CVA proposal. However, HMRC provide a guide to its conditions for accepting a proposal, which indicates how they are likely to vote on any proposal. HMRCs conditions are summarised on its factsheet - http://www.hmrc.gov.uk/helpsheets/vas-factsheet.pdf.

 

Conditions for HMRC accepting a proposal that cannot or may not be achievable â??

 

â?¢ an optimised and achievable offer is made to creditors

 

This is a wide ranging condition, parts of which are covered by more specific conditions below. It does specifically cover HMRCs condition that they expect the Company to pay monthly contributions into the arrangement for a period of 5 years.

 

 

â?¢ the proposal treats all creditors within the same class equally

 

There has been no suggestion that the anticipated CVA funded by Charles Greenâ??s consortium will attempt this. Previous bidders proposed treating certain unsecured creditors differently (such as bondholders and TicketUs) and this would have led HMRC to reject the CVA.

 

 

â?¢ that the open market value of assets is not materially different from the proposal

 

The offer put to creditors is likely to be rejected if there are independent professional valuations which suggest more money can be raised by ceasing to trade, then selling the assets off separately. If a CVA proposal does not disclose the break up valuations, HMRC will specifically request that information.

 

 

â?¢ that values being placed upon liabilities are not materially different from the proposal

 

There needs to be a full disclosure of liabilities. In relation to RFC, this is complicated by the EBT liability raised by HMRC, that has been defended by the club, and is presently subject to a decision by a first tier tribunal.

 

 

â?¢ full reasons for past non-payment of tax and clear explanation of changes madeâ?¦

 

The most obvious reason appears to have been Craig Whyteâ??s apparent decision not to pay Tax & NI, during his period of control. HMRC will seek assurances that Mr Whyte will not be involved in the affairs of the club going forward, as a shareholder or director.

 

 

â?¢ evasion of statutory liabilities or past association with contrived insolvency

 

Proper use of EBTs is widely accepted as good tax planning. Mis-use of EBT resulting in an abuse of the tax system is considered by HMRC to be tax evasion.

 

 

â?¢ payment of other creditors whilst withholding sums due to the Crown

 

This relates to the payment of other creditors, whilst withholding sums due to HMRC. It has been widely reported that this happened during Mr Whyteâ??s period of control.

 

 

â?¢ failure to meet any obligations under a prior voluntary arrangement

 

This can apply where the company enters any form of payment arrangement with HMRC, then subsequently defaults.

 

 

â?¢ exclusion of creditors who are entitled to receive the same treatment as all others within their class

 

It is essential that all debts due to creditors, are treated equally. HMRC will expect itâ??s assessment of the unpaid tax liability relating to the EBTs to be dealt with by the proposal.

 

 

â?¢ a purchaser assuming responsibility for payment of some of the debts in consideration for the purchase of the debtorâ??s assets

 

There has been no suggestion that Mr Greenâ??s proposal contains such conditions. Previous bidders did make this a condition of their bids, and such conditions would have led those biddersâ?? proposals to be rejected.

 

 

Those with a keen eye may have noticed that there is little guidance on the level of dividend which HMRC expect, other than the proposal to creditors is required to be optimised. Our two most recent CVAs proposed around 35p in the £, and HMRC successfully negotiated these up to around 70p in the £. Whilst this should not be taken as any guide whatsoever in relation to RFC, these examples evidence the influence HMRC has in CVAs, where it has 25% or more of the voting rights.

 

If a CVA is accepted by at least 75% of the creditors of RFC, then the club will avoid the sanctions that are anticipated to be levied against it, if it seeks to re-enter the SPL through the newco route. Therefore, achieving a CVA clearly has benefits for those involved with the Club.

 

However, taking into account the foregoing analysis, it is clear that the Company has never been able to meet HMRCs conditions for accepting a CVA in the recent frantic months and it would prudent for those involved to anticipate HMRC rejecting the proposal.

 

Allan McLeod is a Senior Manager at MLM Solutions, who are Scotlandâ??s leading provider of CVAs and successfully negotiate with HMRC to meet their conditions for accepting CVA proposals.

 

Maureen Leslie, Director of MLM Solutions, is a regular commentator on BBC Newsnight Scotland and Reporting Scotland regarding CVAs and corporate insolvency matters.

[forlanssister 3,083]

Maureen Leslie, Director of MLM Solutions, is a regular commentator on BBC Newsnight Scotland and Reporting Scotland regarding CVAs and corporate insolvency matters.

 

We're apparently going to be on Newsnight (not Newsnicht!) at 22.45 on Tuesday.

[the gunslinger 3,366]

interesting stuff.

 

of course it also requires a buyer with cash.

 

I hear the proposals no longer going out today.

[Frankie 8,217]

interesting stuff.

 

of course it also requires a buyer with cash.

 

I hear the proposals no longer going out today.

 

Not a surprise if that's the case.

 

I'd be more shocked if it did go out ahead of the SPL meeting/SFA court actions this week.

[the gunslinger 3,366]

Not a surprise if that's the case.

 

I'd be more shocked if it did go out ahead of the SPL meeting/SFA court actions this week.

 

I would be stunned if it ever does. but I agree certainly not before these meetings.

[Calgacus 8]

The longer this goes on the more I worry that we won't survive this at all.

[gisabeer 409]

i will be very surprised if we come out of this with a cva. a newco is the only option now folks.

[caseyjones 0]

Creditors meeting confirmed for June 14.

[forlanssister 3,083]

From the official site:

 

Duff and Phelps, the administrators of Rangers Football Club, issued the following statement this evening.

 

Paul Clark, Joint Administrator, said: "A formal notice of the CVA meetings will be sent to all creditors and shareholders of the Club tomorrow providing further details of the CVA process.

 

"The proposal will offer the best return for all stakeholders given the position the Club is in. If approved by the creditors, the CVA proposal will rescue the Company and finally enable it to exit administration.

 

 

"Details of the CVA proposal have been finalised today and there has been additional consultation with certain stakeholders. We had hoped the results of this consultation would have enabled us to publish the proposal today but administrative alterations mean the document will be published tomorrow. Rangers supporters should be reassured the CVA process is on track. The creditors' meeting to consider, and hopefully approve, the CVA will be held on Thursday 14 June."

 

[amms 0]

So this sounds like progress, is it?