Full Circle...Or Not Fit And Proper Take 2

[ian1964 10,625]

By Arnold Black

 

When the SFA took action against Rangers in handing down their punishment on â??bringing the game into disreputeâ? they were highly critical of the actions or non-actions of Rangers directors. I think everyone accepts the charges against Craig Whyte are justified but it is worth considering the charges laid against the likes of Alastair Johnston, John Greig and John McClelland, especially in the aftermath of the decision by the SFL clubs to admit Rangers into Division 3 and the resultant panic it appears to be spreading in the minds of SPL chairmen and directors.

 

Stewart Gilmour of St Mirren has predicted â??major redundanciesâ? at the club and at the time of the SPL vote there were comments about six or so clubs facing administration if Rangers were ejected from the SPL. Fans appeared to be happy to accept their club going into administration rather than have Rangers back in the SPL but fans do not have legal responsibilities to consider in their decision-making.

 

It is therefore worth considering what the responsibilities of company directors are.

 

The Companies Act 2006 contains seven general duties of directors:

 

 

 

â?¢ a duty to exercise reasonable care, skill and diligence

 

â?¢ a duty to promote the success of the company

 

â?¢ a duty to act within their powers

 

â?¢ a duty to exercise independent judgement

 

â?¢ a duty to avoid conflicts of interest

 

â?¢ a duty not to accept benefits from third parties

 

â?¢ a duty to declare any interest in a proposed transaction or arrangement

 

These statutory duties are owed by a director to the company and not to any individual shareholder.

 

The duty to promote the success of the company is an interesting one. It is set out in section 172 of the Act and replaced the common law duty of loyalty, often phrased as the duty to act in good faith in the best interests of the company. The duty requires a director to act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of the members as a collective body: not just the majority shareholders, or any particular shareholder or section of shareholders. In doing so the director must have regard (amongst other matters) to six specified factors:

 

â?¢ the likely consequences of any decision in the long term

 

â?¢ the interests of the companyâ??s employees

 

â?¢ the need to foster the companyâ??s business relationships with suppliers, customers and others

 

â?¢ the impact of the companyâ??s operations on the community and the environment

 

â?¢ the desirability of the company maintaining a reputation for high standards of business conduct

 

â?¢ the need to act fairly as between members of the company.

 

The concept of promoting the success of the company, and the non-exhaustive list of factors, were the most controversial aspects of the Act. The Government has described section 172 as a radical departure in articulating the connection between what is good for a company and what is good for society at large. This is said to reflect a cultural change in the way that companies conduct their business â?? that it is now recognised that pursuing the interests of shareholders and embracing the wider responsibilities flagged in the list of factors are complementary purposes, not contradictory ones. The Government also claims that section 172 should resolve any confusion in the mind of directors as to what the interests of the company are;

 

There is no excuse, for example, for thinking that acting in the interests of the companyâ??s members necessarily precludes acting in the interests of those who depend on the company, like its employees and its supply chain.

 

Kilmarnock Chairman Michael Johnston, much-maligned by fans at the time, was the one SPL Chairman not to vote â??yesâ? in the SPL vote. He understood his legal responsibilities under Section 172, stating â??I elected to abstain in order to reflect the result of the consultation process and in recognition of a number of other factors, not least of which was Section 172 of the Companies Act concerning my fiduciary duty as a Director to act in the long term interests of The Kilmarnock Football Club Limited and to ensure its success as a business.â?

 

In view of the doomsday scenario that many clubs are now predicting, they presumably took this into account before the SPL conducted its vote. As responsible directors, they would have sought to establish the impact on their clubs of various scenarios and weighed up the consequences. These consequences would have included the effect on employee jobs, the effect on the business suppliers, as well as the effect on the fans supporting the clubs. In the current climate, they will have considered the reaction of their lenders to Rangers disappearing from the SPL. After all, Rangers was not just a club suffering financial difficulties folding, Rangers was a club continuing and a decision had to be made to remove this â??cash cowâ? from the SPL.

 

We are certain, of course, that the directors would have instructed their management staff, their finance staff, and their business advisers to produce the guidance and plans of future prosperity that would allow them to come to their decision with a clear conscience. Or, more likely, did they wing it and take a calculated risk that Rangers would only be out of the SPL for one season?

 

The agenda for the SPL meeting following the SFL vote suggests the latter. As such, does sporting integrity and fan power continue to rule over legal responsibility? Do the directors now, given the time that has passed, have all the financial information at their fingertips?

 

If the SFL vote is respected, as our First Minister Alex Salmond has said that it should be, will clubs be forced into administration or redundancies as many are suggesting? I would make it clear that is not something Rangers fans should wish to see â?? no club should want to see the loss of a club or employees losing their jobs.

 

But if this is the outcome of the SPL decision, will the SFA step in and take action? Will the directors of these clubs be considered to be derelict in their duties and as a result be deemed responsible for â??bringing the game into disreputeâ?? And will the SFA be as critical of these directors as they were of Rangersâ?? directors who took action by resigning and by making their voices heard on the front pages of national newspapers?

 

Arnold Black is a Chartered Accountant and long-time Rangers fan and season ticket holder.

 

http://www.therangersstandard.co.uk/index.php/articles/current-affairs/141-full-circle-or-not-fit-and-proper-take-2

[tango 0]

If the SFL vote is respected, as our First Minister Alex Salmond has said that it should be, will clubs be forced into administration or redundancies as many are suggesting? I would make it clear that is not something Rangers fans should wish to see – no club should want to see the loss of a club or employees losing their jobs.

 

 

Feel sorry for the clubs employees that may lose their job but the chairmen listened to the hate,bile and bigotry that was spewed out about us from the dark side and therefore I hope they crash and burn one by one

[calscot 0]

If the SFL vote is respected, as our First Minister Alex Salmond has said that it should be, will clubs be forced into administration or redundancies as many are suggesting? I would make it clear that is not something Rangers fans should wish to see – no club should want to see the loss of a club or employees losing their jobs.

 

You may not want to see people losing their jobs but as is always the case, it is often necessary in order for an industry to survive. It is happening all the time in the world and especially right now in the British civil service and armed forces. Would you rather they all kept their jobs but your tax rate went up by 10%?

 

Sometimes it's necessary and not something to be shied away from due to feeling sorry for the unfortunate.

 

Feel sorry for the clubs employees that may lose their job but the chairmen listened to the hate,bile and bigotry that was spewed out about us from the dark side and therefore I hope they crash and burn one by one

 

You can feel sorry for them, but you have to remember that the ONLY fans in the country who originally didn't want this scenario were Rangers fans. The job losses are the will of the REST of Scottish football fans.

 

I personally am now of the opinion that Scottish football needs a catharsis. It needs to see and feel the cold face of reality so that it can rebuild itself without the petty, self serving attitude and instead one that nurtures the game and makes decisions bases on the good of Scottish football as a whole. That's the only way we can survive well into the future.

 

We need to go back to survival of the fittest in order to evolve and survive - and collaboration is one of inherent skills that is needed to be fit for survival in this scenario. Just like dogs need evolved to collaborate in hunting to survive. Single dogs struggled to survive alone.

[Guest Dutchy]

It's all very well posting extracts from companies law, but what's the potential punishment for this sort of wrong doing, if it could be proved to be wrong with their fans threatening to boycott them.

 

Who's going to enforce it?

 

Seems relatively pointless considering what bankers and businessmen have been getting up to over recent decades.