Rangers’ Administration – Story Of A Scottish Tragedy

By Saikat Mandal
12 years Ago

13^th February. Eve of Valentineai??i??s Day, romance was in the air and football returned to its quest for the ai???Holy Grailai??i??.

Romance returned, restored and left a pockmark, a slur in the sphere of beautiful game that led the romantics believe for once, football has lost its sheen in comparison with the grubby money it generates.

History repeats itself and also nature of football works in cycle. But honestly, does football deserve another instance of Leeds United? Ordinarily, only the smartest are allowed surviving in the rarefied air of summit, but this constant financial meltdown vis-Ai??-vis clubs going to administration with a prospect of liquidation miffs everyone.

Then you try to move on forgetting this anachronistic mishap. It only curdles your stomach when you see thousands of placards and banners crying for help ai???Save MY clubai??? ai??i?? you shrivel in retaining the faith in this economic-oriented game.

Rangers provide a kernel of insight into English footballai??i??s greatest nemesis -debt- that keeps guide to a litany of errors which Sir Alex Ferguson rightly describes as ai???Tragedyai???.

Football has evolved by leaps and bounds. In modern day club football, ai???managementai??i?? holds utmost importance that failing to manage it, can led to a massive catastrophe. Scotland is not immune to this. This syndrome started a decade ago, but such knee-jerk reaction started only when Rangers, the biggest club in the United Kingdom with a century long history and tradition have buckled down under the weight of venom called ai???debtai??i??.

Rangers are not the first club in Scotland (5^th club in fact) who faced dire consequences of going into administration. Motherwell in 2002 was put into administration by then owner John Boyle. The decline of Dundee is a burning example. The club went into administration in 2003 and 10 points were deducted as a penalty. The thrust to be in the top to compete with the top comes with strings attached. They say cut your coat according to your cloth. Dundee surmounted a debt of A?23M under Italian manager Ivano Bonetti who lured big names to Dens Park in an attempt to break the stranglehold of Scottish duo- Celtic & Rangers. High profile players like Claudio Cannigia, Fabrizio Ravannelli, Craig Burley and Georgi Nemsadze stepped in. But success eluded, and the club had to sack 25 players and staff. They faced relegation and never returned to the top-tier again.

Rangersai??i?? case is slightly different. They filed notice of their intention to enter administration, as the threat of tax ball was bloating beyond their capability of payment, estimated around A?75M.

This huge potential of tax liability comes under the foray of ongoing tax inquiry by Her Majestyai??i??s Revenue & Customs into the clubs that use complicated tax avoidance process yclept as Employee Benefit Trusts.

Put it simply, Rangers have used this device in order to avoid tax payments and other expenditures that amount to A?49M in 10 years, before Chairman Craig Whyte bought the club last year.

Rangers automatically lost 10 points that ruled them out of title race. But, it is secondary. They still hold the second spot. Important is, it gives a significant protection for the club. It is a proactive and defensive measure, which Mr. Whyte, the majority shareholder and largest secured creditor, addressed as a “long term future”.

He said ai???If we hadnai??i??t done that then liquidation could have been a possibility.ai???

This EBT is a very complex process. Here, the companies registered to it, pay money into a trust, which in turn loans the money to the employees for benefits in the form of insurances like pensions or purchasing of shares. The reason why HMRC suing the present board is that they allege the previous owner used EBT to avoid taxes and National Insurance ‘on the player pay-roll’.

Now that club is under administration, the tax-man has no protection. Whyte could emerge in total control of the club but only through a ‘new holding company’ that will look after this crippling tax liability.

That company will process the Creditors Voluntary Agreement with HMRC according to which they will pay off outstanding debts and will seek moratorium from further actions. In this case, Rangers have appointed Duff and Phelps as the company who will take charge of these tax liabilities.

However, there is a slight twist in the tale. HMRC have forced Rangers into administration over an unpaid tax bill of A?9M that has taken place under the ownership of Mr. Whyte. There was also a concern over a sum of A?24M borrowed against future season ticket sales from the company Ticketus that hasn’t been included in the club’s accounts.

Rangers owner Craig Whyte said: “It remains our firm belief that the club’s future can be secured and we hope this period of administration will be as short as possible.”

Talking about the chairman, there are serious doubts about his capability that has become a matter of great concern. The Scottish Football Association is to hold an independent inquiry into the activities of Rangers. BBC Scotland in a documentary broke the news that Mr. Whyte was disqualified as a company director 11 years ago and served a seven-year ban which the Ibrox club confirmed in a statement to the Plus Stock exchange.

SFA rule states: “The board must be satisfied that any such person is fit and proper to hold such position within association football.”

Rangers costs approximately A?45 million per year to operate and commands around A?35 million in revenue. The club announced that net debt for the recent financial year was down from A?27M to A?14M. But, current liabilities have risen sharply, from A?21.5M to A?34.2M that clearly reflects the reason for A?49M tax bill which the club has been disputing through a tax tribunal process.

Mr. Whyte said that turnover rose nearly A?1M to A?57.2M. The revenue has come from European games, but there is an overall reduction in season ticket sales, hospitality sales and sponsorship revenues.

Craig Whyte - lots of questions still remains unanswered!

Now, Duff and Phelps will cut costs at Ibrox by reducing the playing staff and through player sales. Already the club sold their top goal scorer Nikica Jelavic to Everton for A?5.5m. He is one of the nine departures from manager Ally McCoist’s playing squad for the rest of the season.

So what went wrong at Ibrox? Many feel that Mr.Whyte came with a handful of promises that have never materialized. And once the outcome of the administration process becomes clear his position will be highly untenable. He doesn’t share a great relationship with the fans, as the Ibrox faithful haven’t been able to trust the man in charge because of his past records and lack of transparency.

But is it all due to him? He only took charge last year, how would you then explain the debacle of 10 years tax bill?

The blame can pass on to the previous owner Sir David Murray. Rangers already had a strong team doing well domestically. The need to bolster the squad for Europe and the ambition that goes with it took a pernicious turn as money has been spent recklessly.

Rangers midfielder Jorg Albertz says “Times have changed. They tried so hard to be up there and getting the players in who can do the job in Europe, but there were were other teams who were better.”

What should Rangers do from here? First and foremost, they should not take any steps from now that leave their reputation in the pan. Secondly, they have to rely on TV revenues as they donai??i??t have 65,000 stadia like Celtic which gives them extra mileage through match day revenues. Further, they can hope that they sort their financial doldrums out before the UEFA deadline so that the club can participate in Europe again. Good for them they are still in the UCL qualification spot.

Mr. Whyte vehemently opposes the idea of ai???fearai??? into the vortex of economic crisis. But it is easier said than done. Hope there wonai??i??t be another Gretna in the making. That would be the biggest ai???tragedyai??? ever for Scotland. Rangers should survive for the sake of Scotlandai??i??s identity.

Categories: COVER STORY, English Premier League
Tags: Craig Whyte Rangers' Administration Scottish Football

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