Rejoice rejoice – we have found the golden share.

Golden_eggSo the administrator had finally made a clear declaration on the elusive ‘golden share’.  His statement on Friday, reported in the Coventry Telegraph as

Since my appointment as Joint Administrator of Coventry City FC Limited, there has been a huge amount of interest surrounding the ownership of the Football League’s ‘Golden Share’.  Following information I have received from various stakeholders, I now believe the registration of the Golden Share lies with Limited.

He is careful in his choice of words.  I ‘believe’, is key.  This leaves an element of doubt in the minds of potential bidders considering proposals to take the company, and the club, out of administration.  There is still the chance of facing costly litigation over the issue at a later stage, if any outside bid is successful.  Any submissions will have to be conditional upon the legal holder of the golden share being in the company that the bid is for – i.e. CCFC Ltd.  This conditional offer may put them at a potential disadvantage to any other bids from organisations that have full access to all the documents that can be unconditional.  An unconditional bid is obviously more appealing to any Administrator and more readily accepted.

It has taken over nine weeks working as the Administrator to arrive at the decision of what he now believes.  According to Purnells, under the Insolvency Act of 1986, an Administrator “has the power to do anything necessary or expedient for the management of the affairs, business and property of the company[1].  If Appleton has used the powers in their fullness, has he requested all the correspondence on the golden share, between all of the companies in the group, both CCFC Ltd and CCFC Holdings Ltd, and the football League?  Or has he relied upon documents that were presented to him in the initial files?  Has he requested the audit files from BDO to consider their notes and findings when preparing submitted documents in relation to which company was, and is, trading as the ‘football club’?  If so, why does his declaration utilise the caveat of I believe?  If not, then why not?

Records suggest that CCFC Ltd has historically paid the wages, treated players registrations as assets and showed the profits and costs of both the purchase and sale of players, yet according to the Administrator, there is confusion as to which company legally owns the contracts as the football club.  It is entirely possible that more recently negotiated and renewed contracts have been recorded between the player and CCFC Holdings Ltd. CCFC Holdings Ltd is then acting more like a football club, as SISU have suggested in the press.  As the official information in the public domain stops around June 2012,  it is possible that this change has taken place after that date.  These contracts would satisfy the Administrator that CCFC Holdings Ltd have incurred the recent costs associated with the playing and management wage bills and record the registrations and transactions accordingly.

Has the Administrator utilised the powers vested in the position to request and consult all of the players contracts?  If not, then why the reluctance to?  When a company enters administration, the Administrator becomes personally liable for all of the costs associated with the running of that company, from the point of entry to the date of exit.  This is one of the reasons that the club shop was immediately closed, effectively saving the Administrator the costs of paying the rent and the associated costs.  The same principle applies with the players’ contracts.  If the legal owner of the contracts is CCFC Ltd, then the wage bill for the last nine weeks is the responsibility of the Administrator.  A hefty financial responsibility, particularly in the close season where no income can be derived from match day receipts to off-set the costs incurred.  If the wages went unpaid, the contract is then broken and the player is free to leave without any transfer fee becoming due.

As his recent report and statements show, the Administrator is far from certain which entity is the football club, and so to remove any doubt, it is fair to expect that he should now consider requesting the additional documentation.  If the court must ultimately decide as has been suggested, will he be satisfied that he has undertaken a most thorough investigation so that the court has all of the information it requires in order to draw the correct conclusion?

Appleton has now declared that

A sale process has begun, I have spoken and met with a number of parties who have expressed an interest in the assets Limited possesses and its interest in the Share.

To that end, I have set a deadline of May 31 for indicative offers from those interested parties. If a suitable purchaser is identified, it will still be subject to the consent of the Football League and will also likely involve discussions between Holdings and that purchaser.  The Football League holds its next Board Meeting on June 5 and I hope something can be resolved before then.

So after nine weeks in which he appears to still be unsure as to which of the Limited companies, either CCFC Ltd or CCFC Holdings Ltd is the ‘football club’, the Administrator is expecting indicative offers by May 31 and expects to have any sale finalised some six days later on 5 June.  Is that fair to expect well written, complex, fully financed and realistically costed bids to be submitted, when the interested parties will have had so little information in what exactly they are bidding for an such little time?

It is certainly a positive move that the Administrator has found a significant part of the jigsaw in locating the holder of the golden share, which is particularly necessary as bids are set to be submitted in only four working days time.  It is certainly better than if the discovery had been finalised after the process of bids to purchase had began.  We can only hope that a substantial amount of prospective offers do not suffer unduly due to lack of detail and understanding which is likely for such a restricted time frame, particularly when the Administrator himself has found the task, well, tasking.  The saga continues…

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One Response to Rejoice rejoice – we have found the golden share.

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