More questions for the Administrator

There are a couple more discrepancies that have come to light on the Administrators Report of 15 May 2013, in addition to the questions raised previously.  On appointment, one of the first changes on public record conducted by the Administrator was the filing of an updated version of the Memorandum of Association (MoA) for Coventry City Football Club Ltd (CCFC Ltd), the company in administration, accepted at Companies House 28 March 2013.  The paperwork had been completed and signed off some fifteen months earlier, dated 16 December 2011. The administrator submitted this – he was appointed on 21 March 2013, so all activity would be under his control.  There are two observations here.  Firstly, why had it taken so long for such a form to be posted?  Secondly, we are fair to assume he had consulted the document.

The MoA is essentially the document that shows why the company exists and what it intends to do.  CCFC Ltd’s list is very long and includes to ‘operate and manage the business of football grounds and sports stadia’, ‘provide training and training facilities in all aspects of football’ and to manage and operate shops and bars.  The second paragraph is very clear – the objectives are ‘to carry on business operating and managing a football club’ and ‘to employ football players’.  Further down, it lists an aim ‘to become a member of the Football Association Ltd and Football League’.

In the Administrators Report dated 15 May 2013, in the background section, he has refined the principle activity ‘to be described as that of the operation of sports facilities.’  A very concise summation, that also neglects the text from both the document filed at Companies House and also, the submitted accounts for the past sixteen years.  To quote from the accounts of CCFC Ltd of 1995: ‘The principle business activity of the company is that of a professional football club’.  From the more recent accounts of 2011, signed off by Tim Fisher, company director:  ‘the company is principally engaged in the playing activities of a professional football club’.  These are neat summaries.  Why has this been changed so dramatically in the Administrators Report?

It is interesting to note that there are only four companies listed as creditors and yet a simple error is easily identified in the short list.  The creditors are Arena Coventry Ltd (ACL), Arvo Master Fund Ltd, Coventry City Holdings Ltd and a company not listed at Companies House, Sky Blue Sports Limited.  Who is this mysterious company that is allegedly owed £14.4 million?  The parent company of CCFC Ltd and CCFC Holdings Limited is Sky Blue Sports and Leisure Ltd – are we to assume that the Administrator meant this company?  If so, how can such poor attention to detail be allowed in such an important document set out for the Courts?  If this is the case, how we be sure that Administrator does not get regularly confused when reporting on transactions involving CCFC Ltd and CCFC Holdings Ltd, two companies with dealings that appear very closely linked and can be confusing to separate at times.  The Report states that ACL

On 14 February 2013, the landlord [ACL] applied for a number of Interim Third party Debt Orders against debtors and bank accounts, some of which were being operated by [CCFC] Holdings [Ltd].’

When running a group of companies with a complex structure, some of whom have experienced difficulties with cash flow, it is not uncommon for the officer in charge of paying suppliers to simply use whichever bank account has a positive balance to pay bills.  It’s a practical decision.  Creditors on the whole do not care where the money comes from – they just want paying.  It is easy to imagine that historically, invoices that have been issued to CCFC Ltd have on occasion been paid from an account in the name of CCFC Holdings Ltd.  And vice versa.  This type of activity could be one of the reasons that may explain why the two companies have become almost indistinguishable – hence the erroneous request by ACL.  The correct manner in dealing with such occurrences is to show these types of payments as inter-company loans.  A very close attention to detail is required in order to decipher such transactions and ensure that the invoices have been recorded correctly.

There is no mention in the first report of the relationship between CCFC Ltd and SBSL Ltd. SBSL Ltd is part of the complex group of companies that effectively own the club and as the parent company, submits accounts and cashflows statements for the group of companies.  The debt outstanding in SBSL Ltd is significantly lower than the subsidiaries, after large sums were written off when SISU acquired control of the club.  Around £43 million was reconfigured to just £8.6 million in SBSL Ltd, which do not appear to have been applied consistently – the debts appear to be still showing as due in CCFC Ltd accounts.  And yet the initial report neglects any mention of the parent company, apart from listing it incorrectly in the list of creditors, never mind this apparent discrepancy.  It is worrying that the report overlooks an important part of the club, and companies, recent trading history and complex structure. Lets hope that the Administrator will have paid attention to such details highlighted here, so that in the final report, we can be confident that a thorough, precise and correct examination has been completed.

The Sky Blue Trust has sent a list of questions to the Administrator.  These can be viewed here.

This entry was posted in Administration, Coventry City, Football Finance and tagged , , , , . Bookmark the permalink.

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