Mr Fisher, CEO of CCFC Holdings Ltd, has been very busy in the press recently. He has repeatedly declared that the football club is, and always has been, run by CCFC Holdings Ltd. His argument is being taken so seriously that the Administrator is still unsure which of the companies in the group is the football club, even after almost three months of examining the records and conducting numerous enquiries with relevant authorities. CCFC Ltd, the company in administration, is apparently, a non-trading property subsidiary. The first question to ask is how has a non-trading subsidiary managed to acquire debts in excess of £70 million? The company was only incorporated in 1995 and has never shown either the asset of the ownership of the previous stadium, Highfield road, nor the sale and any resulting profit or losses from such a transaction in the submitted accounts. The stadium was built in 1899 and was the East stand was upgraded in 1993 for an apparent cost of £4.3 million, so how can any significant debt have built up to fit with the current liabilities stated? The club did not move to the Ricoh until 2005 and at that point would be expected to have recharged the trading arm, CCFC Holdings Ltd, for the right to play in the stadium. We know the rental expenses and associated costs on the current lease total around £1.2 million a year. If the recharge had not taken place for some unlikely reason, the debts would now total less than £9 million from the more recent period. Add this to the liabilities incurred from the Highfield Road era, which show in the accounts to May 2005 as an inter-company loan of £8,958,396 and we are still a long way short of the £70 million.
Tim has declared that the accounts that have been submitted for both companies are in fact incorrect. But if this is the case, then how and why are CCFC Ltd in administration? The company would be far from insolvent in comparison to CCFC Holdings Ltd, and it would be more likely that CCFC Holdings Ltd would be in administration, having repeatedly made substantial annual losses – not CCFC Ltd. The debenture, mortgages and loans from SISU and its associated subsidiaries, such as Arvo Master Funds, would have been for CCFC Holdings Ltd and recorded as such – that company would have needed the cash injection, not CCFC Ltd. So, if Tim is correct, how have Arvo Master fund, as part of the same group of companies, put the wrong company into administration?
Mr Fisher signed off the last set of accounts in June 2012. If his recent claim is to be taken seriously, why did he allow statutory information to be submitted that he knew to be incorrect? Will he now report himself to Companies House for such conduct? While he is at it, surely other former CCFC Ltd Directors in the SISU era will be subjected to a similar investigation for signing off accounts that were fundamentally incorrect, such as Joe Elliot (2006, 2007), Ken Dilieu (2010) and Ray Ranson (2008, 2009). If as Tim suggests, CCFC Ltd has always been a non-trading subsidiary, will we need to add former directors such as Graham Hover (2004) and Bryan Richardson (2002) to the ever growing list?
If Tim is indeed correct, will attempts be made to disqualify them from acting as directors for 10 years for submitting false accounts to Companies House and for failure to maintain books and records if this recent case is taken as a precedent? Both companies can also expect letters from Companies House in the very near future, requesting satisfactory explanations and the need to prepare revised accounts. The Administrator, who is now running CCFC Ltd would now have 28 days in which to delivery the correct information to Companies House – although I imagine an exception may be sought due to the complexity of the administration process. The Directors for CCFC Holdings Ltd must also comply with this part of company law and so need to move quickly. The clock is ticking, and there must be a lot of work to do.
So, lets try and work out how this came about. The two companies are separate legal entities but somehow, someone, somewhere has got confused. How can that be? Lets go through the possibilities, to try and find the possible culprits.
The auditors may have to bear some responsibilities. Lets assume the paper work and records have been maintained according to Tim’s ‘vision’. The records were maintained ‘correctly’ and CCFC Ltd’s books show the company as a non-trading property subsidiary. The files were first passed to registered auditors, Grant Thornton who audited CCFC Ltd for the years up to May 2007. They managed to get so confused for twelve years that they signed off incorrect information, putting transactions into the wrong company time and time again. The records would have shown CCFC Ltd acting as a non-trading company, with very few transactions, and yet qualified accountants ignored what was in the file and on the accounts systems and went ahead and changed everything. They added income from gate receipts and sponsorship to the accounts. They also deducted players wage costs, showed the profit and losses from the sale of players registrations in CCFC Ltd’s accounts and added the registration values to the Balance sheet. No-one spotted what the Auditors had done! The directors that signed the financial records off must have been half asleep and didn’t notice for fourteen years.
In 2009, new auditors, BDO LLP, were appointed after someone spotted the massive error, if Timmy is to be believed. BDO should have at this point resubmitted all of the previous accounts – a massive job in itself whilst ensuring the correct records were dealt with in the appropriate manner moving forward. No corrected accounts are on file at Companies House. Even worse, they committed exactly the same mistake as the previous auditors, continuing to report CCFC Ltd as acting like a football club. How did Ray Ranson not notice this grave error when signing of the next set of accounts, when presumably the new auditors were appointed with such a clear brief? BDO failed in the task so spectularly that they were allowed to continue to audit the books for another three years in the same manner of the previous auditors. Is there no end to this incompetency? The audit file and correspondence would make interesting reading – and can be demanded by the Administrator – and would clearly highlight how the errors were made.
If I were one of the individual auditors involved, I would be certainly worried about my future job prospects. Will they also be struck off from the professional bodies of which they are members off? The Auditors insurers would also be likely to be paying out in the not too distant future for such incompetency – presumably CCFC Ltd could make a claim for identifiable losses to recover costs incurred such as the audit fees along with a large proportion of the costs incurred for the Administration. This could be a very expensive oversight – the Administrator has already accrued charges of over £160,000, along with the Administrators solicitors of another £140,000. Ouch.
A company also files returns for both VAT and costs associated with payroll. Both CCFC Ltd and CCFC Holdings Ltd are registered for VAT. CCFC Ltd may not have any employees, if Fisher is to believed, as it would not require any, as apparently it did not trade. Will the Administrator be instructed to re-file returns for all annual returns for PAYE (P35’s) and the quarterly VAT returns should these prove to have been incorrectly completed? There are likely to be fines incurred for submitting false and misleading records, which over the course of eighteen years are likely to add up to a considerable amount.
Lets now assume that the records were maintained as though CCFC Ltd was trading as a football club, which is how the records suggest and the Auditors are off the hook – they have followed the paper trail as instructed at the time. It is just that Tim thinks this paper trail is now incorrect. Directors are likely to be culpable. Historically, playing contracts appear to have been negotiated between the individual player and CCFC Ltd. It is how they appear in the accounts and the Administrator’s statement of 24 May 2013 stated that
the players contracts are in their [CCFC Holdings Ltd] name … This has seemingly been endorsed by the Football League who have completed all current player registrations in the name of Holdings. [my italics]
So even acting Directors were unable to complete legally binding contracts in the name of the company they were acting on – namely CCFC Holdings Ltd. The statement appears to imply that previous registration were in fact made in error which has now been corrected. If the directors struggled, what hope is there for the more junior members of staff to follow the correct procedure?
So, lets assume that the administrative staff were informed that CCFC Ltd was a non-trading subsidiary and either chose to ignore repeated requests from the directors or were incapable of distinguishing the difference. The management must bear some responsibility for allowing the accounts and sales staff to record trading activity incorrectly. When invoices were raised for sponsorship deals say, the management would have wanted the paperwork to be from CCFC Holdings Ltd but the staff could never quite complete the documents correctly, constantly using CCFC Ltd’s headed paper. In the early days, there must be numerous memo’s between the directors complaining of the uncontrollable nature of the employees, consistently ignoring their wishes. These days, there would be numerous emails that would cite exactly the same problem. But no one listened – the staff were a law unto themselves. The personnel files containing staff appraisals would make interesting reading. Lets imagine
‘Des is a valued member of the team, constantly meeting most of the KPI’s set down, regularly beating sales targets set, meets deadlines, uses his initiative, is a very polite and astute young man. However, despite repeated requests, Des in incapable of and refuses to follow the most simple instructions when it comes to completing paperwork. I recommend further training on this matter.
According to this scenario, this would be repeated for all staff of CCFC Holdings Ltd, time and time again over almost twenty years. It would also be interesting to see if glowing references were given to team members when moving to another company, even though all the staff were apparently refusing to follow such simple guidelines. What are the implications for such misleading information? Commercial staff were culled at the start of the 2012/13 season. It was presumed at the time that this was to save the club money after relegation to the third tier, but maybe it was completed to remove those that could not follow simple orders from management!
Maybe the accounts department tried repeatedly to correct the errors. There would be a large pile of emails between themselves and sales teams, highlighting the consistent errors that were never apparently corrected. Maybe the staff were very militant and reluctant to change? There would also be numerous emails between staff in the purchase ledger department and external suppliers requesting that the invoices were completed incorrectly and should be resubmitted. Large corporations often refuse to process and pay invoices that are not completed exactly according to their wishes. But at CCFC Holdings Ltd, this would not be the case. If the supplier refused to co-operate, not only did their services continue to be engaged but the paperwork was somehow incorrect for nearly twenty years. The staff at CCFC Holdings Ltd simply processed the documents for the wrong company. Is there a massive problem with the education and training system in the midlands so that there is a limited supply of decent workers, all of whom are employed elsewhere, leaving only the most incompetent behind to work for the football club?
Can Mr Fisher’s opinions and statements that CCFC Ltd is a non-trading subsidiary be trusted? There is a wealth of evidence in the public domain that appears to contradict his recent statements, but maybe the documents seen by the Administrator contradicts the official documents. If Tim is in fact right, the repercussions for both the companies and the directors, both former and current, could be wide ranging. Normally, the Holding Company of a group is named as such to make it clear that it is the non-trading subsidiary. Fisher’s claims turn the naming on its head, which in itself is misleading, but it is after all, only a name. If CCFC Ltd is in fact a non-trading subsidiary, there appears to be a lot of corrections that will need to be completed, with a high volume of transactions set to be reversed and recorded correctly with possible wide ranging repercussions. The liabilities in CCFC Ltd would be massively reduced – the amounts outstanding would be reconfigured which could dramatically alter the balance of power in relation to the voting rights of creditors to take the company out of administration. No wonder the creditors meeting of 29 May 2013 was adjourned for two weeks, awaiting further information and clarifications. It will no doubt be a very busy period for the Administrator and his team.