The Administrator’s Progress Report into the administration of Coventry City Football Club Ltd (CCFC Ltd) has been filed at Companies House, dated 27 September 2013. The Report records that the ownership of certain assets has been a bone of contention. This is not expanded upon, relying upon the awareness of creditors to the detail explored during the process and so takes a pragmatic approach, dealing largely with identifiable data rather than presenting interpretations or understandings. As an officer of the court with the expressed requirement to facilitate the best possible outcome for the creditors under the process, the Administrator, Paul Appleton of David Ruben & Partners LLP, is presenting a report for the creditors, with an emphasis on quantifiable data, focusing on the distribution of funds relating to the sale of the assets of the company and monies accumulated.
The sale of the Company’s rights, title and interests are recorded as having been completed on 27 June 2013, purchased by Otium Entertainment Group Limited (Otium) for a total of £1,500,004, broken down as follows: Goodwill – £1; Business & Intellectual Property £1; Football League FL and Football Association FA shares £2; Equipment £1; IT System £5,000; debtors (including claim on the rates rebate) £1 million; benefits to rights; benefits to licences; and company records all at £1 each and other unlisted assets of £28,254. Finally, the benefit (subject to burden) of any continuing contracts is listed as £466,742.
The Administrators first Report and Proposals, dated 15 May 2013, noted that SISU, the Football League and Football Association, amongst many other interested parties, held competing views as to which company was responsible for footballing operations. Either CCFC Ltd or Coventry City Football Club Holdings Ltd (Holdings) were the club and held the golden share. The Administrator noted that
The rules of both the Football League and Football Association confer a wide discretion upon these organisations relating to the decision as to whether, or not, it should register any proposed transfer [of the share].
The Football League transferred the entitlement to the Golden Share from CCFC Ltd to Otium, in line with the sale actioned by the Administrator on 02 August. Later in the initial Report, Appleton noted that further investigations were continuing into the
competing views as to the ‘ownership’ of the Share and assets, not least as a result of the information contained within historic documents, including Statutory Accounts, share Registers etc, which suggest that the clubs assets are held in the Company’s name.
The Administrator states in his more recent report that the
Company’s accounting policies are complex and confusing
and notes that clarifications have been sought and expectations are such that the investigation into this matter will be finalised shortly. Appleton also states that he has found no evidence that any of the assets have been sold under value, both past and present, with answers again sought from a variety of parties to ascertain that further investigation is not required as set down by the Insolvency Act of 1986. The parties which provided comment are not disclosed.
The Administrator was reported as stating by the BBC on 27 June 2013 that
However, as I’ve stated on many occasions, it is Holdings which employs the players.
According to the governments own website, an employee is simply
someone who works under an employment contract.
The majority of companies that run football clubs list the employment contracts as assets termed players registrations. Appendix 3 of the Progress Report shows a breakdown of the receipts and payments for the company whilst in administration. Player’s registrations were assets that realised a value of £466,742.
It is notable the difference in language that can be used when talking to the press compared with writing official documentation. Appleton is more free to generalise in his statement above to the BBC, whilst is more precise in stating his understanding in the court documents. As a result, the quote to the media appears more definitive than his in his latest Report. Court documents enjoy absolute privilege under defamation law and so are generally not liable to action under the legislation. However, commercial confidentiality is a consideration. The Administrator states that
The interim Return and the subsequent final report will contain confidential information, which in common with all such reports, will not be disclosed.
Whilst there is no suggestion that the Administrator has not followed correct procedure in his summation, I find it is somewhat disappointing that this document is under no obligation, as the law currently stands, to contain the detail that has been uncovered during the period of investigation that informed his statement as reported in the press. It is also a disappointment that there is no narrative to explain how the Administrator was in a position to offer the assets of players registrations to Otium for almost half a million pounds when he believed all the players contracts resided in another separate company – employed in, and by, Holdings.
The Administrator is also under no obligation to state the financial records for the period 01 June 2011 to 21 March 2013, being the period between the first day of the latest financial year that has yet to be filed at companies house and the date at which the company entered Administration. The accounts to May 2012 are, of course, overdue. The Companies House web site (Q3) states that
Once a company goes into liquidation and the statutory liquidation documents are registered at Companies House Edinburgh, there is no need to file annual accounts and annual returns.
Information that relates to CCFC Ltd would be contained in the parent company accounts, Holdings Ltd, and in SBSL Ltd, the ultimate parent company of the group, that are also overdue. Inter-company activity between members of the group would quite correctly be removed to produce accurate data in the consolidated accounts from SBSL Ltd. Holdings are obliged to produce statements for the company as an separate entity. As the Administrator believes that Holdings employs all of the players, it is reasonable to expect that Holdings would now show the players registrations as intangible assets on the financial reports if submitted. Holdings is now a shell company, with all assets having been transferred to Otium. There is no suggestion that Holdings is about to become liquidated. However, were the company to be liquidated, then the question of which company’s principle business activity was that of the football club may never be fully revealed, nor resolved.
The latest Report also states that Holdings and Sky Blue Sports and Leisure Ltd (SBSL) both had agreed to waive £24.7 million and £7.5 million respectively under the terms put forward for the agreement of the CVA. It is also worth reflecting on an earlier post from July, that considered
when taking control of the club in 2007, SISU restructured the original debts of the club from £43.5 million down to £8.6 million which was then reduced by a further £6.4 million.
Arena Coventry Limited (ACL) the clubs landlords at the Ricoh where the club played home matches until this season, were the largest unconnected creditor, but were owed less than 3% of the total ‘debt’. The company rejected the terms of the CVA that resulted in the company being put into liquidation and the imposition by the Football League of a further ten point deduction. It appears that a large section of fans would like to see ACL use the courts to pursue an independent enquiry or investigation into the internal affairs and workings of the company, an option that would be available to ACL, as a creditor. This type of action is obviously very costly and a Director has a duty is to ensure that he, or she, acts in the best interests of the company. The Administrators fees currently total £513,109 for a total of 1571 hours. As stated in the Report, the Administrator has spent significant time examining the relationship between the company and connected entities, dealing with extensive enquiries from parties such as SISU, the Football League and the Sky Blue Trust, amongst many. Solicitors fees also total over £400,000 to date. The option of further investigation appears very unlikely to be taken. However, should ACL engage with such litigation that may show that concerns were lacking in substance, the legal costs for both parties would be borne by them. Conversely, should any action uncover and expose activity that contravenes Company and/or Insolvency Laws, the largest creditors would stand to make the greatest gain. In theory, SISU related companies could stand to gain by taking advantage of ACL’s action, without exposing themselves to the expense of the process. As such, has the situation become a case of heads you win, tails I lose?