BusinessBusiness RecoveryAdministration is tactical victory for relegated clubs

Administration is tactical victory for relegated clubs

Two football clubs' decision to enter into 'tactical' administrations is taxing the profession as much as the football authorities

Leeds United recently took the insolvency low road and entered into a company
voluntary arrangement as they teetered on the brink of relegation. Boston United
did the same moments before the final whistle blew at their last game of the
season.

Not only did this mean that they suffered a meaningless ten point deduction
this season instead of next, they also offloaded a sizeable portion of their
debts owing to ‘non-football’ creditors i.e. those who are not players or other
clubs owed money for transfer deals.

In Leeds’ case, KPMG partners have been appointed as administrators reporting
that the club balance sheet showed a £35m debt at 31 March 2007.

In addition to needing an injection of roughly £10m to continue trading, the
former championship team was hit by HM Revenue & Customs with a winding-up
petition for approximately £5m. If this debt had not been paid by 25 June 2007,
the club may have been forced into liquidation.

Ken Bates is spearheading a consortium to buy Leeds United but a creditors’
meeting to be held before the end of May at sale will still need to endorse the
CVA.

This requires the endorsement of 75% of those creditors who vote on the deal
but the Bates’ consortium and other creditors may have sufficient voting power
to force through the acquisition of the club from the administrators, despite
any opposition from other creditors.

The disparity between the football creditors who will have their debts
honoured and the almost total loss to the government’s tax take has previously
incurred the ire of HMRC.

HMRC are thought to be owed about £6m by Leeds United.The taxman went to the
courts to challenge a similar move contesting that it was a breach of the law.

Boston, who have been relegated from the Football League into the Nationwide
Conference, may find themselves in no-man’s land if Conference bosses decide to
refuse admission into the lower division.

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