Someone please explain this ownership/debt thing to me as a total novice. Assem Allam owns the club completely 100% OK? Therefore at any point he could decide that we owe him nothing and that all money put in is a gift. Or at any point any gifts he has given in the past could suddenly be deemed loans and instantly we owe him £100m. As the owner, sole creditor and being a Private Limited Company rather than a Shareholder PLC, it is down to him surely what money goes where and how. OK, he could remove money from Allam Marine and pump it into Hull City and vice versa. But basically he owns the Lock, Stock and lot and it's down to him what is allocated where. So how can the business of Hull City actually owe him money when it is his 100% owned business. Therefore his debt/assets to manipulate as desired. The only time it needs to become apparent what is where, is when he decides to sell a business; in which case the Companies House Accounts need to demonstrate what is where? So what am I missing about Hull City AFC actually owing him money? I am asking this purely from a neutral uneducated Business Model Point of View without any bias if anyone can explain more to me please. I got a B in GCSE Economics but that is as far I can go with this stuff.
Ricardo has talked about this a bunch. Since it is new years eve he probably wont be on. Private message him about it.
I give myself a gift and change it to a loan so that I can charge myself interest on it. Better than money in the bank. Happy new year.
It's unlikely Allam Marine had £70m cash sat in an account so he's probably raised the money by borrowing against Allam Marine assets. It's only fair the football club pay interest at 5% if that's what it's costing Allam Marine. However, if the cost is only 3% and he's charging City 5% then that's a bit naughty.
A commercial interest rate of 5% is cheap. The Glaziers average loan structure debt interest at Man Utd is 16%
But this is the crux of my query. If for example he is loaning money from one business to another at 3%, but charging the other business 5% how the hell does that work? They're all 100% his and the money is all one big melting pot. He cannot just magic the 2% difference out of the air and surely he can change the conditions at the drop of a hat to meet his own needs. He has no other creditors or banks to answer to. He could sell, liquidate or shut down Allam Marine or Hull City tomorrow if he wanted to, with no questions asked.
It depends on how the loan is structured...he has stated there is an element against international property held by other family members
Assem Allam doesn't own Hull City Tigers Limited, Allamhouse Limited does. In English law all three are treated as three seperate entities or people, if you like. Allamhouse Limited has lent Hull City Tigers Limited the money for which it is charging interest at 5%. Over the past two years it is likely that all the interest payments have come straight back into the football club. Allamhouse Limited also gets the benefits of the losses made by Hull City Tigers Limited which are offset against the profits of other group companies including Allam Marine Limited. Allamhouse Limited can convert the loans into shares thereby reducing Hull City Tigers Limited liability to it. Not sure if they could write off the loan as a gift, depends on what its internal rules say. The important question is can Allamhouse Limited continue putting money into Hull City Tigers Limited? If the £20 million a year shortfall is coming from group profits then it can. If it isn't, then it can't. The financial well being of Hull City Tigers Limited is dependant upon how much debt Allam Marine and Allamhouse has and how profitable they are. Another record buy in January will result in Assem Allam's companies needed to find up to another £10 million before the end of the season. Such are the financial rules of Premier League football.
For those who don't want a po faced faux legal claptrap (and I am a law school graduate): There are many tax benefits to this set up and it can help the owner reduce tax liability and generate and income on savings that beats a bank. Despite the thought they are merely lending cash they don't have for more interest that they pay it has to be rembered that you need to have assets to underwrite any risk and it is notmal for affluent people to speculate with their savings. Despite a healthy income payment the owners have covered a huge debt and deserve massive thanks. In times where banks are afraid to loan cash the input of a patron such as Allam is fantastic and we should be thankful he is here. If he makes a few quid from his loan then good on him as this is the real world and he is entitled to it. Only the ignorant would begrudge an oncome on the outlay as he could just have stuck the cash in bonds for a safe return. As for who owns what you need to understand company law and the concept of person as a distinct identity from an individual: you off set personal liability using a corporate entity. Simply put: the Allams have risked cash on an income and a possible capital gain on their invesent. Sceptics say they are after a future payday whilst those who trust their beneficial rhetoric think they are looking for a sustainable business built on a gift. Making an income is not really the issue.
This. Even if I set up a company named Alex Ltd, it is still a company, and has a different liability to if I personally invested in something, due to the different laws governing companies to individuals.
That made sense to me but spell check and champagne has kind of ****ed up the words Apologies. Basically, we should be grateful of the risk and tolerant of the reward. Allam had earnt every penny he earns on his loan as it stems From the risk he has to pay up of it all goes pear shape.
Absolutely. He was willing to invest when a bank probably wouldn't, so he is perfectly entitled to the return he will get on his dollar, especially as it (I assume) is below the going interest rate on a risk free loan from a bank.
I agree it is not an issue now because the directors of Allamhouse don't want the loan repaying and have loaned more cash into the club then the interest payments received. If Allamhouse wanted the loan repaying because of a change in directors or because cash was needed elsewhere in the group then Hull City Tigers Limited would be a net contributor to Allamhouse rather than a net beneficiary. The real issue is how healthy is Allam Marine and can it keep on lending money to Hull City Tigers Limited.
You always have to take into account the issue of participators in a company. This means that you can't lend money to them without unfavourable tax effects. This is why I think Allam will have borrowed to lend the money to Hull City. He would use his shares in Allam Marine as security for the borrowing. He wouldn't give the money to the club because it is more tax effective for him to get repaid his loan when he sells the club. If he still owns the club when he dies his heirs may not have as big an income as he had and if they are left shares in the club it may be possible that they can be paid small dividends from the club without attracting any tax - but for this to happen the club would have to have made profits at some point so there can be distributable reserves available, which is unlikely.
