Just saw this - are you really an accountant? An owner has no more chance of getting any money back from a gone concern that anyone else. The creditors whose debts are secured by debentures or charges over fixed assets are the only ones with a chance of recovery. They may or may not have anything to do with the ownership of the share capital - usually they are not. Being an "owner" gives you no protection at all.
An owner can sell the business. Any external party who loans the company money could find the owner or creditors putting the club into administration. If the owner lends the company money they will usually arrange to have a charge over all the assets. Of course another creditor may have a second charge over the assets but it may effectively be worthless. Abramovich converted his loans into shares but I think that was more to do with UEFA regulations at the time. Maybe he didn't have the same UK tax considerations as many football club owners and he thought that Chelsea, if he was minded to sell, would be worth the same with loans and shares or shares on their own.
Of course an owner can always sell the business - if he can find a buyer. That's just the point. Also, an external party who loaned the company money would then obviously become a creditor. It is extremely unlikely that any such loan would be security free. That loan could be made by anyone even an owner, but only a debenture holder such as a bank or the directors themselves have the capability to enter the club into administration. A debenture holder because they have the right, and the directors because they have a legal obligation. A creditor could only apply for a winding up petiton which unless they were secured would be a waste of time. The Revenue are a prime example of this - stupid principle over the reality of actually getting your cash back. The directors have a responsibilty towards the creditors to ensure that the business is operating in a mannner that deems it to be a going concern, otherwise they must consider entering it into administration. They could only continue to trade through improved profitability or the real prospect of future gains to meet it's obligations to those creditors. If the directors continued to allow the company to trade in an insolvent position, they would become personally liable for the situation and could subsequently face prosecution. Who actually owns the club, viz. the share capital is totally irrelevant.
"Nobody loaning money to a club would have much chance of getting their money back unless they are the owner." This is the case with Hull City, Allamhouse are 'owed' the written off debt from when the Allams took over but as I understand it, since HCAFC don't have much in the way of assets (the stadium being public) then they are very unlikely to ever recover the money - unless we go PL and become stable there longer term.
Question for you accountants - Ricardo/Peter Saxton - can you explain the term "to have a charge over the assets" pls? does it mean to be 'first in line' to them if the comapany is liquidated?
In case they're not around, I'll answer that for you TC as we haven't got a game today. A charge over the fixed and floating assets of a club (business) would normally be deemed to be a first call in the event of failure and liquidation on tangible assets and usually the debtor book. Second charges ranking behind a first charge holder could be taken by a potential loan offerer, but to all intents and purposes it would be worthless as the first charge holder would receive his entitlement at the expense of anyone ranking behind.
Many people can put a company into administration including creditors, the company itself, its directors, a liquidator or a supervisor of a CVA.
What have you said that questions me and I have not responded to? To be honest you are talking about very basic stuff and somehow it seems to make you think you are more knowledgeable than people who have earned their living from doing much more advanced work for decades.
Never claimed to be an accountant - and was just making the point that methods of valuation can differ depending on the accounting practice adopted - and that can change from one period to the next - as long as the company's 'independent auditors' concur ... in terms of getting your money out etc one thing to keep in mind is that the Inland Revenue are always a preferential creditor - which is why they don't mind putting companies into liquidation = they get their money first.
HMRC are usually less aggressive than other creditors initially so many football clubs build up PAYE/NIC and VAT debts. In fact with PAYE/NIC HMRC wouldn't know exactly how much was owed until the payroll year end was submitted because clubs would only inform HMRC what related to a particular month when it was paid to HMRC. From April next year Real Time Information will be introduced (there's a pilot now) and most employers will be reporting payroll details to HMRC when or before they make payments to employees.
Glad you clarified that point to the old buffer Peter. I've been there, got the tee shirt, read the book and actually wrote most of it Fosse..........
Just saw this ealier post of yours peter - can't continue the chat tonight as the wife is screaming at me to shut the laptop and get the car out. Hope to have a chat about the "basic stuff" I'm talking about tomorrow. Not claiming at all to be more knowledgable than a qualified accountant - just that I've been around a while and experienced an awful lot of what I'd have preferred not to have.
Morning Peter - just recovering from last night. Now how about this "basic stuff" I'm talking? I'm not sure of your background in accounting, but readily admit I have no formal university qualifications, and am only qualified through the university of life. I've learnt so much tthrough personal experience, particularly this past 20 years - I'll tell you a little bit. About twenty years back, I was expanding my businesses too quickly (in hindsight) and there was a real danger that I would be in breach of my banking covenant. My bankers wanted some "comfort" before renewing my facility so I agreed to have Grant Thornton in for a "health check". It worked a treat. I had a glowing report and the facility extended. That was the good news. The bad news as far as I was concerned was that the bastards charged me 9 grand for just over a week's work and producing a twenty page report for the bank. Bloody scandalous. At this point my feelings towards accountancy in general cooled somewhat. All was well until about ten years back when banks in general started getting cold feet about their total exposure. I think it was the aftermath of the third world losses they had to write off and it spilled over into the UK operations. Once again and for little reason, they wanted to review my facility. They said the same as the previous time - "we'd like someone to come in and have a look on our behalf." After going apeshit with the dickhead who was then my local manager, he agreed not to ask one of the "big boys" and suggested someone local - an individual on their panel who's opinions they greatly respected. Fair enough I said - send him in. Local my arse! He came down once a week from Cheltenham (about 100 miles) for 8 weeks and charged me £800 a day. Then the bastard had the cheek to charge me expenses on top of that of £120 per day because he'd lost his licence and had to have a bloody driver bring him down! Once again, a decent report that did the trick, but it still wrankles with me that it cost me that cash for a piece of paper just to cover the arse of the bank manager. You might have guessed I have no time at all for the banks - in fact I hate them with a passion. As far as accountants go, and there's nothing personal in this (I'm sure you're a very nice bloke and good company), I have even less. Most are souless nerds with the personality of a turd. They spend more time boring than a ****ing woodworm. Like I said, no offence personally Peter - it's just the way I feel in general.....
I understand you attitude and I agree with you totally. Some accountants try to charge inflated fees and look for the odd mug to come along. You are not a mug but in your case you had to deal with banks who don't care about the costs because it's not your money. A couple of years ago I got a new client who's a banker. His previous accountants were the firm of accountants I trained with - Ernst & Young. His income consisted of of employment income and two or three interest bearing bank accounts so I only need his P60, P11D and yearly certificates of interest. Ernst & Young were charging him £500 for a simple tax return. His income varies from about £1m to £4m per year. I have another client who has three jobs and she provides me with a P60 from each job. Her income is about £45k per year. I charge both of them £100 + VAT to do their tax returns because I think that's a fair price for the work involved. Some accountants charge based on "Value Pricing". This is a concept which takes into account what the work is worth to a client so the same work may be charged differently based on who the client is. I dealt with the incorporation of a sole trader. He had income of £200k per year which I estimated that selling it to the company he formed would result in goodwill of about £2m which he could draw out of the company over a long time without paying any tax other than the capital gains tax from selling the sole trade business. I think I charged him about £1k which included dealing with HMRC. I know some accountants advisors suggest charging based on the income generated over the lifetime of the deal. I've known fees of about £125k being charged on that basis for similar deals. I don't think that is reasonable but some accountants can achieve it because their clients trust them. Most of my clients are small limited companies (highest turnover is under £5m), sole traders, partnerships, and employees with property rental income. I'll charge from £100 to £5,000 with the vast majority around £600 - £1,500. I charged a client just over £3k for quarterly VAT returns, company accounts, monthly payroll and two personal tax returns. I get them to provide as much information as possible on spreadsheets but this one can still be complicated so I have suggested they use QuickBooks accounting software. One of the directors is coming to see me in a couple of weeks and I am going to teach her how to use the software. When they are up and running my fees should be cut in half but I don't believe in giving advice based on what fees I can achieve. It's very hard to decide on a new accountant and it's always best to go on recommendations. I've stopped all advertising and nearly all my new clients come from recommendations. I have a website but I knocked it up in a few hours and it';s rubbish but I planned to changed it when I had time but it never happened! I've promised myself to make time this year but it will involve a lot of long hours. I have every sympathy with your thoughts on accountants but there are plenty of reasonable ones out there - just avoid the ones who go on about being proactive and provide a personal service. That's code for bullshitter!
