We Need to talk about Worcester

[die_mole]

Looks like the clubs owners but under a different name:

worse than the glazers

 

[Bada-Bing!]

Looks like the clubs owners but under a different name:

Cheers must have glazed over that bit. So this Mq property Ltd owns both the car park and Sixways stadium and the training pitches are owned by Worcester Capital investment Ltd.

I know for tax purposes that if one of them owns 75% of the others then they form a group structure, which means they can transfer assets for no Gain/no loss for capital gains and trading losses can be transferred between group companies which are profitable to reduce tax of the profitable company. All perfectly legal.

But for legal purposes - it boils down to limitation of liability of the shareholders. They are only liable for debts of the companies up to the share capital contribution, which is why I am assume but would like to see who are the shareholders of the Mq and Worcester Capital companies. Will have a gander on Companies House later.

 

[Lé Ddanno]

Cheers must have glazed over that bit. So this Mq property Ltd owns both the car park and Sixways stadium and the training pitches are owned by Worcester Capital investment Ltd.

I know for tax purposes that if one of them owns 75% of the others then they form a group structure, which means they can transfer assets for no Gain/no loss for capital gains and trading losses can be transferred between group companies which are profitable to reduce tax of the profitable company. All perfectly legal.

But for legal purposes - it boils down to limitation of liability of the shareholders. They are only liable for debts of the companies up to the share capital contribution, which is why I am assume but would like to see who are the shareholders of the Mq and Worcester Capital companies. Will have a gander on Companies House later.

"All" limited liability does is prevent shareholders from being forced to pay all of the debts of an insolvent entity. You can still claw back an asset that they've benefitted from when they've received it at an under/no value, or preferentially, or fraudulently.

Limited liability also doesn't extend to Directors if an entity goes into an insolvency process. They carry the can for making/authorising the transaction.

 

[die_mole]

don't you have to pierce the corporate view to go after directors or find they breached a duty?

Just going through wikipedia and it seems the overall structures of our corporate law are similar but the specifics have evolved differently

 

[Lé Ddanno]

don't you have to pierce the corporate view to go after directors or find they breached a duty?

Just going through wikipedia and it seems the overall structures of our corporate law are similar but the specifics have evolved differently

This is a lecture subject tbh. I will try to summarise. 1) it's been a very long (16hrs) day and 2) I'm on annual leave from uhh.. now so my brain has checked out a little bit. Also apologies if I patronise in any way, it's unintentional.

Shareholders own the company, directors control it day to day.

The corporate veil applies to shareholders, not directors. The "veil" is basically shorthand for the limited liability element of a company, which means a shareholder is only liable for (usually) the £100 (or whatever) capital they put into the thing to buy shares. Directors and shareholders usually hold overlapping roles, especially in smaller, non-PLC entities.

"Piercing the corporate veil" tends to apply to a solvent company that has done something that has favoured one or more shareholders, or prejudiced a creditor, i.e. it isn't really something that crops up in an insolvent one.

As a very, very basic example, a company with one property worth £300,000, no other assets, and creditors of £300,000, sells it to the sole shareholder for £0, and doesn't declare or pay any stamp duty (thus also creating a creditor in HMRC). At that point, a creditor, who was previously promised they would be paid through the sale of that property, can make a claim based on the fact that the shareholder has unequitably/lawfully acquired the asset that was promised to them.

If a company is insolvent, the shareholders are already SOL. This is because, in an insolvency process, creditors get paid before shareholders

Directors' duties are owed to shareholders up until the point that a company is insolvent (or the Directors knew or ought to have known it is insolvent). At that point their duty is to creditors and shareholder rights go out of the window. They won't get paid anyway.

Once that point of insolvency is crossed, 99% of the cases I've seen contain a breach of duty by the directors, in strict terms. In realistic terms you don't go after most of them. They either translate into claims under the Insolvency Act (breaches covered by S212) or you have to take the human element (dude was doing anything they could to save the business, and didn't cause more losses) into account

I hope that makes sense.

 

[Lé Ddanno]

Sorry, TLDR: No, once a company hits an insolvency process, Directors can be liable, no corporate veil applies

 

[die_mole]

Sorry, TLDR: No, once a company hits an insolvency process, Directors can be liable, no corporate veil applies

okay got you. I conflate the two cause I 1. never had any intention into going into corporate law and 2. I just assume all directors are shareholders. In the states we only really care about Delaware's interpretation of the business judgment rule which give a lot of leeway to directors.

 

[Lé Ddanno]

okay got you. I conflate the two cause I 1. never had any intention into going into corporate law and 2. I just assume all directors are shareholders. In the states we only really care about Delaware's interpretation of the business judgment rule which give a lot of leeway to directors.

******* Delaware. I'm on my third fight with that bloody place now

 

[Lé Ddanno]

Also, didn't remember you're US based (Dan Biggar??)

 

[die_mole]

Biggar is the patron saint of beautiful yet terribly inefficient rugby. Therefore he is my hero haha.

 

[Lé Ddanno]

I'll agree to disagree on the B word

 

[Bada-Bing!]

"All" limited liability does is prevent shareholders from being forced to pay all of the debts of an insolvent entity. You can still claw back an asset that they've benefitted from when they've received it at an under/no value, or preferentially, or fraudulently.

Limited liability also doesn't extend to Directors if an entity goes into an insolvency process. They carry the can for making/authorising the transaction.

Yeh covering this in my CTA OMB course - close companies mainly with group structures thrown in; and mainly in context of Solvent liquidations. I did cover the limited liability in law degree but most of it forgotten now.

But yeh very interesting the whole winding up process and whether it's a solvent or insolvent liquidation.

Do you work in insolvency?

Also I would add that limited liability can be eroded where, say for example, a bank seeks to shift a company liability to a director-shareholder by asking for a personal guarantee, such as a company bank loan. Doesn't looked like it's happened in Worcester's case.

 

[Scotty]

If Worcester do go into administration thats a home game not happening for each club this season, meaning thats a games revenue lost and doubt there will be any compo. For a struggling sport in general every game matters, it Wasps survive surely they cannot afford to lose a game, if they were to fold(not that they are as it stands) then thats 2 home games per team which is a big loss for clubs.

 

[LeinsterMan (NotTigsMan)]

 

[TRF_Olyy]

Saw someone say that the club owned the house outright then remortgaged it last year and haven't made any payments - how many hundreds of thousands of pounds is that now unaccounted for?

 

[TRF_Olyy]

 

[Geordie]

If Worcester do go into administration thats a home game not happening for each club this season, meaning thats a games revenue lost and doubt there will be any compo. For a struggling sport in general every game matters, it Wasps survive surely they cannot afford to lose a game, if they were to fold(not that they are as it stands) then thats 2 home games per team which is a big loss for clubs.

Ive seen figures of 400k - 600k per game Scotty big money...

 

[Lé Ddanno]

Do you work in insolvency?

For my sins, yes. I specialise in investigations, suing directors, clawing back assets and such, so I would be very interested in having a look at this case.

 

[Reiser99]

Worcester Warriors battle to avoid administration

Worcester owners Colin Goldring and Jason Whittingham "work through options" as they bid to avoid the club going into administration over unpaid tax.

www.bbc.co.uk

Part of the analysis highlights lots of dodgy activity by the club directors. Selling land and assets cheaply. Setting up multiple companies with no clear purpose.

Also says that according to current rules they would get a 35 point deduction for administration. Dunno if it could increase but doesn't seem like they would drop out of the league immediately. However surely they would have to consider if Worcester could keep playing the whole season as if they can't then better to remove them now than in January for example.

 

[Which Tyler]

Also says that according to current rules they would get a 35 point deduction for administration. Dunno if it could increase but doesn't seem like they would drop out of the league immediately. However surely they would have to consider if Worcester could keep playing the whole season as if they can't then better to remove them now than in January for example.

Just on this - there's also a clause that this can/should be waived if insolvency is due to factors outside the club's control - specifically mentioning epidemic/pandemic.

It's also a ring-fenced season, so no-one would really give a flying...