Glasgow Rangers facing administration trouble
15 February 2012
by James Daniels
The world of football was shocked this week as Glasgow Rangers, one of the mightiest teams in Scottish football, were forced to enter administration, owing to a £9 million tax debt that was accrued in less than a year.
In fact, Rangers’ perilous financial situation could get worse before it gets better – they are also facing a tax tribunal with HM Revenue and Customs, which could end with Rangers facing a bill for £75 million.
Rangers have eked out one small victory in the current proceedings – they were successfully able to appoint their own choice of administrators, Duff and Phelps. HMRC had argued that this was against the 1986 Insolvency Act, which requires five days notice before the appointment of administrators.
The shock surrounding Rangers’ fall into administration was due to the stature of the club itself. Glasgow Rangers might be one of the biggest clubs in the UK to fall into administration, but they certainly aren’t the first – in fact, they aren’t even the only club this week. Portsmouth Football Club are to apply for administration on Friday, having had their bank accounts frozen over £1.2 million of tax debt.
Going into administration calls for a team of administrators to come in and manage the finances of the business (or in this case, football club), with the hope of a more favourable outcome than the eventual bankruptcy and winding up of the business.
To do this, administrators will take any necessary steps to ensure that debtors are paid back, regardless of what effect this may have on the football team in the long run.
With the football club in administration, players and staff will be far more vulnerable to losing their jobs – administration erodes the protection that contracted players usually have. However, the wages of the staff who remain are among the top priorities of the administrators, ensuring that the staff have the best possible chance of being paid fairly.