Debt ridden Football Club described as ‘hopelessly insolvent’

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Football club insolvent

A judge has heard how a English Professional Football Club is described as “hopelessly insolvent” at a high court hearing over a ownership dispute.

The comments came as desperate attempts to save Swindon Town Football Club entered a new chapter.

At the High Court, a judge was told the League One side would need £2.8m cash in the four months to the end of June and had last month taken a loan from the football league to help pay the club’s wage bill.

In the latest wrangling over the ownership of the Swindon side, Judge Nicholas Thompsell likened the club to a ‘car speeding towards a wall’. The analogy was given citing Chairman Lee Power and rivals Clem Morfuni and Michael Standing are pulling at opposite sides of the steering wheel.

Judge Thompsell kept the ban on Mr Power selling the club or placing it into administration and gave him until April 30 to provide documents to help Axis finalise their bid. Axis and Mr Standing will continue to provide financial support to the club to cover cash flow. The case is expected to return before the judge in mid to late-May.

During a seven-hour hearing, which was held over Microsoft Teams, the court heard details of the parlous state of the finances of the club, whose finance director left in recent weeks and where 90 per cent of administrative staff remain furloughed.

The club was insolvent on both a cash flow and balance sheet basis and would require £2.8m cash in the four months to the end of June. In March, the payroll bill was met in part by a loan from the football league, Ms Thornley said.

She accepted that Axis had offered to contribute £300,000, but said: “We’re talking about liabilities that are going to run into many millions in the next few months.”

Ms Thornley described the club as “hopelessly insolvent” and said a court order placing the club into administration could be appropriate if a sale could not take place quickly.

Administration could see the club be penalised by the league, with the deduction of a dozen or more points.

The court heard Mr Appleton had not been given the go ahead by the footballing authorities to act as an administrator for the club. Mr Power’s concerns that he could be liable for “wrongful trading” if the company continued to operate while it was insolvent were assuaged by Mr West QC, who said that the government had suspended the wrongful trading rules as a result of so many firms struggling during the pandemic.

What is the dispute about?

History of dispute

Football agent Michael Standing claims he has a 50 per cent stake held in trust for him following a verbal agreement with Mr Power in March 2013. He says he has put millions into the club since then via Mr Power.

By contrast, Mr Power, who became chairman in the same year, says Mr Standing was acting as agent for his then client Premier League ace Gareth Barry.

Mr Standing obtained a court injunction in November 2019 preventing Mr Power from selling the club without his permission. A five-day hearing to adjudicate on the claims is expected to take place in June 2022.

Australian construction mogul Clem Morfuni was transferred a 15 per cent share in holding companies Swinton Reds and Seebeck 87 last November after a High Court fight in which he too obtained an injunction preventing the club’s sale without his express permission.

Mr Morfuni, whose share is held by Axis Football Investments Ltd, said he paid £1.1m for the 15 per cent stake in 2018.

In March, the court granted a temporary injunction preventing Mr Power from putting the club into administration.

The football club Swindon Town are now facing relegation to Division Two further decreasing its value.

You can read more about the case here.

 

 

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