Rangers run risk of three-year Euro exile if they lose tax case

The licence required to contest UEFA competitions can only be obtained by clubs that have been members of their national association for three years. If Rangers enter administration then fail to strike a deal with their creditors, the prospect of starting up again as a new company becomes a realistic possibility, but one UEFA is alert to.

“If a club sets up a new company simply to avoid paying its debts or obligations then they would almost certainly fail the three-year rule,” a spokesperson for UEFA told Scotland On Sunday. “This is to ensure clubs do not simply create a ‘newco’ and leave the previous entity in charge of dealing with debts.”

Rangers owner Craig Whyte, below, admitted last week that the Ibrox club could go into administration if they lost their ongoing tax tribunal with HMRC over the use of Employment Benefit Trusts and were landed with a £49 million tax bill. One possible option in that scenario, he conceded, would be to form a “New Rangers”, with the assets, but none of the debts, transferred from the old Rangers FC.

Financial fair play is a key plank of Michel Platini’s UEFA administration and the strict licensing criteria were applied in the summer in the case of the Romanian club Timisoara. They finished second in their top league but were denied entry to the Champions League and demoted to the second tier of their domestic set-up because they failed to meet the licensing criteria.

Following a failed appeal by Timisoara to the Court of Arbitration for Sport, UEFA made the following statement: “Clubs are not allowed to change their legal form or structure in order to obtain a licence, simply by ‘cleaning up’ their balance sheet while offloading debts – thus harming creditors (including employees and social/tax authorities) as well as threatening the integrity of sporting competition. Any such alteration of a club’s legal form or structure is deemed to be an interruption to its membership of a UEFA member association and consequently three years must pass before a club can apply again for a UEFA licence. In other words, the three-year rule is designed basically to avoid circumvention of the club licensing system.”

It appears difficult to see how Whyte could avoid administration if Rangers’ tax case goes the way of HMRC. In these circumstances, to exit administration as the same entity they went into it, Rangers would need to obtain a Creditors Voluntary Agreement – wherein creditors accept a pence-in-the-pound fraction of the sums owed to them. Insolvent companies need to have agreement that covers 75 per cent of their debt. HMRC has a policy of not voting for CVAs. If HMRC wins the tax case with Rangers, it will be owed more than two-thirds of the Ibrox club’s debt.

Rangers, then, would have to form a new company that would have to apply for membership of the Scottish Premier League. On entering administration, the club would be hit with the automatic ten-point penalty. If Rangers cannot exit administration via a CVA any further punishment would be at the discretion of the SPL board, whose role it would also be to decide on what basis Rangers would be allowed to transfer their SPL share to a new company.

The six-man SPL board comprises Ralph Topping (chairman), Neil Doncaster (chief executive), Eric Riley (Celtic), Stephen Thompson (Dundee United), Derek Weir (Motherwell) and Steven Brown (St Johnstone).

If it were to come to a vote for Rangers’ re-admission, it could mean Celtic’s Riley deciding on the fate of his club’s arch-rivals.

But the reality is that SPL clubs are likely to allow a reconstituted Rangers back into the fold because without them the championship and its television and sponsorship deals would be devalued, with serious financial implications for the member clubs. Like the very bank that allowed the Ibrox club to rack up huge debts across the past decade, in terms of Scottish football, Rangers are simply too big to be allowed to fail.