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dylanisabaddog

Derby on the brink?

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11 hours ago, dylanisabaddog said:

You work in the most corrupt industry in this country and have the nerve to criticise HMRC. Hang your head in shame. 

By the way, 1 in 3 bank accounts in tax havens around the world are controlled by a UK company or individual and that behaviour is enabled by people like you. 

https://www.accountancyage.com/2015/11/24/corruption-rife-among-accountants-says-survey-of-profession/

You have no idea what you are talking about.

And just for your information i do not and never would condone the use of offshore tax havens, its a form of stealing. BUt it happens because the UK Government allows it to happen and no other reason. They could stop it tomorrow but refuse to do so.

 

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And just to add there are some very good people working within HMRC but as a government department, its shambolic and falling apart at the seams.

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16 hours ago, duke63 said:

Why should football clubs have different rules to other businesses in financial difficulty?

Its time HMRC showed they will not allow football clubs to abuse the tax system by ignoring their liabilities.

Remember every non payer means either the burden falls on you and me or its another public service, maybe the NHS, that loses out.

It might knock some sense of reality into football club spending

Agree totally,  Except the bit about it meaning a shortage to the NHS etc.  Spending is what a government can get away with. NOT what comes in (see recent furlough money). What was not paid to HMRC was money deducted from players/staff wages. Not handing it over when it is due is theft. Nothing less. Derby gambled they could get promoted. You don't go to a casino, then ask for your money back if you don't win. Let them go bankrupt. Just as with Newcastle, whose fans don't seem to give a stuff about the barbaric behaviour of Saudi Arabia. What message does it send out to canary pride ?

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17 hours ago, sgncfc said:

HMRC can't give in, too many other clubs also owe them tens of millions. Part of this problem is the complete ineptitude of administrators, whatever business they get involved in. It's a ridiculous system having to appoint accountants with no accountability themselves. The EFL and the PL should have their own people to act in this situation and their own hardship funds or levy for making sure that clubs cannot fold - many other industries have this in some form.

 

HMRC have given into countless big corporations and multi billionaires, who after a cosy chat get a reduced bill... one rule for...

The system of appointing administrators, who themselves take millions out of a failed business, at the expense of creditors is a corrupt closed shop and needs to be replaced with a non profit organisation, who's interest is only on what is best for owners, staff, creditors and all other interested parties.

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14 hours ago, K Lo said:

I'm sure Derby could get £26+ million by selling their ground again.

It is currently used as security for a £20 million loan to MSD - they can't sell it unless they pay the £20 million back first.

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18 hours ago, Capt. Pants said:

Liquidating Derby FC isn't going to help HMRC and the public get the money its owed.

It may well do. If their assets are liquidated HMRC gats "first dibs" doesn't it?

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Let's not forget that the reason Bury went and why Derby might is because of very rich owners who suddenly decide they've had enough. In this case, Morris is still worth hundreds of millions - he's just chosen to stop spending it on Derby. It's a personal decision he's made. Of course he's entitled to decide when and how to spend his money, but there are consequences.

When such individuals or corporate owners (the Coventry and Blackburn examples are also relevant here) make that decision, it puts a football club at risk, not a standard entity. A football club is much more than a company they are used to playing with and yes of course special rules should apply so that when this happens there is a failsafe in place. That is part of what the recent enquiry has reported on (and which the PL are today rejecting).

The Government will need to appoint a compulsory regulator - voluntary regulation never works where so much money is involved. It will happen eventually because so many clubs are in trouble.

Rooney seems to think it's all fine. He's ignoring the fact that Derby has very few assets and lots of debt and liabilities. The situation is similar to the one Sisu played out at Coventry, and I can see a similar thing happening; the guy in the frame to take over doesn't have enough money to also buy the ground back and there is very little security to borrow on. Administration and rebirth in the National League may actually be the only way the club survives.

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42 minutes ago, Badger said:

It may well do. If their assets are liquidated HMRC gats "first dibs" doesn't it?

I bet the HMRC football team is pretty good then !

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40 minutes ago, Badger said:

It may well do. If their assets are liquidated HMRC gats "first dibs" doesn't it?

Derby don't own their ground, they sold it to Morris for £80m to try to avoid FFP penalties.  He then used it as security on a £20m loan he then gave to the club.......to also try and avoid FFP penalties. So that one transaction generated £100m in cash and assets for the club over 2 or 3 years. It's all gone. Morris has lost more than £200m in supporting Derby but he's still worth £500m plus.

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10 minutes ago, sgncfc said:

Let's not forget that the reason Bury went and why Derby might is because of very rich owners who suddenly decide they've had enough. In this case, Morris is still worth hundreds of millions - he's just chosen to stop spending it on Derby. It's a personal decision he's made. Of course he's entitled to decide when and how to spend his money, but there are consequences.

When such individuals or corporate owners (the Coventry and Blackburn examples are also relevant here) make that decision, it puts a football club at risk, not a standard entity. A football club is much more than a company they are used to playing with and yes of course special rules should apply so that when this happens there is a failsafe in place. That is part of what the recent enquiry has reported on (and which the PL are today rejecting).

The Government will need to appoint a compulsory regulator - voluntary regulation never works where so much money is involved. It will happen eventually because so many clubs are in trouble.

Rooney seems to think it's all fine. He's ignoring the fact that Derby has very few assets and lots of debt and liabilities. The situation is similar to the one Sisu played out at Coventry, and I can see a similar thing happening; the guy in the frame to take over doesn't have enough money to also buy the ground back and there is very little security to borrow on. Administration and rebirth in the National League may actually be the only way the club survives.

2 things.

Are there players worth anything?

They won’t restart in the National League, they need to restart at the bottom of the pyramid. There is no reason why they should be allowed to take the place of clubs who have worked their way up.

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Looking a bit bleak for Derby I'm afraid. Looking at their contract situation, any potential buyer would be wondering exactly what they'd be getting

2024

image.png.2e31dafe628b9c9ed5775c365b6aadf9.png

2023

image.png.a5733782f5b1ab423776a511178e230e.png

2022

image.thumb.png.122d95df351779f63cb08e5e3fb7efbb.png

 

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Derby are in a world of problems. Their situation is particularly tricky for a few reasons:

  • They owe HMRC c.£30m and, from what I can tell, most of this is a preferential debt (PAYE, NICs etc.) - i.e. has to be paid in full before unsecured creditors are paid.
  • EFL rules (Articles of Association, Article 28) mean that the EFL can take away Derby's share in the football league if they don't pay their football creditors in full (i.e. players, other clubs).
  • Football creditors are unsecured, and the new rules (since Dec 2020) mean HMRC can insist on being paid before football creditors (they lost several times in court prior to the change). Derby reportedly owe c.£10m to football creditors.
  • On top of that they owe reportedly £30m+ to MSD which is secured against the ground and training facilities.
  • From what I can tell, Derby don't have enough assets to cover all the above (Mel Morris now owns the ground after he sold it to himself).
  • Derby look to be losing c.£1m a month through the administration - they are being funded by further loans from MSD.

For Derby to survive they need a CVA which is approved by 75% of the creditors and pay off the football creditors in full. HMRC's published position is that they will not agree to a CVA where unsecured creditors are treated differently (and in preference to HMRC). HMRC appear to own >25% of the total creditors amount. The CVA can't be passed without HMRC's approval.

However, as mentioned above, there are precious few assets. HMRC is likely to get very little from a 'successful' CVA and even that is risky as the club is simply not fiancially viable at the moment. My understanding is that on a liquidation, Derby would 'lose' the player registrations due to breaching the EFL rules - they revert to the EFL. So a liquidation would see the loss of what remains of Derby's already insufficient assets.

The only hope is a negotiated sale between the administrators, Mel Morris, a new owner and HMRC. The difficulty for a new owner coming in is that the debts to MSD, HMRC and the football creditors have to be cleared - at least c.£60+ million - before a penny can be spent on improving the club. Big ask. The only way to make it attractive is for HMRC to take a reduced cut (see the press) and/or Mel Morris to dip into his pocket.

I don't know what the odds of that are. HMRC have certainly being a lot more hostile to football clubs over the past few years (pursuing winding up orders against e.g. Bolton etc.). Though those pre-date the new preferencial creditor rule (Derby, I believe, is the first 'big' club to go into administration following the legal change). HRMC might not want the public optics of writing off PAYE tax its owed if the benefit to the taxpayer is negligble.

If I was a betting man, then I would wager that pragmatism will rule through and deal will be done that will keep Derby alive. But I'd venture that at this point it's a coin toss.

Going forward, I imagine HMRC are going to be much more aggressive with winding up orders. For whatever reason, they didn't pursue those with Derby and it's meant an enormous sum has accumulated with little hope of it being paid. It's bad business for tax payers.

A final word r.e. administrators. As an accountant it is disappointing seeing the now usual 'vultures' talk around administrators. Administrators are regulated and are professionals. I've worked with some good ones, some less good ones (like all professions). The amount they charge is the market rate and is comensurate with what I'm charged out at by my firm. I've not crossed paths with the guys running Derby's administration. But from what I gather, they are well respected and among the most experienced in the country when it comes to football administrations. They'll be working hard to achieve a good outcome for Derby and earning their keep.

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Bolton were a matter of minutes away from following Bury, and much of it was the intransigence of the then owner Ken Anderson before the takeover by the Football Whites consortium. Morris may have to take a loss and then some here.

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4 hours ago, Kenny Foggo said:

HMRC have given into countless big corporations and multi billionaires, who after a cosy chat get a reduced bill... one rule for...

I completely agree. What’s that saying? “If you owe the bank £1000, it’s your problem. If you owe them £1 million, it’s theirs”. ☹️

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2 minutes ago, Nuff Said said:

I completely agree. What’s that saying? “If you owe the bank £1000, it’s your problem. If you owe them £1 million, it’s theirs”. ☹️

Heh, owe the bank a fortune and you're a valuable customer, owe them an amount most people can relate to and you're a bad debtor.

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1 hour ago, MrBunce said:

Derby are in a world of problems. Their situation is particularly tricky for a few reasons:

  • They owe HMRC c.£30m and, from what I can tell, most of this is a preferential debt (PAYE, NICs etc.) - i.e. has to be paid in full before unsecured creditors are paid.
  • EFL rules (Articles of Association, Article 28) mean that the EFL can take away Derby's share in the football league if they don't pay their football creditors in full (i.e. players, other clubs).
  • Football creditors are unsecured, and the new rules (since Dec 2020) mean HMRC can insist on being paid before football creditors (they lost several times in court prior to the change). Derby reportedly owe c.£10m to football creditors.
  • On top of that they owe reportedly £30m+ to MSD which is secured against the ground and training facilities.
  • From what I can tell, Derby don't have enough assets to cover all the above (Mel Morris now owns the ground after he sold it to himself).
  • Derby look to be losing c.£1m a month through the administration - they are being funded by further loans from MSD.

For Derby to survive they need a CVA which is approved by 75% of the creditors and pay off the football creditors in full. HMRC's published position is that they will not agree to a CVA where unsecured creditors are treated differently (and in preference to HMRC). HMRC appear to own >25% of the total creditors amount. The CVA can't be passed without HMRC's approval.

However, as mentioned above, there are precious few assets. HMRC is likely to get very little from a 'successful' CVA and even that is risky as the club is simply not fiancially viable at the moment. My understanding is that on a liquidation, Derby would 'lose' the player registrations due to breaching the EFL rules - they revert to the EFL. So a liquidation would see the loss of what remains of Derby's already insufficient assets.

The only hope is a negotiated sale between the administrators, Mel Morris, a new owner and HMRC. The difficulty for a new owner coming in is that the debts to MSD, HMRC and the football creditors have to be cleared - at least c.£60+ million - before a penny can be spent on improving the club. Big ask. The only way to make it attractive is for HMRC to take a reduced cut (see the press) and/or Mel Morris to dip into his pocket.

I don't know what the odds of that are. HMRC have certainly being a lot more hostile to football clubs over the past few years (pursuing winding up orders against e.g. Bolton etc.). Though those pre-date the new preferencial creditor rule (Derby, I believe, is the first 'big' club to go into administration following the legal change). HRMC might not want the public optics of writing off PAYE tax its owed if the benefit to the taxpayer is negligble.

If I was a betting man, then I would wager that pragmatism will rule through and deal will be done that will keep Derby alive. But I'd venture that at this point it's a coin toss.

Going forward, I imagine HMRC are going to be much more aggressive with winding up orders. For whatever reason, they didn't pursue those with Derby and it's meant an enormous sum has accumulated with little hope of it being paid. It's bad business for tax payers.

A final word r.e. administrators. As an accountant it is disappointing seeing the now usual 'vultures' talk around administrators. Administrators are regulated and are professionals. I've worked with some good ones, some less good ones (like all professions). The amount they charge is the market rate and is comensurate with what I'm charged out at by my firm. I've not crossed paths with the guys running Derby's administration. But from what I gather, they are well respected and among the most experienced in the country when it comes to football administrations. They'll be working hard to achieve a good outcome for Derby and earning their keep.

A good summary. The point I was making about administrators is both the conflict of interest (the more efficient they are, the less they earn) and that football clubs are (or should be) different. A good administrator will do everything they can to secure the future of the business, but ultimately it is a financial decision about whether to ultimately liquidate or wind up. Ending the existence of a football club should never be an option.

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2 hours ago, sgncfc said:

Derby don't own their ground, they sold it to Morris for £80m to try to avoid FFP penalties.  He then used it as security on a £20m loan he then gave to the club.......to also try and avoid FFP penalties. So that one transaction generated £100m in cash and assets for the club over 2 or 3 years. It's all gone. Morris has lost more than £200m in supporting Derby but he's still worth £500m plus.

An accountant would say he's lost that money but I prefer to say spent that money. He's born and bred in Derbyshire and is a lifelong fan of the club. He's made wrong decisions but at least he has a real connection to DCFC

People spend a lot of money on their passions so fair play to him.

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3 hours ago, sgncfc said:

Derby don't own their ground, they sold it to Morris for £80m to try to avoid FFP penalties.  He then used it as security on a £20m loan he then gave to the club.......to also try and avoid FFP penalties. So that one transaction generated £100m in cash and assets for the club over 2 or 3 years. It's all gone. Morris has lost more than £200m in supporting Derby but he's still worth £500m plus.

I remember this now - there was a fuss about over-valuation!

I presume he sold it to another Morris company? I'm not really clear about what has gone on here. At one stage I thought that he still owned the ground (because Derby sold it to him) but if that is the case, how did the debt end up with Derby? Surely any loan made by a director or other company would still be counted for FFP purposes - I'm not sure I'm explaining myself here😟. How can Derby get the ground back if they sold it to Morris. I'm not sure why the £20 million MSD loan ended up as a liability to Derby - I know it is widely reported by don't understand the mechanism by which it arose?

The salient point being, will any new owners also have to buy the ground as well as clear the HMRC and football debts (+ 25% of non football debts).

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2 hours ago, MrBunce said:
  •  
  • On top of that they owe reportedly £30m+ to MSD which is secured against the ground and training facilities.
  • From what I can tell, Derby don't have enough assets to cover all the above (Mel Morris now owns the ground after he sold it to himself).

Thanks for your summary. What I don't understand is if derby sold the ground to another of Morris's companies, why are they liable for the MSD debt? Surely this debt is owed by Morris - he owns the asset against which the debt is secured?

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1 hour ago, sgncfc said:

The point I was making about administrators is both the conflict of interest (the more efficient they are, the less they earn)

Doesn't a similar conflict of interest occur over auditors - the more rigorous they are, the less attractive they might be to companies, especially those trying to "hide" things or being "creative" in their interpretations?

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5 hours ago, Badger said:

It may well do. If their assets are liquidated HMRC gats "first dibs" doesn't it?

That was my first impression until I recalled that they don't own their ground. The only assets are likely to be the players....... 

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9 minutes ago, Badger said:
2 hours ago, MrBunce said:
  •  
  • On top of that they owe reportedly £30m+ to MSD which is secured against the ground and training facilities.
  • From what I can tell, Derby don't have enough assets to cover all the above (Mel Morris now owns the ground after he sold it to himself).

Thanks for your summary. What I don't understand is if derby sold the ground to another of Morris's companies, why are they liable for the MSD debt? Surely this debt is owed by Morris - he owns the asset against which the debt is secured?

I think that I've got it now! Ground sold to  a holding company, which I presume also went into administration and that the administrator is dealing with more than one Derby County related company. Still begs the question of why Morris didn't put Derby into a completely different company - he'd be liable for the £20 million debt but the ground is an asset which is presumably worth more?

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2 minutes ago, dylanisabaddog said:

That was my first impression until I recalled that they don't own their ground. The only assets are likely to be the players....... 

My theory is (at present) that another company that owned the ground has also gone into administration and that the administrator is dealing with them all? Not sure if this is correct - otherwise I can't see why they are liable for the MSD loan?

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1 hour ago, sgncfc said:

A good summary. The point I was making about administrators is both the conflict of interest (the more efficient they are, the less they earn) and that football clubs are (or should be) different. A good administrator will do everything they can to secure the future of the business, but ultimately it is a financial decision about whether to ultimately liquidate or wind up. Ending the existence of a football club should never be an option.

Apologies if I was a little prickly. It wasn't aimed at anyone in particular. I saw a lot of the same commentary when the administrators proposal came out. 

Admin of football clubs is a little odd. A 'normal' company would be in the process of being liquidated. As you say a football club has to keep going. In this present situation, the longer the admin goes on the harder it would presumably be to sell the club (what with the mounting losses). So it kinda works both ways. 

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3 minutes ago, Badger said:

I think that I've got it now! Ground sold to  a holding company, which I presume also went into administration and that the administrator is dealing with more than one Derby County related company. Still begs the question of why Morris didn't put Derby into a completely different company - he'd be liable for the £20 million debt but the ground is an asset which is presumably worth more?

I think (though I'm not sure as it is quite confusing with all the entities) that the company that owns the stadium is not in administration.

There are two charges. One is against the stadium and presumably personally guaranteed by Morris. The other was a floating charge but has now been fixed to what I think is the training ground and some land the 'club' own (filed a few days ago). 

The whole structure is quite hard to follow. There's the 'club', then a stadium entity (which appears to collect sponsorship income), another which collects season ticket revenue, another to collect academy funds and so on... 

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1 hour ago, MrBunce said:

I think (though I'm not sure as it is quite confusing with all the entities) that the company that owns the stadium is not in administration.

There are two charges. One is against the stadium and presumably personally guaranteed by Morris. The other was a floating charge but has now been fixed to what I think is the training ground and some land the 'club' own (filed a few days ago). 

The whole structure is quite hard to follow. There's the 'club', then a stadium entity (which appears to collect sponsorship income), another which collects season ticket revenue, another to collect academy funds and so on... 

Thanks - that makes sense. 👍 I have been trying to work this one out 🤯

So presumably this mean that even if they buy the club and clear all the debts, they still will not own the ground?

I also believe that Morris is technically entitled to 25%of the £100 million he is owed unless he waives it?

Edited by Badger
Added sentence

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7 hours ago, ......and Smith must score. said:

An accountant would say he's lost that money but I prefer to say spent that money. He's born and bred in Derbyshire and is a lifelong fan of the club. He's made wrong decisions but at least he has a real connection to DCFC

People spend a lot of money on their passions so fair play to him.

Why fair play to him?

Perhaps he has a knack of gaining money and spending it on his passions but does he spend it well?

What is the point of sitting on £500 million whilst the very existence of the Club that, apparently, he loves is under threat?

The logic is lost on me.

 

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6 hours ago, Badger said:

Doesn't a similar conflict of interest occur over auditors - the more rigorous they are, the less attractive they might be to companies, especially those trying to "hide" things or being "creative" in their interpretations?

Yes, absolutely. It has always struck me as a ludicrous system - but at least the auditors are usually not the firm's normal accountants (though there is no law against it and they sometimes are). But normally a company has to pay two sets of accountants to agree that the way things have been accounted for is correct.

Wonder who audited Derby?

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