Payout pot for oldco Rangers’ creditors takes £2m hit

The bill for the liquidation process, which began after Rangers Football Club plc was placed into administration in 2012, has risen by 20 per cent (£2.171m) in 12 months since April last year from £10.7m to £12.9m.

The new figures from BDO were revealed in its most recent report to creditors and show the price of the process, which began in October 2012.

Legal fees, as well as the cost of litigation in relation to the process, now ongoing for almost four years, has reached £7.8m and increased by more than £886,000 since April last year.

The figures in the report also revealed BDO has received £2.9m since Rangers went into liquidation - and almost £800,000 since April 2015.

It all means that the rising cost of the liquidation process since the last BDO report will be a blow to creditors with the pot dropping from £18.8m to £16.7m.

The majority of legal costs (£5.4m) were paid to London lawyer firm Stephenson Harwood in relation to the settlement of a legal claim against another lawyers firm Collyer Bristow over the acquisition of oldco Rangers by Craig Whyte in May, 2011.

The liquidators banked £24m for Rangers creditors as a result of the settlement.

BDO said the fees went to legal firm Stephenson Harwood as “it had been necessary to instruct” the company on a “no win, no charge” conditional fee arrangement basis.

Funds from the long-running liquidation process have also been devoted to continuing to fight the co-called “Big Tax Case” at the Supreme Court which could have a major bearing on the amount of money given to creditors from the liquidation.

Some £152,186 has been spent on counsel costs alone to fight the case.

Around £72m of the £94.4m owed to the taxman, Oldco’s biggest creditor, relates to Rangers’ use of the Employee Benefit Trusts (EBTs) that are the subject od the case.

The original November EBT judgment meant the taxman, in one of the biggest tax claims it has ever pursued, won its claim and Rangers oldco were liable for a bill of £46.2m plus charges over the use of EBTs from 2001 until 2010 to give millions of pounds of tax-free loans to players and other staff.

However, BDO were successful in an application to the Court of Session in March to be granted leave to make a legal challenge to the highest appeal court in the land.

The case will now go before the Court of Session next year to determine, finally, whether oldco Rangers’ use of EBTs broke tax rules.

The case will have no financial impact on Rangers in its new identity because the tax liability remains with the in liquidation oldco.

BDO also confirmed that it still hopes to be in a position to provide an initial dividend to creditors later this year. But this will be dependent on the status of a legal claim over the payout pot.

In its last report, BDO advised the joint liquidators had been notified of a potential claim by solicitors representing a firm called Law Financial Limited (LFL), which is 100 per cent owned by Worthington Group and of which Craig Whyte was a former director.

LFL said in this claim it had taken part of the floating charge and the debt due to Lloyds and that it had a secured claim of around £25m in priority to all other creditors.

The joint liquidators then made an application to court in a bid to set a deadline by which LFL had to submit its formal claim.

The firm, as a result, confirmed it would not be submitting a formal claim in the liquidation.

However, in September 2015, the liquidators then received notice from The Rangers FC Group Limited - a company previously known as Wavetower Limited - confirming it had also taken part of the floating charge and debt due to Lloyds and had a secured claim of £18m.

The legal move was then abandoned by lawyers acting for Wavetower and a new claim for £3m has been submitted, which is still under consideration.

The BDO report said: “A claim at this level would not preclude the joint liquidators from paying a first dividend to unsecured creditors.

“As a result, once the Wavetower position has been established, the intention of the joint liquidators will be to present an amended scheme of division to the committee with a view to the payment of a first dividend later this year.”

BDO’s report added: “This is a complex liquidation containing a number of key areas of investigation, each of which may have a significant impact on the ultimate outcome for creditors.”