Disgraced former Rangers FC owner Craig Whyte has been handed the maximum possible directors disqualification from acting as a director of a company following an investigation by the Insolvency Service. The 15-year ban was issued for “failing to avoid conflict of interest in the running of the club”.
Mr Whyte took Rangers into administration in February 2012. The club was consigned to liquidation in June of that year, just 13 months after his tenure began.
An unlawful transaction
Craig Whyte bought the majority stake in Rangers from Sir David Murray for a fee of just £1 in May 2011. The agreement was made on the understanding that Whyte would inject £27million of his own money into the Ibrox club, and pay off around £18milion of existing bank debts.
However, the transaction was predicated on the untruth that Whyte was funding the acquisition using his personal wealth or the wealth or his company. To mask this charade, Whyte set up an unlawful transaction, whereby Rangers FC effectively funded the purchase of its own shares.
At this point, Mr Whyte’s chequered past, which included a seven-year director disqualification in 2000, was not in the public domain and did not emerge until after the transaction had taken place.
Failure to act in accordance with directorship duties
The Insolvency Service investigation found Whyte had failed to act in accordance with directorship duties and avoid conflicts of interest, including:
“Causing Rangers Football Club (RFC) to enter into an agreement to effectively fund the purchase of its own shares; conducting the affairs of RFC without reference to other board directors; preventing RFC from being subject to proper corporate governance, and causing RFC to fail to comply with its tax obligations.”
Whyte removed a number of other directors during his term as owner, while others quit after being frozen out of the decision-making process. The club owed HMRC £21million in unpaid tax bills by June 2012 and was subsequently liquidated.
Rangers Football Club was subsequently relaunched as a new company by a consortium led by Charles Green and is currently in the process of working its way back to the top tier of Scottish football.
Behaviour went unchallenged
Speaking of the disqualification, The UK business minister Jo Swinson, said: “The court has disqualified Craig Whyte for 15 years for the harm he caused to Rangers and to the many football fans who believed in his promises.
“Mr Whyte bought a much-loved club and promised fans he would provide further cash to bring success. However, he caused the club to use this money to fund the purchase of its own shares, reducing funds for investment. He also failed to consult other directors on important decisions, meaning his behaviour went unchallenged.
“Such blatant lack of regard for proper corporate behaviour and control does not have a place in modern society. Directors have a clear, statutory duty to ensure their companies are run properly, for the benefit of the creditors, shareholders and, in this case, fans who believed in him.”
Failure to maintain proper accounting records
Craig Whyte’s long line of financial improprieties does not stop there. His actions as a director at Tixway UK, another of his firms, were also heard in court. In this instance, he was adjudged to have failed to “maintain or preserve adequate accounting records, or if records were maintained, he failed to co-operate with requests to deliver them.”
Over £2millon worth of assets either disappeared or if they still exist, cannot be found by the liquidator. The judge said that, given the extent of the improprieties, it was necessary and appropriate for him to impose as lengthy a disqualification period as he could.
Top tips for directors
- Always ensure the company’s accounting records and bookkeeping is in good order as you as a director have a legal obligation to do so
- Always remember it is the director who is accountable by law not the bookkeeper, accountant or advisor – ignorance is no defence educate you in your week areas
- A director has a legal obligation to act in the interests of the company and shareholders but when the company is insolvent the director must put creditor’s interests first
- Never treat limited company money as your own piggy bank – it isn’t your money even if you are a one man limited company. The company is a legal entity in its own right so taking company money without going through the proper channels can have serious implications for the director