The Rangers Story: A Challenge for Sports Lawyers

When I first started my blog a few days ago, I made a promise to my readers that I would remain independent towards analysing several sports law issues. One of them is the well-publicised matter of Rangers FC. The latest developments are of interest to many observers, particularly to football fans in Scotland. For the sports lawyer, this case presents a unique challenge. It is my intention, in the next few weeks, to analyse, extensively, such challenge in a series of different posts.

It could be argued that there are several ramifications from the club's current administration. All those involved or, at least, those who have an interest in the matter, could certainly understand and appreciate the several company law principles that are now extensively being analysed almost everywhere. From the sports lawyer's point of view, the most important issue under analysis should, perhaps, be the collision between the relevant company law principles and the sporting rules that touch upon the regulation of the financial aspects of clubs.

Over the next few weeks we will have the opportunity to develop several arguments as to whether sports law could provide answers to the different questions currently under examination. One of them, would demonstrate the current gap between company law and self regulation. It is my intention to try and bridge the gap, if possible.

As you are all aware, Rangers are facing a very unpleasant dilemma. If they continue to operate in the current form, they must find, immediately, a rather large amount of money to cover their debts. The primary aim of the administrators is obviously to satisfy the creditors and in this instance, the secured ones first. From experience, there is usually nothing left for unsecured creditors, once all secured creditors have been paid. This poses an embarrassing situation for the creditors who have chosen to invest in the company, without creating first floating charges. Given that there are assets, which they, upon sale, could perhaps satisfy some demands, the lack of prudent investment could only mean that there would be some losses for such investors.

At the same time, another question could be posed as to whether the running of Rangers FC gives rise to ethical and/or legal considerations. I would argue in favour of both elements. There is no doubt that the principle of limited liability is open to abuse. This has been recorded in numerous publications and has been argued by several experts. It is, however, a business medium that makes investment so attractive and so desirable. But there are, obviously, risks, particularly when you are trying to run a business like Rangers FC with other people's money, or in a more polite term, when you run debts that you are unable to repay.

In this situation, there may be only one option [unless an extremely generous benefactor is willing to part with around £100m of his hard earned money] and this is the rather morbid option of liquidation. This is where the real battle begins, at least in terms of self regulation. There is nothing to stop anyone from creating a new company [usual and reasonable restrictions apply and they are subject to statutory requirements]. As long as this company satisfies all necessary statutory requirements, a certificate of incorporation could be given to it, so it could start trading. But in terms of football regulation, the operation of such company needs to satisfy further regulatory requirements. Here, we have the involvement of possible four regulators: the SPL, the SFA, UEFA and FIFA. In essence, we are looking at four different sets of self regulation, which potentially could come in direct conflict with the law of the land. This is indeed the most major challenge for the sports lawyer.

We would, therefore, attempt to examine, in the next few weeks, whether a possible creation of a new Rangers FC, could be challenged before disciplinary panels [and possibly before CAS] and whether the 'sporting exception' could prevail over the law of the land.

As I stated earlier, I will maintain an independent analysis, with an aim to clarify, as far as I can, these important developments for sports law and football.

Dr. Gregory Ioannidis

2 May 2012