18 July 2007 :: by
The takeover of Leeds United by Ken Bates took another twist today when it was revealed that, far from being a formality after the re-sale of Leeds last week, the court case brought by HMRC may have some teeth. It is accusing both Ken Bates and Mark Taylor of being in breach of s216 of the Insolvency Act 1986. Given that Taylor is a solicitor and that KPMG are a major player in the insolvency industry and that Gerald Kranser (an insolvency practitioner) never mentioned this before it would seem that no one thought that a breach had occurred.
A contravention of s216 may seem more like a technical offence but may still bring a fine or imprisonment to Bates and Taylor if proved. Though prison is not on the agenda much to the chagrin of HMRC, Chelsea fans (and some Leeds fans!).
The section in question provides that any person who has been a director of a company which has gone into liquidation must obtain the court's permission prior to becoming a director of a new company with a similar name within five years of the liquidation. Sounds simple enough and wth the heavyweight expertise on his side Bates would not expect to fall foul of such a simple rule, so why the apparent breach?
It hinges on the similarity of the names of two companies - basically if they are similar then Bates and Taylor need the court's permission to act as directors of the new company (the one that is irritating HMRC so much).
The doubt arises because before the demise of Leeds United Football Club Limited it was renamed to Romans Heavies Limited. That was the actual name it was carryng when it went to the wall. The latest company is called Leeds United Football Club Limited and so is now technically different. So the case will rest on whether the change of name obviated Bates and Taylor from the need to obtain the court's permission to become directors of the company which successfully bought the football club. One presumes that application wasn't made as surely HMRC would have checked that fact before alleging a breach of s216. KPMG, the 'shambolic' administrators of the wreckage of Leeds United are said to have believed that an application was made! Doh! Well asking for a copy of the court's permission for their files at the time of the CVA would have sidestepped that landmine. If KPMG fell asleep of this matter too you have to wonder just how hard the rest of the country's insolvency practitioners are laughing at their handling of what should have been a lucrative administration with lots of good free publicity for them.
For Leeds fans the question now remains one of whether or not a breach of s216 is enough for HMRC to successfully overturn the CVA and whether or not that means we still have a football club, let alone one that is in League One.
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