Football Governance

Written evidence submitted by Wrexham Supporters Trust (FG 48) 

This submission is sent on behalf of the Wrexham Supporters Trust and highlights the need for better regulation to ensure football clubs are better run so that their assets aren’t put in danger by people whose interests aren’t aligned with the long term interests of the Football Club.

1. The Fight to save the Racecourse, Part 1

2. The recent tale of Wrexham FC fans’ fight to save the Racecourse began in 1998 when Wrexham AFC (the name of the former club) purchased a 125 lease from by Marston Thomas & Evershed brewery for £750,000 in order to secure their tenure at the Racecourse Ground for a peppercorn rent. Wolverhampton and Dudley Brewery inherited the freehold to the Racecourse when they took over Marston in 1999. Following the sale of Griffiths’ majority shareholding to Memorvale Limited in March 2002, Wrexham AFC began negotiations with Wolverhampton and Dudley Brewery to purchase the freehold to the ground on trust for Damens Limited, a company owned by Alex Hamilton. [1]

3. When the purchase was completed in June 2002 the freehold was transferred to Damens Limited for nothing within the same day. Wrexham AFC then entered into a 120-year lease with Damens Limited at a cost of £30,000 per annum, significantly more than the peppercorn rent they had paid to previous landlords, Wolverhampton and Dudley Brewery (Conn, 2005; Jones et al, 2006). However, the minutes of the first Board meeting attended by Mark Guterman on June 11th make no reference to the transfer of the ground to Damens Limited. [2]

4. The ownership of Wrexham AFC had been separated from its main asset, the Racecourse Ground. The club had only owned the Racecourse for a matter of hours before it entered into less beneficial lease than had been previously agreed with Marstons, Thomas & Evershed. Renowned football journalist David Conn would later claim that this was the first evidence that football clubs’ assets were being separated from the ownership of their clubs for personal profit. [3]

5. In April 2002 Alex Hamilton and Mark Guterman had entered into an agreement - which they called the ‘Wrexham Project’ - to profit personally from the property assets of Wrexham AFC. [4] However, Guterman and Hamilton fell out and went to court in September 2004 over the terms of their joint venture agreement (JVA), where details of the ‘Wrexham Project’ first came to light. [5] This agreement [6] stated that:

5.1. "The management and control of the football club is to be on an equal… basis, with the main or sole objective to realize the maximum potential gain from the property assets of the football club for the benefit of [Mr Hamilton] and [Mr Guterman]."

6. According to football journalist David Conn, this agreement was a landmark moment in football, the first evidence that property developers were seeking to profit personally from the development of football clubs’ assets (Conn, 2005). The purchase of the Racecourse Ground on trust for Damens Limited also provided evidence that Wrexham AFC’s primary asset was separated from the club. This backs up the concerns raised by authors such as Holt (2003) who stated that:

6.1. "A well-publicised tendency at some Football League clubs has been to form a second (‘holding’) company and then separate the ground from ‘the club’. This has been a source of criticism from fans’ organisations who highlight the danger that this can be a first step towards selling the ground (or the land on which it is built) for the personal financial benefit of the club owner." [7]

7. Alex Hamilton did not remain as Chairman of Wrexham AFC for long. He fell out with the remaining two Directors on the Board and resigned as Chairman on November 1st, 2004. The Directors, faced with a winding up order from the Inland Revenue, applied for an administration order. The club was placed administration on December 4th, 2004 and Begbies Traynor was appointed to run the club. The purchase and subsequent transfer of the Racecourse Ground to Damens Limited had been a key element in the incubation of Wrexham AFC’s financial problems.

8. Wrexham AFC entered administration on December 4th, 2004 to prevent the Inland Revenue’s winding up order from liquidating the club. However, according to Emery & Weed (2006, pp. 11) "many [people] had little sympathy for Wrexham’s plight" and reported the view "that clubs that go into administration do so as a result of ‘stupid’ financial management". [8] The Football League immediately imposed sporting sanctions on Wrexham AFC and deducted it 10 points. Wrexham AFC appealed against the decision, but lost, in what was seen as a test of the new rules on sporting sanctions. Understandably, most Wrexham fans saw this sanction as unjust, given the fact that the club had lost its primary asset through no fault of its own.

9. Following the application for an administration order, the courts appointed insolvency experts, Begbies Traynor, to run the club. Begbies Traynor was previously appointed as administrators at 5 football clubs: Chester, Darlington, Doncaster, Huddersfield, Lincoln and has significant experience of the football industry. They saved all 5 clubs they previously worked for, which was instrumental in their appointment to Wrexham AFC. When the Directors of Wrexham AFC decided to apply for an administration order they took advice from the Football League and Huddersfield Town who told them that Begbies Traynor were the best in the business. This decision proved to be pivotal to the very survival of Wrexham AFC.

10. The benefit of placing the club in administration was that the administrators had the power to challenge and overturn transactions. In particular, the administrators examined the legality of the transfer of the ground from Wrexham AFC to Damens Limited and decided to challenge it in court. [9] The theory was that if the Racecourse was returned to the ownership of the football club then the club would have an asset worth millions, which would make it more saleable to potential new owners. Fortunately due to their unexpected success in winning the LDV Vans Trophy in April 2005, Wrexham AFC had the money to take Damens Ltd (who had by now changed their name to Crucialmove Limited) to court. However, due to the Football League’s rule that clubs could only spend 18 months in administration, the club had to act quickly and therefore began proceedings in June 2005.

11. Wrexham AFC won its court battle against Crucialmove Ltd in October 2005 on the basis that the transfer of the Racecourse took place without the knowledge of the Directors. The High Court ruled that the then Chairman, Mark Guterman, had not acted in the best interests of Wrexham AFC, but for himself and Alex Hamilton. [10] This judgement was based upon evidence of the ‘Wrexham Project’ provided in a court case between Hamilton and Guterman and from evidence provided by the Directors that they no knowledge of the transfer because it had not been discussed at Board meetings. [11] The High Court judge, Alistair Norris QC ruled that:

11.1.1. "This is a straightforward case in which the fiduciary duty position in the club has been misused for the benefit of those interested in the exploitation of property assets." [12]

12. Crucialmove Ltd appealed against the decision in February 2006 and lost, marking the end of a long battle for the ownership of the Racecourse Ground and the very survival of Wrexham AFC.

13. Wrexham AFC’s exit from administration took place in three parts, which marked the end of its immediate financial crisis. Firstly, the administrators formed a new company – Wrexham Football Club 2006 Ltd – which took on the old club’s assets and debts on exit from administration. Secondly, the club’s debts were discharged via a Company Voluntary Arrangement (CVA) and thirdly, the club and its Racecourse Ground were sold to local businessmen Nev Dickens and Geoff Moss. With the ownership issue resolved, the administrators used a Company Voluntary Arrangement (CVA) to discharge the club’s debts of £3.25m at 28p in the pound in order to sell it on as a going concern. [13]

14. Wrexham FC 2006 was sold to local businessmen Neville Dickens and Geoff Moss for £3.3m on August 3rd, 2006, just 2 days before the start of the 2006/07 season. [14] The new owners announced that they planned to build a new all-seater stand and apartments on and behind the KOP end of the Racecourse Ground. [15] Wrexham FC 2006 appointed a Chief Executive Officer (CEO) for the first time in its history, who was given responsibility for the day-to-day running of the club and is empowered to make decisions in the absence of the owners, who themselves ran successful local businesses. However, unlike Lincoln City, the new owners did not immediately offer shares or a place on the board to supporters.

15. Table 1 below illustrates the chronology of events in the recent ownership of the Racecourse Ground.

16. Table 4: The ownership of the Racecourse Ground.

17. The Fight to save the Racecourse, Part 2

18. Sadly, this wasn’t to be a new dawn for Wrexham FC 2006 Ltd. After narrowly avoiding relegation to the Football Conference at the end of the 2006/07 season, the club was relegated from the Football League for the first time in its 81 year history in April 2008. To compound the lack of success on the field, an analysis of the club’s accounts for the period 2006-2010 shows that the new club has built up debts of £3.7m in the four seasons since coming out of administration. [16] Once again, it is on the verge of losing its primary asset the Racecourse Ground.

19. In the intervening period since coming out of administration Wrexham FC 2006 Ltd became part of a holding company structure, whose ultimate parent was Wrexham Village Ltd, a company set up to develop student accommodation on land behind the KOP stand. In 2009 Wrexham Village purchased that land from Wrexham FC for £6m, paying off the debts that Wrexham Football Club 2006 Ltd had taken on when coming out of administration and trading losses that had been incurred since August 2006. [17] Unfortunately, the club continued to maintain its wage bill at League 2 levels and as the team performed badly, crowds fell and turnover reduced, placing the club further into debt. [18]

20. Since coming out of administration in August 2006, Wrexham FC 2006 Ltd has lurched from crisis to crisis, sacking three managers in its short existence. On each occasion, former managers have been paid off and new managers have brought in new players to play to different systems. [19] Off the pitch, the owners have also had to face fans’ anger at the appointment and subsequent dismissal of two sales staff who had allegedly been involved in unethical charitable fundraising activities. [20] Most recently, the former Chief Executive was arrested and charged with theft and fraud by the Metropolitan Police for financial irregularities. [21] His contract was later terminated. [22] Each episode has eroded trust in the management team.

21. In December 2009, Wrexham Village, the holding company which owns Wrexham FC 2006 Ltd, bought the franchise for the Celtic Crusaders Rugby League team and relocated the club from Bridgend in south Wales to the Racecourse Ground in Wrexham. [23] At the time, this was presented as an opportunity to share the costs of running the Racecourse with Wrexham FC and to secure the football club’s future. [24] However, the Crusaders soon got into financial trouble themselves and entered administration in November 2010 because of bad debts, which were reportedly related to the previous owners. [25]

22. In December 2010 the Crusaders exited administration and formed a new company W Crusaders Ltd. [26] Although the club was deducted 4 points by the Rugby Football League for entering administration, the outcome was met with great optimism by newly appointed Chief Executive Rod Findlay. [27] However, in January 2011, Crusaders’ Chairman Ian Roberts - who is also Chairman of Wrexham FC 2006 Ltd - made public plans to create a new company within the Wrexham Village group structure, which would own the Racecourse and lease it back to the Crusaders and Wrexham FC 2006 Ltd. [28]

23. Understandably, this caused anger and fear amongst Wrexham fans, many of whom accused the Wrexham Village owners of asset stripping, something they strenuously denied. [29] The following day, the Directors issued a statement via the Crusaders and Wrexham FC websites, which claimed that the new structure would make it easier to attract grants to improve the Racecourse. However, suspicious Wrexham FC fans monitored Companies House submissions and discovered that the RFL had taken out a charge against the Racecourse, still owned by Wrexham FC. As details of the administration exit emerged, Wrexham FC fans found that the Crusaders owed the Rugby Football League £0.7m, which had secured its debt against an asset owned by Wrexham FC, albeit with the Wrexham Village Group. [30]

24. Wrexham Supporters’ Trust

25. During the first financial crisis, Wrexham Supporters’ Trust indemnified players’ contracts and took over the Club Shop making a £20,000 profit, 50% of which was shared with the club and the rest retained the rest to purchase equity in the club in the future. The Trust also gave the club £3,000 per month to support it financially while it was in administration. Since exiting administration, the Trust has contributed over £30,000 to Wrexham Football Club in the form of sponsorships and donations and we have also accumulated a six figure sum in reserves. At the outset of the second crisis, Wrexham Supporters’ Trust has developed a vision to create a community-based football club which owns the Racecourse, the oldest international football ground in Wales.

26. We view the stadium as a community asset so the Trust is encouraged by proposals within the Localism Bill to enable local organisations to purchase assets owned both publicly and privately, as this could help to facilitate the purchase of the Racecourse in the future (subject to the Bill’s approval in Wales). As the Trust gears up for a fundraising drive to implement its vision, it will need supporters and business to dip deep for support. Tax relief for investors in supporters’ trusts could help to encourage local supporters and businesses to buy into our vision, whilst match funding for community shares would provide a significant boost to the size of war chest available to purchase the Racecourse and Wrexham Football Club.

27. We believe the Trust as the democratic vehicle for fans and community is the best steward of the club. Whilst some will question the ability for the club to compete without a ‘wealthy’ benefactor, actually there are a number of reasons financially that make sense for us to own the club. By being a community club legally we will need to reinvest all money into the club and no one person will profit plus we will also have community objectives written into our constitution. This all leads to a better brand and a collective feeling of trust which will help us attract sponsors and revenue from fans and the community. This feeling of combined ownership should lead to bigger crowds too, and even if we aren’t winning on the pitch the numbers we attract should be more resilient. By electing our own stewards they will be accountable to the fans and community of Wrexham, which will help with the transparency and communication coming from the club – something that has led to so much frustration and mistrust from recent owners and Directors.

28. Realistically we need to work in partnership to achieve our aim of owning and reuniting the ground with the football club. In our favour we know that our community club structure appeals to partners such as the local authority and other strategic and long term investors as the structure encourages working together to achieve common goals. Hopefully we can become a community club with an asset locked stadium owned by the community without the club going into insolvency again but having a right to buy period should we go bust would help strengthen our position and ensure that this vicious cycle of vested short term interest doesn’t continue to damage our club.

January 2011

References

Bagnall, S. (2011). Wrexham Crusaders owed more than £2m. Daily Post. January 18th, 2011. http://www.dailypost.co.uk/news/north-wales-news/2011/01/18/wrexham-s-crusaders-owed-more-than-2m-55578-28003786/

Jones, P. (1992) Wrexham: A Complete Record 1872 – 1992. Breedon Books Sport.