What does administration mean for Glasgow Rangers?
The Glasgow Rangers’ hopes of a 54th league title have been slashed as the club prepares to go into administration as a result of unpaid debt.
The UK Government, more precisely Her Majesty’s Revenue and Customs (HMRC), are owed around £78 million. Club chairman Craig Whyte admits “there was no realistic or practical alternative” to administration.
The HRMC have built their case around the methods in which the Rangers formerly paid their players. They allege the Scottish side used certain methods of payment to evade tax.
So what does this all mean? What is “administration” in sport and what can be expected?
Firstly, administration is the preferred alternative to liquidation. It is a legal process that acts as a safeguard for clubs battling to repay debt.
Administration ensures that assets are not sold off in the repayment process. The aim is simple: to restructure a club’s finances so that it can continue to operate without the threat of liquidation.
The HMRC will favour an administration as the likelihood of reimbursement is greater than with liquidation.
However, administration is not a luxury that goes without sacrifice.
The Scottish Premier League league rules state the following: “Where the Insolvency Event occurs during the season, points deduction shall apply immediately”.
Rangers will be deducted 10 League Points as payment for administration. On the current table, Rangers sit four points behind bitter rivals Celtic. Administration will widen that gap to 14 points.
The long term affects threaten the sustainability of the club more so than the loss of points. Players are imperilled by possibility of redundancy and participation in Europe, if achieved, is not assured.
Initially, players’ contracts remain valid, but the administrator will assess the situation and determine whether they can be honoured in future.
If the Rangers wish to feature in European competition, they will need to be issued a licence by the SFA (Scottish Football Association). For that to happen, they will need to convince the SFA that they have reinstated stable management.
Failure to separate themselves from the administration by March, will result in the side not be given a licence.
Furthermore, if they exit the administration before March but as a different entity, they will be required to apply for a new licence. If so, there is no guarantee they will receive it.
While the situation is not ideal for the Rangers and their fans, the process may allow the prestigious Scottish club to salvage some credibility.