| The Purpose of the Trust 15:49 - Apr 12 with 10156 views | londonlisa2001 |
With apologies for starting yet another thread, but this doesn't really fit anywhere.
The time is surely right for asking 'what is the purpose of the Trust'?
Because I'm not sure I think it was ever 'to own shares in Swansea City FC' but believe instead it is 'to ensure the permanent existence of Swansea City FC' .
The distinction is in many ways an important one as it determines the available options in the current situation.
The discussions are being terribly distorted at the moment by the constant banging on about 25%. Well some actual facts. The ownership by the Trust of 25% of shares (or actually voting rights) does NOT stop the club from issuing more shares irrespective of what certain posters keep saying. In order to issue shares in a company, the company needs 50% plus 1 to agree to it (an ordinary resolution). The Trust is certainly not in a position to get to 50% plus 1 of the club. If the club gets an ordinary resolution of shareholders to issue shares it can do so. However, the articles of the club (and possibly the shareholders agreement reiterates this) means that when the club issues these new shares, all shareholders are entitled to take up their proportion of the new shares issued to retain their relative ownership %. So if new owners wanted to inject £20m into the club, the Trust would be entitled to buy shares for £4.2m to remain at 21%. This is called pre emption rights and means that the Trust would not be diluted.
In order to issue shares without pre emption rights, the club needs a special resolution, which is 75% plus 1 to vote in favour of it. At that point, the Trust would not have the ability to buy new shares issued and would be diluted.
In many ways though, this is moot, as the Trust wouldn't have the money to take up its rights anyway, so can't maintain its share irrespective of the shareholding it has at this point.
The ONLY change to this is if the shareholders agreement states something different ( eg that shareholders cannot be diluted in this way) which is probably not the case. So the Trust could never stop shares being issued even if it had 25%, it could only ensure they had the right to buy whenever they were issued.
There are certain other decisions which also require a special resolution - these include altering the articles of the club, reducing share capital and also anything else that is specifically stated either in the articles or a shareholders agreement (there may be certain things mentioned that require this that we are not aware of).
It is obviously the case that the new owners want the ability to pass special resolutions, so they are either concerned to make sure that the Trust cannot raise money and retain its percentage shareholding, or there is something else which is specified that they want to control (could be anything - unless we saw the articles or SA we can't guess what it may be).
In general though, new owners will want 75% as it gives them the ability to do anything they want.
So if it's accepted that the Trust will not be allowed to own enough to get to 25% with these potential owners, there are only a few things they can do.
They can hold onto shares as is, with a minority say and an acceptance that they could be outvoted on everything.
They can sell the shares and bank the money.
They can attempt as I mentioned on Sunday, to find different purchasers who may be more prepared to work alongside them.
This is where the question of what the Trust is for comes in. The Trust need to decide whether it may be better to cash out and retain the money for a rainy day or whether to stay in with these or others.
Some comments have been made that they can't cash out as no offer has been made for their shares. Well firstly, the shareholders agreement may give certain rights to insist on a sale at the same value as the others. It is rare that a minority shareholder can be left hanging in this way. However, even if the shareholders agreement is silent, there are certain actions that can be taken. One is an acknowledgement that there are minority protections in place - a minority shareholder cannot be diluted down to a reduced value of the shareholding - if the Trust were diluted and left with worthless shares, they could take action against the new owners to force a purchase of their shares at the proper value (I.e. £21m assuming £100m valuation now). But there are also provisions for a situation called a 'quasi partnership' which may well apply here. It covers a situation where people have entered into a business relationship with the intention of a partnership, collaborative business decisions, no one having control etc etc. but using a limited company to do it. Given the provisions that we understand of no one being able to get to more than 25% and so on at present, there may be a good chance of the court ruling that this past 10 years or so has been a quasi partnership. If that is the case, the Trust can force purchase of their shares at value.
If the Trust want to remain, then either these owners or others is the next question. It is perfectly possible that the Trust could find others who are willing to be more collaborative. We know there is other interest in the club - those people from last year for starters - they didn't buy Everton - are they still interested? There have also been rumours about Terry Matthews - has he been spoken to?
If there are no other more pleasant options, then it comes down to in or out with these people.
There are some benefits of staying in, but if the Trust just has a director who is ignored and a vote which is worthless, then all that really exists is that the Trust have invested £21m (by not cashing it in) in U.S. Investors that don't value them.
As a final unrelated point - the new Trust statement says that the books have been made available to the new people and yet the supporters director didn't know. How many directors are required for a board decision on that and why was the board decision not minuted and made available to all board members?
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| The Purpose of the Trust on 20:54 - Apr 12 with 2335 views | FearOfAJackPlanet |
| The Purpose of the Trust on 20:43 - Apr 12 by DafyddHuw |
The Yanks would have no reason to want to buy the Trust's shares. They'll already have enough do what they want. |
Find someone else (on the sly, obviously - when in Rome...).
I appreciate that a minority stake might not be an easy sell, but you can't tell me there isn't some individual/organisation out there that wouldn't want a 21% stake in a profitable Premier League football club with the way the TV deals are going? |  |
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| The Purpose of the Trust on 21:50 - Apr 12 with 2280 views | monmouth |
| The Purpose of the Trust on 20:50 - Apr 12 by FearOfAJackPlanet |
Tend to agree with this view.
It's a Supporters Trust, not an investment vehicle. Now that the 'by the fans, for the fans' model (as specious as it was) has been firmly confined to the history books, why should the Trust play ball? All this 'want to keep the Trust on board' talk is just a way to keep it docile as a passive, materially irrelevant shareholder whilst the carve up happens.
Find a buyer, sell up. Be a truly independent Trust, not paying lip service to the controlling shareholders. Check-out with a massive war-chest and use it to champion fan issues and to nurture a fund to secure a club in Swansea should it all go tits up (it inevitably will at some point...). |
It may actually be easier to create pressure and checks and balances with a big PR fund outside the tent pissing in, making it clear that they have a sceptical and alert fans group watching them closely from day 1. Plus it would create a massive stir and give a huge megaphone effect at the national press from the start. Depends on the Trust's assessment of the situation, obviously.
First step must be to clarify the legals though surely. If what's been done is illegal or ultra vires, then there is presumably a fairly clear legal remedy? It is very possible that the trust shares have to be bought out as part of the deal which would a)increase the price by 21m which may kill the deal anyway and/or b)bring the above scenario into play as an option.
Actions so far have spoken a lot louder than words so I would believe nothing now that isn't legally guaranteed in the various agreements.
Then again, I'm not a corporate lawyer so might be talking utter cack. |  |
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| The Purpose of the Trust on 21:53 - Apr 12 with 2271 views | Nookiejack |
| The Purpose of the Trust on 20:54 - Apr 12 by FearOfAJackPlanet |
Find someone else (on the sly, obviously - when in Rome...).
I appreciate that a minority stake might not be an easy sell, but you can't tell me there isn't some individual/organisation out there that wouldn't want a 21% stake in a profitable Premier League football club with the way the TV deals are going? |
They could achieve more than 21% presumably as Trust can acquire 21% of the 79% being sold under the pre emption rights - if that someone else loaned the Trust the money with a view to Trust then later selling the shares?
If someone else had deep pockets could subscribe to any new issue of shares - so remain undiluted. | | | |
| The Purpose of the Trust on 22:11 - Apr 12 with 2231 views | hammy |
I suppose it is becoming quite obvious that the current individuals that hold the majority shareholding in SCFC have decided to "cash in" on their shareholding. They have attempted it once and failed due to an aggressive rebuke by the supporters trust, etc. They have now taken a second, more covert approach and brought in "investors" that allegedly seem just a little less dubious than the previous lot. It seems that this process will continue until the shares are sold.
In any other business this would be seen as quite normal and the shareholders would be roundly applauded for their good work and slapped on the back for doing so well. But this is football; quite amazing that a business / sport steeped in corruption at the top end has supporters that still give a feck, especially within the Sky Spurts driven PL. But that's why we keep turning up to watch our team I suppose.
With the extortionate fees being paid to players. managers and agents then the world has truly gone mad. So possibly the purpose of the trust is to shine a light on the financial manoeuvring at the moment in an attempt to scupper any potentially negative takeover by a financial vehicle. But I suppose the natural conclusion to this, in order to keep the club as a true footballing entity, is to take the Swans back into the lower leagues where the focus on extreme finances is not the key consideration. Otherwise, with the ever increasing broadcasting deals it is inevitable that some form of financial institution is going to look to make a few quid off the back of the Swans PL position.
The money men usually get their way in the end ... |  |
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| The Purpose of the Trust on 22:43 - Apr 12 with 2186 views | Nookiejack |
| The Purpose of the Trust on 21:53 - Apr 12 by Nookiejack |
They could achieve more than 21% presumably as Trust can acquire 21% of the 79% being sold under the pre emption rights - if that someone else loaned the Trust the money with a view to Trust then later selling the shares?
If someone else had deep pockets could subscribe to any new issue of shares - so remain undiluted. |
Just thinking about this a bit more - the Trust will have first refusal of 21% of 79% say being sold.
However if the remaining 79% of 79% is not taken up by existing shareholders (they all sell their shares) - can the Trust then buy these shares as well under the pre-emption rights provisions.
Or up to a level where another party might be interested? | | | |
| The Purpose of the Trust on 12:47 - Apr 13 with 2015 views | londonlisa2001 |
| The Purpose of the Trust on 19:48 - Apr 12 by Nookiejack |
So what you are saying is they just issue new shares which will have pre-emption rights - but Trust won't have funds to take up their proportionate share. So gets diluted away.
I suppose the thing is any new issue would mean the assets of the club would increase by the cash received for the new shares, or if that cash is used to buy stadium or more expensive players.
Hence the Trust would own a smaller share of a larger pot?
If the club manages to get into the Champions League - the Trust's stake could be veery valuable and would in short term at least Trust would have certain information rights until diluted away - to ensure club was not being mortgaged away? |
Exactly.
If new owners put in an additional £50m the trust share goes down but the value of that share is maintained as the club's value has just increased by £50m.
If they put that in as debt then the value of the club won't increase (as £50m of assets goes in but also £50m of liabilities) but the Trust aren't diluted by debt either.
As I said in the OP, the devil is in the detail of the shareholders agreement which may or may not change these usual companies act provisions. But in any circumstances company law ensures that the Trusts shares could never be worthless - the Trust would have a remedy under minority shareholder protection rules to force the majority shareholder to make good the value. | | | |
| The Purpose of the Trust on 12:53 - Apr 13 with 2006 views | londonlisa2001 |
| The Purpose of the Trust on 20:03 - Apr 12 by Nookiejack |
Do you need a special resolution to wind up the club?
For example The Yanks know that if things go wrong and we get relegated - all they have to do is sell the players - replace them with youth team players on £100 a week contracts - then bank the parachute money.
The thing is say without the 75% they can't wind the company up and get their cash back.
They could get it out through dividend but only if the club is making distributable profits and this would be unlikely in a relegation situation. Or take years to do so? |
Yes you do. You need a special resolution for members (shareholders) to wind up a company.
But we need to be realistic here, if they are putting £100m of their money into the purchase of shares from the current owners (or £71m or whatever it is) the best way for them to get a good return is to make sure the club remains stable, grows through expansion etc, improves commercial agreements by some distance and waits for the next TV deal (which will be higher) and flip the club at that point for £200m say.
There is absolutely no point in asset stripping the club as we don't have significant assets. Our asset is the TV income and the only way we get that is by remaining in the premier league.
If they wanted to spend £100m on a quick asset strip, they certainly wouldn't buy Swansea City Football Club. | | | |
| The Purpose of the Trust on 13:00 - Apr 13 with 2002 views | londonlisa2001 |
| The Purpose of the Trust on 21:53 - Apr 12 by Nookiejack |
They could achieve more than 21% presumably as Trust can acquire 21% of the 79% being sold under the pre emption rights - if that someone else loaned the Trust the money with a view to Trust then later selling the shares?
If someone else had deep pockets could subscribe to any new issue of shares - so remain undiluted. |
Just as a point - pre emption rights are over new shares issued not existing shares being sold.
However, there is usually a right of first refusal to but existing shares when they are sold. But, again, there is normally a right of first refusal to buy all of them, not just the 4% that the Trust need. The whole point of such clauses is to allow existing shareholders to remain in a company if they want and to increase their stake but not in a way which harms the sale of the ones that want to sell. In this situation, the trust buying just 4% harms the whole deal and wouldn't be allowed (unless there is a very strange provision in a shareholders agreement which is unlikely). So the trust couldn't raise £4m and job done, they'd have to buy them all for £70 odd million. | | | |
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| The Purpose of the Trust on 13:37 - Apr 13 with 1953 views | Clinton |
This thread should be a sticky, it clarifies so many points on what can and can't be done with various shareholder ownership percentage.
There are so many other threads with myriad questions and partial answers, theories and folklore. |  |
| If you can fill the unforgiving minute.
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| The Purpose of the Trust (n/t) on 13:41 - Apr 13 with 1945 views | nantywatcher |
[Post edited 13 Apr 2016 15:26]
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| The Purpose of the Trust on 14:21 - Apr 13 with 1912 views | Glyn1 |
| The Purpose of the Trust on 13:37 - Apr 13 by Clinton |
This thread should be a sticky, it clarifies so many points on what can and can't be done with various shareholder ownership percentage.
There are so many other threads with myriad questions and partial answers, theories and folklore. |
I absolutely agree. Please would this be made a sticky?
And thanks Lisa for clarifying so many points - I was worried before, I'm terrified now. |  |
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| The Purpose of the Trust on 14:42 - Apr 13 with 1878 views | londonlisa2001 |
| The Purpose of the Trust on 14:21 - Apr 13 by Glyn1 |
I absolutely agree. Please would this be made a sticky?
And thanks Lisa for clarifying so many points - I was worried before, I'm terrified now. |
Ha - sorry !
In all honesty, the aim is not to terrify but instead to focus on the actual issues rather than get sidelined in lots of discussions about stuff that doesn't matter so much.
The reality as I say is that they are not going to 'asset strip' - it makes no sense to do that.
The Trust have a lot of decisions they can make - it's just that they are a bit different to the ones that may be assumed.
They can choose to stay on board - influence decisions if possible and it may be that the new owners will be far more amenable than fans may think. If after consideration of the detailed offer the Trust choose to 'bank' the current value - there are a few ways that they can do that as I've said.
There may be other things in the shareholder agreement that we do not know about. One thing that occurs to me is that I've heard before that there is a provision that no single shareholder is allowed at the moment to get above 25% of the club. Now I don't know whether there is any truth in that, and if there is, whether it was an informal understanding or actually enshrined in the shareholders agreement and if so whether all parties to that agreement would have to agree a change. If it was the latter, then the Trust could actually just refuse to give agreement to a change and stop the deal if they decided that was in the club's best interests.
The other point is that the Trust can refuse to sign any new shareholders agreement unless certain rights are given to them. (One of the statements says that the new owners want a new agreement). These rights could circumvent a lot of the 'usual' provisions of the companies act to give the Trust assurances that they don't have the money to 'buy'.
No one at the moment knows what the deal is regarding future investment in the club (after ownership has changed hands). I would suggest that we wait to see what is proposed before assuming that they are all gits out to screw everyone over. All we know for certain is that they will want to make money - there are a few ways of doing that which would be great for the club and for us as fans.
Lastly, we need to refrain from comparing any new deal with the way things used to be. There is no status quo anymore - we are currently in a position where the current owners are happy to work behind the back of the Trust and try to exclude them. Bear that in mind when wondering whether new owners would be better or worse for us. | | | |
| The Purpose of the Trust on 18:12 - Apr 13 with 1809 views | Nookiejack |
| The Purpose of the Trust on 13:00 - Apr 13 by londonlisa2001 |
Just as a point - pre emption rights are over new shares issued not existing shares being sold.
However, there is usually a right of first refusal to but existing shares when they are sold. But, again, there is normally a right of first refusal to buy all of them, not just the 4% that the Trust need. The whole point of such clauses is to allow existing shareholders to remain in a company if they want and to increase their stake but not in a way which harms the sale of the ones that want to sell. In this situation, the trust buying just 4% harms the whole deal and wouldn't be allowed (unless there is a very strange provision in a shareholders agreement which is unlikely). So the trust couldn't raise £4m and job done, they'd have to buy them all for £70 odd million. |
Thanks Londonlisa for explanation that Trust will essentially have to buy £70m of shares under right of first refusal - dependent on shareholders approval/articles - to block deal. | | | |
| The Purpose of the Trust on 18:18 - Apr 13 with 1795 views | Nookiejack |
| The Purpose of the Trust on 12:53 - Apr 13 by londonlisa2001 |
Yes you do. You need a special resolution for members (shareholders) to wind up a company.
But we need to be realistic here, if they are putting £100m of their money into the purchase of shares from the current owners (or £71m or whatever it is) the best way for them to get a good return is to make sure the club remains stable, grows through expansion etc, improves commercial agreements by some distance and waits for the next TV deal (which will be higher) and flip the club at that point for £200m say.
There is absolutely no point in asset stripping the club as we don't have significant assets. Our asset is the TV income and the only way we get that is by remaining in the premier league.
If they wanted to spend £100m on a quick asset strip, they certainly wouldn't buy Swansea City Football Club. |
No I don't think the Venture Capitalists intention is to asset strip - but they will have planned exit routes even before they go in.
One of their planned exit routes will be if it all goes wrong and we start tumbling down the leagues. Hence they could sell players, replace them with youth team players on £100 a week contracts and bank parachute payments along with money from player sales.
They can then get all this money out of club if they have 75% - as they then can wind company up. If they did not have 75% would find it hard to get money out.
So a protective measure with regards to managing downside risk. Rather than them going in initially to asset strip. | | | |
| The Purpose of the Trust on 18:20 - Apr 13 with 1793 views | Nookiejack |
Another question is with regards to whether Articles and Shareholder Agreement allows the transfer of voting rights with regards to shares you don't own? | | | |
| The Purpose of the Trust on 18:25 - Apr 13 with 1721 views | Nookiejack |
The other thing I was mulling about was Entrepreneurs relief. Somebody said to me once that if you earn >5% of a company you would pay relatively low CGT rate?
Some rumours suggest that Huw Jenkins and Leigh Dineen will keep some shares in club.
However if Leigh Dineen only owns 5% - will he have to sell his entire stake to qualify for Entrepreneurs relief?
These guys seem to be doing well making incredible amounts of money and paying little CGT tax on it? | | | |
| The Purpose of the Trust on 19:32 - Apr 13 with 1681 views | Nookiejack |
I suppose one of the other things is on a share sale - the sellers have to warrant that they all own the shares.
When you look at the share history of club - it seems some shares were bought at later dates than others. In contrast Mel Nurse's shares appeared to have been cancelled - hence why Trust's effective stake increased from 20% to 21%.
Does the Trust need to ensure it has full details of transactions and cashflows specifically into the club - when all the shares were subscribed for - at each date? Would Trust have had to approve additional issue of shares?
There is obviously tremendous value at stake here - so doesn't Trust have to ensure that all shares issued were acquired following correct legal process. Otherwise could lose out on substantial value if proper process had not been followed.
Hypothetically if shares were not bought correctly then legal challenge could be brought at a later date - so assume indemnities will have to be given by existing shareholders to the Venture Capitalists? | | | |
| The Purpose of the Trust on 23:02 - Apr 13 with 1612 views | Nookiejack |
| The Purpose of the Trust on 18:25 - Apr 13 by Nookiejack |
The other thing I was mulling about was Entrepreneurs relief. Somebody said to me once that if you earn >5% of a company you would pay relatively low CGT rate?
Some rumours suggest that Huw Jenkins and Leigh Dineen will keep some shares in club.
However if Leigh Dineen only owns 5% - will he have to sell his entire stake to qualify for Entrepreneurs relief?
These guys seem to be doing well making incredible amounts of money and paying little CGT tax on it? |
Ignore this one - I keep forgetting they have made their investments through companies not individuals. Hence don't think Entrepreneur's relief applies.
If they have had clever tax advisers their companies will have qualified for substantial shareholding exemption and not pay any tax on their capital gains. I think your company would need at least 10% holding to qualify. So some of our current shareholders may well be luckier than others - if they currently hold 10% or more of shares. | | | |
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