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Rangers: What happens next?

This picture shows a general view of Ibrox Stadium ahead of the Scottish League Cup match  between Rangers and Inverness in Glasgow on September 16, 2014

Ahead of Friday's Extraordinary General Meeting, Sky Sports News HQ's Charles Paterson assesses the complicated situation at Rangers - and what may happen next.

THE CURRENT SITUATION

Sky Sports learnt on Sunday that Dave King has gained enough votes to carry his resolutions at Friday’s EGM; on Tuesday King claimed victory in a statement and requested the EGM be called off.

Rangers responded by confirming the EGM will go ahead, and claiming the outcome cannot be taken for granted. Sky Sports understand Derek Llambias and Barry Leach have no intention of resigning before Friday’s meeting.

Additionally, Rangers confirmed they have begun the process of drawing down a second £5m loan from Sports Direct. If drawn down in full, Rangers will owe £10m in total to Sports Direct, with the loan secured against club assets including Murray Park and registered trade-marks.

King’s side alleges Llambias and Leach are looking for a full contractual payoff to their 12 month contracts; King says he has no intention of agreeing to this.

WH Ireland, the company Nomad, resigned on Wednesday, meaning Rangers cannot trade shares on the stock exchange until a new Nomad is installed.

WHAT MAY HAPPEN BEFORE THE EGM?

Assuming King wins Friday’s vote, a formal process will take place whereby Llambias and Leach will leave the board, after Paul Murray and John Gilligan are appointed. King says on Wednesday he would delay his appointment to the board to allow himself to be vetted by the authorities. Llambias and Leach must technically appoint the new board or be financially accountable for the costs of hosting the EGM (estimated to cost c.£60,000).

Image: Dave King

King claims he has a new Nomad lined up, but it is unclear which company is being considered. Any Nomad appointed by King would be Rangers’ fifth in less than three years; financial experts have told Sky Sports it is unlikely the AIM stock-market will oppose any appointment, though they have the right to challenge a new Nomad and ask for justification to approve King as a Rangers director.

Sports Direct retain the right to appoint two directors to the Rangers board, as long as the £10m loan is outstanding. King’s camp has indicated there is no immediate need to repay the loan, despite the securities attached and the influence it holds over the club.

If King does not repay the loan, there is technically nothing that can stop Sports Direct re-appointing Llambias and Leach onto the board, immediately following their removal on Friday.

IMMEDIATE ISSUES FOR KING

Mike Ashley is the biggest obstacle to King; if Sports Direct calls in their loan then immediate funds of £10m will be required to pay it back.

Rangers' Kris Boyd celebrates his goal with team mates during the William Hill Scottish Cup Fourth Round match at Ibrox, Glasgow.
Image: Rangers: Third in the Scottish Championship

King must appoint a board, including a chief executive and finance director. Sky Sports understand the board is likely to contain at least six individuals; King, Paul Murray, John Gilligan, plus possibly Douglas Park, and representatives of George Letham and George Taylor. A new CEO/Finance Director would increase this further, as would a possible fans representative as has been mooted.

There is no suggestion at this stage that King has identified a CEO or finance director – Paul Murray has been asked to stand in as chairman whilst King's position is scrutinised. Longterm, King has earmarked the role of chairman for himself.

If King is appointed as a director, it is likely that he, and Paul Murray, will be asked by the SFA to justify themselves as “fit and proper persons”.

Any SFA case against King would be based on his suitability as a director following his convictions for tax fraud in South Africa, and his presence on the board when Craig Whyte took the club into administration. There is also the possibility of the stock market acting against King due to those South African tax convictions. Any SFA case against Murray would be based on his time as a director prior to Craig Whyte’s takeover.

Section 216 of the Insolvency Act prevents directors of a company that enters liquidation from becoming directors of a company with a similar name. There are exceptions, though, including if directors are being appointed to a company that has been using the name for more than 12 months, as is the case with Rangers International Football Club plc.

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Rangers Supporters Trust spokesperson Chris Graham says fans are aware that Dave King’s takeover of the club will not prove an immediate solution

KING’S FUTURE PLANS

King’s long-term business outlook for Rangers is unclear, but it is likely his funding plan will be made up of debt and proposed equity, with a fresh share issue in due course.

King has at various times pledged to invest up to £30m in funds; Paul Murray has been quoted suggesting Rangers may need up to £50m of funding in the next three to five years.

One of the first official pieces of business could be to serve notice on the various extensive contracts between Rangers Retail and Sports Direct (believed to be between five and seven years).

Will Dave King want to delist Rangers? It seems unlikely given the pledges he has made; it's also unlikely King and his associates have the funds to take the club private and invest in it long term. But taking the company into private ownership ultimately could be a way to keep it from Mike Ashley.

However Wednesday's suspension of trading could be the first step on this road. If Rangers do not appoint a new Nomad within 30 days they will be delisted from AIM. 

Rangers require investment to rebuild their commercial and marketing departments; they also require investment in the football department, youth academy, recruitment process and perhaps a sporting director.

King’s takeover should receive an initial boost financially from the fans, they are expected to return to matches at Ibrox, and upcoming season ticket sales due for next season are expected to rise.

Will King appoint a new manager to see out the season, with Kenny McDowall serving his notice? Sky Sports understand King does not considered this a short-term priority, rather that it is important to make the right long term decision for rebuilding the club

Ultimately do Dave King and his consortium have the finance long-term? Only time will tell if they can afford to run Rangers; King needs to spell out his long term economic spending plan and has promised to be transparent.

Regarding the board, Sky Sports understands King, Park, Letham and Taylor don’t intend to be present at the club on a day-to-day basis, instead their representatives are likely to oversee affairs. Paul Murray’s role as a middle man will be vital. In particular King and Park’s relationship may be key to the harmony of any alliance going forward.

Image: Mike Ashley

MIKE ASHLEY’S FUTURE ROLE

Mike Ashley continues to control 9% of shares, retains Sports Direct’s commercial contracts with Rangers Retail, and until his loan is paid off has a hold on all of the club’s assets except Ibrox – nobody is clear what his long term plan is for Rangers.

How does King work with him? If the two reach agreement perhaps Rangers can be allowed to rebuild under King. But two massive business egos are likely to clash.

There is a theory that Ashley/Sports Direct’s contracts are so onerous that Ashley is waiting to see the new regime struggle with finance before turning to him for help – he has never lost a fight and his wealth is unlimited unlike King and his allies, so Ashley’s next move will be intriguing.

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