Compensation question

Discussion in 'Bulletin Board' started by Brian Mahoneys Waist, Oct 13, 2021.

  1. Bri

    Brian Mahoneys Waist Well-Known Member

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    After reading some posts on the BFC financial situation I've come to the conclusion that
    Pacific Media bought the club for 10m with an upfront payment of 6.5m.The remaining 3.5 is due in instalments.BFC have made 1 payment of 750k using funds from the BFC coffers.Further payments have been suspended due to legal proceedings between BFC and the Crynes/Council.Can someone from our learned friends Sheriff,Red Rain and Archafield confirm if i've got the gist of there earlier posts because in fairness to me I find it all somewhat confusing.
    My point on compensation is ,If Bfc sack Shopp does the compensation payoff come from the clubs coffers or the owners pocket.?
     
  2. Don

    Donks Well-Known Member

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    The Club is the employer, not the owners. Any compo would be paid by BFC 100%
     
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  3. Dan

    DannyWilsonLovechild Well-Known Member

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    The football club is a separate entity. The club employs a coach. if they sack that coach, the club pays the compensation/payoff as contractually set out (subject to any negotiations).
     
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  4. She

    Sheriff Well-Known Member

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    Compensation to the head coach would be a genuine expense of the club, so would be the club's liability.

    The concern raised in the other thread is that the owners have now set a precedent of using the club's funds to pay liabilities that aren't related to the footballing activities. The consequence of this is that the club now has £750k less cash available from which to pay any compensation to Schopp if they sacked him, so may now be impacting decisions which directly impact the on-field performance (or lack of it).

    Broadly speaking, yes, you've got this correct. The club was valued at £10m at purchase, but 20% of this value relates to the Cryne family's minority shareholding in it, so the external investors only hold £8m of this value within their shareholding.

    The £6.5m initial payment was the upfront purchase cost they paid. The additional £3.5m due in instalments is a separate figure arising which was based on performance after the takeover, so it's pure coincidence that this plus the £6.5m adds upto the £10m total valuation. The important point is that there was an additional liability of £3.5m of which only £750k has been paid to date (the unpaid instalments being the subject of the court action by the Cryne's) and that the 1st £750k instalment payment was made using the day to day working capital of the football club, not the investors' own resources.
     
  5. Don

    Donny-Red Well-Known Member

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    So the £750k paid from the clubs coffers isn’t part of the purchase price but an additional performance bonus?

    Whilst I can see that it does impact the clubs cash on hand, and I’m far from happy that those funds are diminishing, I don’t see that there’s even a moral problem with the ‘club’ rather than the ownership vehicle making that payment to the ex owners.

    In fact it’d be totally bizarre if I bought a business off you and paid in full, and that business later met a benchmark, that I would owe you additional money that had to come out of my earnings from a separate source, rather from the businesses profits.

    I’ll go further, how’s a club that’s struggling to stay in profit end up owing a performance bonus to the previous owners? Particularly one that takes them from an operating profit to a loss.
     
  6. She

    Sheriff Well-Known Member

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    Most of the the detail regarding your queries are covered off in this post, particularly as to the nature of the £3.5m liability. http://barnsleyfc.org.uk/threads/to...rust-the-80-owners.308601/page-6#post-2827393

    There are countless reasons why the nature of the payment is morally wrong, again covered at length in the linked thread. Given the phrasing of your defence of it, the most logical one is that they're using an asset which is partly owned by the ex-owners (which is being devalued by the loss of capital from it) to make payments due to the ex-owners.

    Additionally, the additional performance based consideration due was originally agreed at £6m, and subsequently re-negotiated downwards to £3.5m, based on on-field performance in the 18 months immediately following the takeover. There was pretty much zero prospect of the club generating either of those figures in retained profit during that period, so it's illogical to expect that the additional amounts be payable from funds generated by the club in that time.
     
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  7. Red

    Red Rain Well-Known Member

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    As I understand it, the purchase agreement stated that the purchase price for 80% of the club was £8m, but if the club was promoted back to the Championship within an agreed period, the purchase price would increase by a further £3.5m. Of course, I have not seen the agreement signed by all the parties, and I do not known how the contract was phrased, but that is at the heart of the disagreement which is now to be resolved through the courts, and personally, I chose to believe the Cryne family.
     
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  8. Dan

    DannyWilsonLovechild Well-Known Member

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    What Sheriff said.

    At the time of the takeover we were in the championship at threat of relegation..

    The Crynes essentially deferred a significant chunk of money, £6m, to only be paid if we stayed up that season, or we came back up the following. Latterly, they reduced that again to just £3.5m as a fixed amount and not determined on promotion, which we did, saving the 80% owners £2.5m. And the Crynes agreed to a lengthening of the payment schedule.

    This also doesn't account for the considerable write offs by Patrick to clear the balance sheet, and retaining circa £5m in cash in the business for the new owners to use.

    I'd say the Crynes have bent over backwards in this deal.
     
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  9. MonkeyRed

    MonkeyRed Well-Known Member

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    The additional payment was agreed at the time of the original sale as a Championship club is more valuable than a League One club to the new owners. It was then renegotiated (down) by both parties when promotion back looked inevitable under Stendel. A bit like buying stocks and promising that you'll pay the seller more if their value increases to a certain amount when they're your own.

    On your second paragraph, agreed. There was arguably financial interest in us being relegated and staying in League One for the 80% owners due to the bizarre nature of the clause being tied to on-pitch fortunes. Not a good idea all round to me.
     
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  10. MonkeyRed

    MonkeyRed Well-Known Member

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    Also, the 'moral' problem is largely that the 80% claim to have taken no money out of the club, and of course the West Stand debacle puts £750k having been used for the club to buy itself in sharp relief.

    The other question is... why £750k? If the club's accounts had allowed the cashflow, it's not impossible to suppose a scenario where the full amount was paid without recourse to legal action.
     
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  11. Don

    Donny-Red Well-Known Member

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    For me I t’s not a case of believing any party, but about whether we as fans ‘feel’ that the right things are done, but more importantly whether the right things are done.

    We’ve got fans who ‘believe’ that the 80% consortium have ‘paid nothing’ and that’s patently not true. Here there are complex discussions about who owes what, and it’s not exactly transparent.

    I wish the club was being run better, I’d like a little more honesty and transparency, but that’s secondary.

    But I also strongly believe that if I bought a business, and there was an additional balance due beyond the initial sale price, there’s nothing morally ‘wrong’ with paying that sum from the company’s profits. If I only owned one business, what are my alternative revenue streams?

    Clearly in the case of Barnsley, that’s complicated by the debt being owed to someone who has a stake in the club still, but that’s a separate issue.

    Its also disingenuous to claim to have ‘taken no money’ out of the club, but again, a separate issue.
     
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  12. Don

    Donny-Red Well-Known Member

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    I agree 100%
     
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  13. Red

    Red Rain Well-Known Member

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    Can I recommend that you read the following thread, as Your points have already been discussed there.

    http://barnsleyfc.org.uk/threads/to...ose-of-us-whom-distrust-the-80-owners.308601/
     
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  14. Don

    Donny-Red Well-Known Member

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  15. Red

    Red Rain Well-Known Member

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    I suggested that you read the thread because it would save me re-typing everything that I had already written there.
     
  16. Dan

    DannyWilsonLovechild Well-Known Member

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    As RR has mentioned though. £750k was used through the club and in so doing saved tax, turning a profit into a loss. Also denying dividend tax being paid if it had been withdrawn.

    It's also made our retained earnings negative and badly impacted on our solvency. I'd certainly consider those as part of whether it is seen as a moral action or not.
     
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  17. Arc

    Archerfield Well-Known Member

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    I think there may be some confusion on the payments to Oakwell Holdings in this thread.

    As an accounting principle if payments are contingent on a future event which is uncertain then this must be disclosed in the accounts.

    Referencing Oakwell Holdings Limited accounts at 30 November 2018 the debtors were clearly stated at £1m in the next 12 months and a further £3m in more than 12 months. If these were contingent payments on league position, Oakwell holdings could not list these as debtors as the payment would be contingent.

    Any further payments above and beyond these may well be dependent on league position.

    Also I have previously referenced £5m of payments on top of the repayment of £6.3m on loans. I derived that further £1m payment at the time of purchase given the Increase of circa £7.3m in the cash balance shown in accounts from 2017 to 2018
     
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  18. Don

    Donny-Red Well-Known Member

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    As I said, I’m not happy at all about what it has done to the solvency of the club. And that’s the tip of the iceberg as to why I’m unhappy about it. And there’s the added complication that one of the shareholders is also the recipient.

    But there’s a huge leap to ‘they did it this way in order to avoid paying tax’.

    But I’m no accountant and I don’t pretend to know anything about tax avoidance.

    What I do know though; is that people often come to damning conclusions when they’re talking about issues they already hold a prejudice on, especially when they hold some but not all the evidence.
     
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  19. Dan

    DannyWilsonLovechild Well-Known Member

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    I'm not claiming that they've chosen purposefully to pay this through the club to eliminate a tax payment. As RR has outlined though, in their action, they have created a £750k expense in the clubs accounts which means corporation tax losses were not written down, and if it had been withdrawn as dividend, that dividend taxation was not paid as it wasn't required.

    There's no prejudice there. And this is often overused to emphasis opinion, but this time it is very much a fact. We can only individually suppose motives, but the actual actions are recorded in the financial statements for all to see.
     
    Last edited: Oct 13, 2021
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  20. Arc

    Archerfield Well-Known Member

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    The club has enough accumulated tax losses from previous years to not to have to worry about corporation tax.
     
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