Readers the below is copied from a facebook post i made on a RangersFirst FB group
reproduced so that it is easier for non facebook users to interact with
Folks you may have followed some twitter chat @rchrdtknsn regarding the Project CIC that is part of Club 1872, James Blair asked me to send him a more thought out question to try and get to the nitty gritty of it all, below is my attempt. Anyone with better English than me is welcome to suggest any edits
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There is concern being raised by members regarding how the Projects CIC and the asset lock will work.
There is concern being raised by members regarding how the Projects CIC and the asset lock will work.
Rather than asking a list of questions I have outlined below how I understand it works and certainly how Project funding within Rangers First was intended to work
Most members appear to be very keen to make sure that money can make a difference beyond just share buying but the mechanics of how this works seems to be a source of conflict, rumour, innuendo and conspiracy and all that is needed to stop this becoming a sore is some quick clarification on the CIC rules as they stand and any future directors attitude to said rules.
I have outlined what I believe the issues and applicable rules are
I would ask that you read the below and confirm that the below is correct and if it is not what the specific faults in the argument and how this impacts the working of the Projects CIC are
Intro
CIC’s and are set up as “Not for Profit” for example Rangers First “the Company is not established or conducted for private gain any surplus or assets are used principally for the benefit of the community”
From the Rangers Supporters Trust Rules “the business of the Society is to be conducted for the benefit of the community served by the Club and not the profit of its members”
And final from the Club 1872 document that was voted on:
“Financial Contribution: Creating a new means for direct investment in the club through specific projects identified by members”
The share buying part of Club 1872 is well understood as demonstrated by the work of Rangers First and Buy Rangers, however the Projects CiC and how it would work is less well understood.
Members understand that a proportion of membership money will be used for “projects” but what qualifies as an appropriate project under the CIC asset lock rules and how the ongoing relationship between a funded “project” and the CIC works has not been fully communicated.
The Project CIC money falls subject to the same statutory asset lock rules as monies previously raised by Rangers First and so any money that leaves the Project CiC for any defined project is subject to the legal asset lock rules, this is called a Transfer of Assets and must satisfy certain criteria
The regulator of CICs in 6.1.1 of the rules outline the rules (copied below)
6.1.1. A transfer of assets must satisfy certain requirements This means that, subject to the CIC meeting its obligations, its assets must either be retained within the CIC to be used for the community purposes for which it was formed, or, if they are transferred out of the CIC, the transfer must satisfy one of the following requirements:
• It is made for full market value so that the CIC retains the value of the assets transferred;
• It is made to another asset-locked body (a CIC or charity, a registered society or non-UK based equivalent) which is specified in the CIC’s Articles of Association;
• It is made to another asset locked body with the consent of the Regulator; or
• It is made for the benefit of the community.
• It is made to another asset-locked body (a CIC or charity, a registered society or non-UK based equivalent) which is specified in the CIC’s Articles of Association;
• It is made to another asset locked body with the consent of the Regulator; or
• It is made for the benefit of the community.
Provision to this effect must be included in a CIC’s Articles. CICs are also able to adopt asset lock rules that impose more stringent requirements, provided they also include these basic provisions.
We will ignore bullet points 2 and 3 as these are not relevant for the questions that are being raised by some members and focus on point 4 and point 1
Point 4. The Community is not the same as the Club.
The community is the people who have a relationship with the Club. The Club is a Profit earning Public Ltd Company with shareholders all who in theory can receive a dividend or an increase in their share value as the asset and success of the club grows, and importantly it is shareholders who are ultimately responsible for funding the company, either directly or via successful trading and when a shareholder funds directly they expect an increase in their shareholding to occur, unless it is an all round rights issue, I which case they avoid dilution
The Project CIC cannot Gift/donate money for a project direct to the Club for no tangible and legal return as any money passing from the CIC to a profit making body does not satisfy the CIC or company rules in at least two ways.
1. “the company is not established for private gain” The projects CIC handing over money in a way that it retains no value for the asset transferred (e.g the cash)to a company that has shareholders is using Asset locked money of the CIC for the private gain of the shareholders of the Club, as any money into the Club represents a positive entry in either cash or net asset value of the PLC
2. The Community is not the same as the Club. From the RSTs Mems and Arts “
“the business of the Society is to be conducted for the benefit of the community served by the Club and not the profit of its members”
This makes it very clear that the Community and the Club are not the same thing. The Community of Rangers Supports is served by the Club they support.
The Club is a PLC and in principal exists for the benefit of its shareholders not the benefit of the Community, if we were to time machine back to before the Club issued share capital in the 1899 we would I understand find the Club being operated as a Members Club on a One member one vote basis, this is an example of a time when you could perhaps consider the Club and the Community as being broadly the same but not now and certainly not as a PLC
Point 1 Retaining the Value for the Fans
The way in which moneys from the Project CIC could be made available for the Club to spend and still fulfil the asset lock rules and make the asset transfer permissible is by fulfilling bullet point 1.
• It is made for full market value so that the CIC retains the value of the assets transferred
As a perhaps silly example should the CiC decide that it wants to buy goal posts for the stadium, it can do this (subject to a members vote) and the Club/Cic can buy goalposts, but the asset value of the goal posts must then appear as an asset in the accounts of the CIC, if something bigger was desired say money was used to build a stand then after a suitable vote this could be done but the CIC would have the asset and that way the fans bit by bit start to own more than just the shares in the PLC but bricks and mortar of the Club and what better way to protect it for the next 100+ years than that. It also works this way should the CIC decide to loan money to the Club, it either has to be repaid or return as for example shares it cannot simply disappear into the day to day cash flow of the Club
Furthermore the vote for Club 1872 included in reference to the Project CIC the note
“Financial Contribution: Creating a new means for direct investment in the club through specific projects identified by members”
The financial transactions between the CIC and the Club are to be seen as investments not as donations, the above bullet point 1 shows how this investment relationship is envisaged by the asset lock rules
No part of Club 1872 can simply give away money to the Club it must have that money that asset transfer realised as either an asset or investment within Club 1872 itself
It was always the intention within the Rangers First structure that when the relationship between the Fans and the Club fulfilled the words contained in the acronym A.C.T (Authority, Communication, Transparency) e.g that the fans via their shareholding had some legal authority, that there were good and mutual lines of communication open between Club and any engaged Fans and that the workings of the Club were transparent that we should move from a pure share buying scheme to one where as much as 50% of income could be spent on projects, but it was always on the basis that any investment/loan or project fund would be recognised in the CIC accounts at the asset value, for all of the legal and moral reasons noted above
