Facebook post on Club 1872 CIC asset lock rules

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

-------------------------------------------------------------------------------
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.

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

Fanownership and not just owning Shares

Where I show that the aims of Fanownership are not just achieved by the Fans groups buying Shares.

Some people like Cooperative Fanownership of Shares because of the philosophical belief in the common ownership of property and assets.

I am not like that

Personally I think private Enterprise is fine and that if i was to endorse a particular line of thinking then at the moment it would be that "people should be equally given the chance to make themselves as unequal as they like."

To this end it is my opinion that the destination of where you want Fanownership to take you is as important as the organisational setup of collectively buying shares.

This is because as you go along i believe it is possible that what Fans want from a fanownrship model can be seen to be delivered plus greater impact on the Football bit we all care more about if you are flexible and at some point realise that buying more shares is not the answer.

So what do Fans really want when they talk about Fanownership?

There is obviously no straight forward answer, but Fanownership issues normally raise their heads when things are either difficult or during a time of uncertainly  at your Club,  maybe debt issues, or fan relationship issues, or the Club is for sale or about to be quoted.

For this reason pure Fanownership normally raises its head in the form of what you would normally call Shareholder Activism.....a Fan group buying up or bidding for shares or a single group gathering proxies in order to get their voice heard..........mostly though this does not work as at short notice a large enough share block either bought or by proxy can not normally be found.

But what if there was a different way?

If i was to summarise what most Fans tell me they want via however they understand Fanownership for their Club it would be:

 "Consultancy through Transparency"

Fans want to know what is actually going on at their Club and they want to be listened to by their boards, but not just listened to and then ignored but actually get heard and get some action on the issues that they care about.

It is about boards treating Fans as grown ups rather than like being at school hiding your workings from the person next to you with a covered arm and your head down.

It is a recognition that Football Clubs are different, they may be companies with all the rules of Companies, but they are also institutions with a history that will outlast us all, you do not pass onto your kids what Supermarket you shop at but you do hope to pass on what team they support.....


...football is just different....FULL STOP

So here is a different pathway one which gets the Fans the Consultancy through Transparency but also if the board of the Club respond the way they should to the Fans (their customers) allows a change of direction to focus on building the best team the Fans can get.

A proposal.

Fans form a New group, with the single issue of Fanownership, no baggage and everyone forgetting about Yesterday and focused on tomorrow.

If you have been wronged or have done wrong to someone else, let it go your Club is more important than you are.

This New group gather financial Support lets say it gets 10,000 people at £15 per person per month average.

That's £1,800,000 per year

The group is constituted as  CIC so that it is ultimately flexible, e.g it is not only bound to just buy shares the board and membership are empowered to be flexible and adaptable in their approach to achieve the Consultancy through Transparency aim.

The CIC goes about buying shares as this is the ultimate way of getting Consultancy through Transparency, with the first target being 5% which crosses an important line in a PLC.

However the CIC makes it clear to the board that while pure Fanownership floats some folks boat really we all care about the football the most and so if the board were to negotiate in an appropriate way for this Consultancy though Transparency to be effected via the CIC with all its members then the CIC could in fact direct the money raised each month at a Club project that would have the aim of having a better more secure Club.

For example:

This could be a Youth Academy or Scouting initiative.

The funding and contracting of player recruitment

Development in a secure way of a Stadium or Property asset.

Funding of a Safe Standing initiative

frankly imagination is the limit, so long as it fitting into the legal structure and protections that a CIC type approach need then it can be done.

Any excess over the contract to the Club for whatever sort of issue suggested above is adopted could then be used to purchase shares as they become available.

Thus this hybrid achieves Cooperative ownership of Shares long term, while benefiting the team immediately, and getting the fans the Consultancy through Transparency they mostly want.

This is why fanownership should not just be framed in terms of owning shares but in terms of the final destination of what fans seem to want, which is to be Fans but be able to hold the board to account properly and quickly should it be necessary.

The above is achievable at any PLC Club, and has the added advantage for the existing shareholders that this sort of contracted Fan Engagement helps the share price.....


....so everyone is a winner....

but hopefully most of all your team.

GET IT DONE

Update to One Group to Lead them all.

A post where i develop some further ideas from the original post....

Please read original post first, you can find t here: One group post

I have had a few questions from a couple of different Fans who are members of existing groups and some of no group from different Clubs about this.

So please be aware this is not directed at any particular group or any particular Club.

Much though we like to think "our" Club is different from all the rest in my experience the reality is the only real difference between one Club and another revolves around scale.

It is difficult sometimes to see through any agenda that someone might ask you a question with, so i will try and avoid any judgement of anyone or any group so if you feel judged or that I am judging it is not my intention.

At the end of the day Fans love their Clubs and anyone who puts in time as a volunteer to coordinate a sensible Group be it a Supporters Bus, an overseas Supporters Club a Supporters Trust, or any other of the myriad types of group we create around our Clubs should be applauded.

It can be a truly thankless task, and those that have stuck at it should all get medals IMHO.

However that is not to say that the good reason why something was set up cannot over time drift and become factious and difficult and even alienating or divisive to other Fans who are members of no groups or Fans who are members of other groups.

Please note most Fans are members of no Group at all other than just being Fans of the team they support, this is important because we often end up forgetting just what a minority of Fans it is that are group members, or regular users of Fans Forums and Social media. the bulk of all of the supporters in Scottish Football are a very silent majority

(N.B I use the term member from the point of view of the person concerned. The reality is most Groups of Fans cannot actually use the term in its Legal meaning as they have no Memorandums and Articles of Association that define the term membership. But frankly if someone thinks of themselves as a member of a group be it a bus or an Internet forum or a Fan based Sunday Football team then that is good enough for me in this article)

So with all that said can I suggest some fundamental questions, to draw us to a conclusion.

Do you care about Fanownership of your Club?

Do you agree that Fanownership is much more easily if as many people as possible participate?

Do you therefore agree that any impediment that would stop people participating (rightly or wrongly) in the greater interests of achieving Fanwonerhsip should be removed?

Do you agree that in the interests of your Club should be paramount rather than the interest of individuals or groups?

Do you have any Fans Groups who again rightly or wrongly create division within your fan base?

Frankly if you answer Yes to the above then i refer you back to the previous blog entry noted at the start of this post and suggest that for Fanownership to truly stand the best chance and engage equally with as many people as possible then the best chance of doing this is the creating of a Single issue new group to make it happen.

I will write another post on the technicalities of doing this so that all are treated as equally as possible.

So to summarize give folk no reason not to participate other than that they don't believe that the Fans Controlling the Governance of the Club are best placed to ensure its future.

If they don't believe in themselves then at least you do.

@rchrdtknsn

Frankly if this does not get the Fanownership juices flowing nothing will......

A simple statement from an enlarged institutional Investor.

From Gersnet

River & Mercantile have sent me the following statement in response to the questions.

“I have bought shares in Rangers as it is a valuable football franchise, that is materially underpriced by the stockmarket. I intend to be a long term shareholder, supportive of Management and Corporate Governance that restores value for all stakeholders.”

I have indicated my disappointment that they have not answered any of the specific questions and said that I will let them know how folks on here respond.


I refer everyone to basically ever post i have made in the last 10 days!

Where to start.......


.....i think i will leave it for now

Do some more Math. Fanownership makes money

A simple post.

If you don't believe that Fans can control clubs and have them run successfully by professional people, and that those leagues the club's are members of can also be profitable , successful and fan orientated then ladies and gentlemen I give you

The German Model

Can you imagine a Scottish SPFL dominated by a Fan oriented agenda.....ticket prices....kick off times....just think for a moment.

What is a High Net Individual (HNWI) in relation to a Fans COOP CIC?

A Post where i show you do not need to drive a Bentley to massively help the cause of Fanownership

We often think of HNWI as being really money bags, Bentley driving, private jet taking people.

However when it comes to enabling people to invest in a CIC the barrier is somewhat different.

 

Put simply a CIC can raise money by membership fees e.g you £18.72 per month or by debt.

Borrowing money in order to pay it back using the membership fees coming in monthly.

This money can be borrowed on virtually any terms.

As an example when Portsmouth fans bought their club recently they also had a borrowing scheme for HNWI who could nominate a rate of interest on the debt to there equivalent of a CIC.

IIRC the maximum interest rate was 8% however the average rate at which HNWI fans were prepared to lend the money to the fans group was 2%.

A great example of Fans helping Fans for all to get what they are after. ..the salvation of their Club.

Under the rules that broadly exist for this sort of thing a HNWI does what you call self certification....basically a declaration that you can afford to loan the money.

You can read the specific definitions here

Qualifications for self certification of HMWI status

But summarised you need to either be earing more than 100 per year of have Assets of more than 250k excluding your house.

Any fan in this category is able to act as a HNWI and could make a loan to any CIC of any reasonable amount.

So if the great big HNWI are not stepping up how about just 20 folk loaning 50k each backed by 40000 fans paying in monthly.

You could own 5% of the club with all the rights of holding the board to account by the end of the week.

@rchrdtknsn

Definition of Fanownership

A post where i unpack a little of what I mean by Fanownership

One of the main IMHO knee jerk reactions to any Fanownership proposal is....

"the Fans cant run anything"

"the Fans disagree on everything"

"Fanownership would end up with the Club being run like a Bowling Club"

"we are so divided how will we ever agree on running the Club"

I see the word Fanownership more as a short hand for.....

Community Ownership and Fan Governance....you can see why a short hand is needed.

Community Ownership is more about just getting the fan that goes every week to engage in the Purchasing CIC, it is about engaging anyone or any organisation with a link to Rangers Football to positively engage in the Clubs ownership and Future.

Fan Governance should be seen as being more about oversight of a properly appointed Board of the Football club rather than Fans with no particular experience getting involved in any day to day running.

Most Fans are frankly not that interested in what happens day to day in a football Club but do want to make sure that they can properly and if necessary forcibly hold the board to account for its decisions and spending and introduce transparency that prevents folk running the Club for their won benefit.

I think all Clubs and certainly all Fans of all clubs would benefit from a bit more transparency in our Great game and in our great Clubs

So when i say Fanownership think Community Ownership and Fan Governance