Portsmouth a target for HMRC?

2 March 2010

Having been appointed by the High Court last Friday Andrew Andronikou of Hacker Young, has to go back today and prove that the qualifying floating charge held by Balram Chainrai or his associates was valid and therefore he was able to take the appointment.

We believe that HMRC Enforecment will challenge the legality of Chainrai’s claim to control the club, which was secured under the terms of a mortgage agreed by the previous owner Ali al-Faraj.

According to our search of Companies House, we note that the company had a winding up petition issued by HMRC and 16 County Court Judgments from trade creditors totalling c£100,000. Clearly, the company was insolvent pre the Administration. So the ability to appoint was not in doubt on that score.

Checking we see that a debenture with a fixed and floating charge was registered by Portpin Ltd on 7th January 2010. That company is not (that I can see) a UK registered entity so we cannot check whether Chainrai is a director or shareholder of that company. This is probably why HMRC are going to Court today to get copies of the debenture and make sure it is valid.

Note: behind that Portpin debenture is another legal charge on deposits held at Coutts Bank.

HMRC’s move is to check the validity of charges that has ensured that he is at the head of the queue of creditors owed a total of £80 million. As a floating charge holder Portpin is more likely to receive a dividend from the administrator (once the assets are sold off or a CVA is proposed) than tax and trade creditors who may receive nothing at all.

HMRC are now known to have football clubs in their sights and will seek to have the original administration overturned. It is possible, if the charge is NOT valid, that the winding up order will be made. But the word from the Administrator is, its just process.

ONE thing for sure, once appointed the administrator will have to check whether the directors have been involved in wrongful trading. With 16 CCJs and a winding up petition, coupled with regular stories in the press about failure to pay salaries on time, it is clear that the company failed the insolvency cashflow test for a considerable time!