Portsmouth Football Club have won a court battle against HM Revenue & Customs (HMRC) to avoid liquidation. HMRC had appealed to the High Court to block a proposed company voluntary agreement (CVA) agreed by the club's creditors in June to take Pompey out of administration.
HMRC claimed that the CVA was "unfair and seriously flawed". Apparently it gives preference to football creditors, including players, who can claim up to 100% of monies owed them, while other creditors, including HMRC, will receive much less.
HMRC barrister Gregory Mitchell said that under this so-called 'football creditors rule': "One class scoops the pool and the rest are left out in the cold."
Despite the apparent unfairness of the arrangement, High Court Justice Mann said there was no alternative: "There is no way in which any worthwhile solvency can flow into the club other than the CVA."
Pompey chief executive David Lampitt expressed his delight at the ruling: "We're delighted and relieved at the outcome announced today in the High Court.
"It's obviously a massive step forward in the process towards getting this great club back on its feet.
"I would like to give my personal thanks to all those who have supported us through this difficult period, in particular our fans, commercial partners and Portsmouth City Council.
"The result is a huge relief to the staff here whose loyalty has been unswerving and whose hard work has held the club together."
HMRC also argued the administrators' valuation of the club's debt was £13 million short. Justice Mann disagreed, however.
In a triple whammy for the Revenue, the judge also order HMRC pay Pompey's costs in the case, valued at £200,000.
HMRC said in a statement: "HMRC is naturally disappointed not to have won this appeal and we can confirm that we do not intend to appeal.
"Our aim when pursuing debt of any kind is to achieve a fair outcome for the taxpayer and we will take this forward in the wider context of the football industry through separate and outstanding legal proceedings over the status of the so-called football creditors rule."
- Portsmouth look to the future after first win of the season - over the taxman (Guardian)
- Portsmouth Football Club Statement - 5th August 2010
- Portsmouth Football Club Enter Administration (The Solicitor)
- Insolvency law news (The Solicitor)
- Tax law news (The Solicitor)
- Corporate insolvency (Findlaw.co.uk)
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