Mike Ashley has been invited to meet the SFA, faced with 2 charges over his involvement with Rangers. The club themselves face a further charge. Here we explore the charges themselves and attempt to raise further questions which will be explored later in a follow up piece. 

The first of those charges is a potential breach of rule 19: “except with the prior written consent of the board no person [who] has any power whatsoever to influence the management or administration or a club, may at the same time either directly or indirectly (a) be a member of another club; or (b) be involved in any capacity whatsoever in the management or administration of another club; or (c) have any power whatsoever to influence the management or administration of another club." 

The second relates to rule 77: “A recognised football body, club, official, Team Official, other member of Team Staff, player, match official or other person under the jurisdiction of the Scottish FA shall, at all times, act in the best interests of Association Football”. 

It is a matter of record that Ashley, or at least his representatives, had consulted with the SFA. It has also been reported that the SFA had written to seek clarification from Ashley as to his intentions. It would further appear that these charges may be the result of a delay in Ashley’s response. At the moment, what the SFA seek to achieve by presenting these charges is a matter for speculation. 

That Ashley has built a stake in Rangers has also been widely reported. His strategy was speculated upon on this site back in September (here). What has become clear is that despite taking no part in the open offer in September, Ashley has found another way to exert leverage over Rangers. This has been in the form of ostensibly unsecured loans of around £3m. 

During his time at Newcastle United, he has made similar loans, repayable on demand. The difference South of Hadrian’s Wall is that he owns the club outright. That gives him the flexibility at Newcastle of maintaining a personal cash flow free of tax, as well as flexibility in dictating terms for a potential sale whilst also reducing the potential for Capital Gains Tax in the event of a sale. 

What the loan arrangement does at Rangers is give him disproportionate power over the solvency of the club. Given the difficulties that Rangers have had in raising funds outside the top flight, form a combined investment of less than £5m, or in Ashley terms, a bad night out at a casino, one of the twin towers of Scottish football is at his whim. Already, former Newcastle Chairman, Derek Llambias has been installed in a prominent position, whilst existing directors have “left”.

In the meantime, it is understood that Ashley has committed to underwriting a rights issue for Rangers shares in January. For the uninitiated, that is to guarantee to buy new shares created which will raise cash to repay debt. This would reportedly take his stake to 29.9%, the maximum allowed under Stock Market regulations without having to launch a full take over. This, however, is above the 25% considered to be a “blocking” stake, giving him a significant element of control.

Ashley then clearly has influence over Rangers, as defined in their rule 19. No doubt, legal argument will include what is meant by the rule itself and how enforceable is it? Certainly, the SFA, the S standing for Scottish, can regulate their own competitions. Ashley’s ownership of another club comes under the jurisdiction of another football association, that of England. It can easily be argued that the SFA’s tentacles can not be extended to an alternative association, where SFA’s power is SFA, the latter S standing for Sweet. 

Both associations are constituent members of both UEFA and FIFA. Of course, many of UEFA’s members are within the European Union, where theoretically free movement of capital is allowed. UEFA have their own regulations as to what will happen in the event of 2 clubs from member associations, owned or influenced by the same individual or entity, face a potential conflict of interests. 

For the time being, there is no direct conflict. Rangers are in the 2nd tier, the only route left to them for UEFA qualification next season being via the Scottish cup competitions. As the Newcastle board have fed back to their own Fans’ Forum, cups are not a priority at Newcastle under Ashley. The chances of both clubs being in a UEFA competition this year are non-existant and for next year are distinctly slim. 

What Ashley can gain from either club is a matter for conjecture and this will be addressed in a follow up piece. 

However, returning to the legal position, there is precedent for owners to be involved with multiple clubs in UEFA associations. Giampaolo Pozzo bought Serie A club, Udinese in 1986. The business model there mirrors what we have seen at Newcastle in recent years, the purchase of players cheaply for resale to ambitious clubs, an example being Alexis Sanchez who featured for Arsenal last weekend. 

Next on Pozzo’s shopping list in 2009 was Spanish club Granada. With the help of several Udinese players on loan, Granada gained successive promotions and now feature in the lower ranks of the Spanish top flight, La Liga. The third club in Pozzo’s empire was Watford, bought in 2012 and currently in the play off positions. 

Rule 19 will therefore be difficult for the SFA to enforce, on the grounds that the SFA have no jurisdiction outside their own competitions, that UEFA have any potential conflict of interests inbuilt into their own rules and furthermore, that Ashley is free to move his capital where he chooses within Europe. 

The defence to rule 77 is more straightforward. Scottish football has had the central focus on 2 clubs, Rangers and Celtic, for generations. The alternative to offering a financial lifeline to Rangers risks the historic club going out of business or at least struggling to finance a return to the top flight for years to come. By facilitating the maintenance of Rangers’ historical presence, surely this is in the interest of Association football, at least in Scotland. 

Of course, the SFA can make a preliminary finding against Ashley. On the further charge against Rangers, they can be excluded from the Scottish FA Cup, devaluing the competition and ensuring that Ashley has no chance of influencing 2 teams in UEFA competitions for another year. 

Any finding can be challenged in a variety of arbiters, be those sport-based or legal. However, there is another element to this. The SFA annual revenue is a little over £30m, their profit around £0.5m. That revenue is around 1% of Ashley’s wealth, the profit a fraction of what Ashley can lose on the turn of a roulette wheel, an even smaller fraction of what he can lose on a Stock Market gamble. The SFA could bankrupt themselves if they take on he big boy, in more way than one. 

It remains to be seen what sort of compromise will be achieved, if any, before 27th January when the hearing is due to take place, indicentally the week after the 4th round of the FA Cup. Whilst the SFA will be hoping for giant killing act of their own, the balance of probabilities suggests that they will be back page news for a fleeting moment. By challenging their 2nd biggest club, they risk a huge own goal.