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Page last updated at 17:57 GMT, Wednesday, 6 October 2010 18:57 UK

Liverpool owner's legal challenge 'likely to fail'


Full interview with Liverpool chairman Martin Broughton

By Nabil Hassan

Tom Hicks and George Gillett's legal bid to thwart the takeover of Liverpool is likely to end in failure, according to a leading insolvency expert.

Hicks and Gillett argue Liverpool's directors have dramatically undervalued the club by agreeing a £300m sale to New England Sports Ventures.

But Liverpool chairman Martin Broughton says that he has the final say when it comes to the sale of the club.

And Guy Thomas of SA Law told BBC Sport that Broughton has the upper hand.

Hicks and Gillett tried to sack managing director Christian Purslow and commercial director Ian Ayre in a last-ditch bid to keep control of the club on Tuesday night, looking to replace them with with Hicks's son, Mack Hicks, and Lori Kay McCutcheon, a vice president at Hicks Holdings.

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And Purslow, Ayre and Broughton are now consulting lawyers over whether they can resist Hicks and Gillett's attempts to replace them and force through a sale to the owners of the Boston Red Sox.

Broughton claimed the American owners were going back on pledges made when major creditor Royal Bank of Scotland extended their finance arrangement until next week, with changes implemented to remove Hicks and Gillett's power to veto a sale.

"When I took the role they gave a couple of written undertakings to Royal Bank of Scotland - that I was the only person entitled to change the board and that they would take no action to frustrate any reasonable sale," Broughton said.

"I think they flagrantly abused both of those written undertakings. I have the casting vote."

It is because of this that Thomas, Head of Insolvency at SA Law LLP, believes that the power rests with Broughton, Purslow and Ayre.

"It depends on the strength of that drafting but I'm imagining it was very, very carefully worded," stated Thomas.

What Liverpool fans think of takeover

"If the wording isn't strong enough then the default position is that you've got to go and get permission from the shareholders that says, yes you can sell this business.

"Now if Broughton found a way when he was appointed to overcome that and the drafting of his agreement with them gives them that power then the owners have a real problem in being able to block the sale because they have already in effect, if the chairman has things lined up properly, given him permission in place before he was appointed."

Thomas added: "Broughton says he had got Hicks and Gillett to agree to changes in the Kop's constitution before he took the role.

"Broughton wanted [and says he got] the ability to deliver a sale if it was a reasonable deal.

"The first part of this was the ability of the board to sell the club and the second was his ability as chairman of the board to control the board's membership. Broughton says this was backed up with the owners' undertakings not to frustrate a reasonable transaction."

Liverpool's three directors could though be forced to take Hicks and Gillett to court to force the sale through, something Broughton is confident will result in victory.

It [the sale] has got to go ahead because the consequence of it not happening is administration

Guy Thomas - SA Law LLP

Thomas explained: "In essence, any application to the Court would be to authorise the sale of the club.

"Put another way the board is saying that not only did they try to authorise a "reasonable deal" - i.e. what they were authorised by the owners to do, but that now, those same owners are now trying to kill it."

The looming threat of administration, however unpalatable for most fans, also strengthens the directors' hand in Thomas' opinion

It is likely that if Liverpool is not sold before the 15 October deadline that RBS has set to pay back the £240m of loans and £40m of fees owed to them, the Reds could be placed in administration and Hicks and Gillett would lose control of the club.

"In simple terms, unless the owners and the directors come to an agreement or it is resolved that quickly over the next few days then the bank will make the decision for them," added Thomas.

"The sale has got to go ahead because without more funding the consequence of it not happening is administration."

Ultimately, Thomas believes that time is running out for Liverpool's owners.

"The board had a number of bids in front of them, they appear to have considered them carefully and chosen a preferred bid," he said.

"Broughton says he effectively obtained "pre approval" of a "reasonable transaction" before he took the job. He also says he obtained the power to hire and fire the board.

"This is what appears to have saved him and the commercial director last night. These "undertakings" as Broughton refers to them are also the basis for any application to the Court to enforce if Hicks and Gillett don't back down.

"There is another option: before the 15th, citing the impasse with shareholders and the cost of such an application to the court, the board could also consider inviting RBS to appoint an administrator or seek to appoint one themselves."

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see also
Liverpool 'to shed debts' in deal
06 Oct 10 |  Liverpool
Red Sox owners to buy Liverpool
06 Oct 10 |  Liverpool
Liverpool owners dismay chairman
06 Oct 10 |  Business
When baseball meets football
15 Oct 10 |  Liverpool
Liverpool board split over bids
06 Oct 10 |  Liverpool
Liverpool chief calms money fears
22 Sep 10 |  Liverpool
Hicks to target Liverpool buyout
17 Sep 10 |  Liverpool
Benitez slams Liverpool hierarchy
21 Sep 10 |  Europe
US pair agree Liverpool takeover
06 Feb 07 |  Liverpool

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