Portsmouth’s future appears even more uncertain after authorities challenged the appointment of the administrator running the English Premier League club during its legal protection from creditors.
The British government’s revenue and customs authority is chasing the indebted club for unpaid taxes and has questioned the validity of Andrew Andronikou’s appointment last week.
A High Court judge ruled on Tuesday that Portsmouth has to prove that Portpin, which is owned by club owner Balram Chainrai, was entitled to hire Andronikou.
Judge Alastair Norris said Portsmouth must provide evidence of every transaction with Chainrai and Portpin.
The case was adjourned until the week commencing March 15 to let the club prepare a response to allegations by the lawyer representing revenue and customs that the club’s finances are insufficiently transparent.
“There are serious questions that arise and require full investigation as to what financial dealings there have been between the various different owners of the club and between the club and its owners,” Gregory Mitchell said. “At the moment, everything is shrouded in mystery.
“The question we ask, and supporters and members of the public ask, is: ‘How is it possible that this once-great club has become insolvent with liabilities exceeding assets by a figure of £65 million [US$98 million]?’” he asked.
Andronikou insisted to Sky Sports News that the issues could be resolved by “exchanging documents and it’s unfortunate we’ve had to do it in this forum.”
Portsmouth last week became the first club in the 18-year history of the Premier League to seek the bankruptcy protection known as administration.
The protection seemed to have thwarted revenue and customs’ application to have the club liquidated in its attempt to recoup about £12 million in unpaid tax.
But the matter returned to court on Tuesday, with revenue and customs questioning several aspects of the case.
“It is beyond highly unusual for a creditor to challenge the appointment of an administrator,” Danny Davis, restructuring expert at law firm Mishcon de Reya, said. “It is an indication of how upset the revenue is at how it has been treated.”
Portsmouth’s debt was estimated at £86 million in the High Court, £8 million higher than Andronikou has suggested.
The remainder of the playing squad is valued at £21 million, £17 million below the figure given last week by chief executive Peter Storrie.
Davis said the club, which was in debt even after selling almost a full squad of players for transfer fees totaling £100 million, had used what was known as “involuntary finance” to stay in business.
After overspending on wages and transfer fees, it effectively borrowed from the government by failing to pay tax.
“Football people need to get an understanding of the recessionary climate we are in,” Davis said.
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