Wycombe Wanderers Football Club PLC has
recently published annual accounts for the year ending 30th June
2006.
The PLC's Annual General Meeting was to be held on Thursday, 7th
December 2006 but due to errors in resolution 4, the AGM has been
postponed - see link to this notice below.
As a service to members, scanned copies of the following documents
can be found below:
1. The AGM Calling Notice that includes the four resolutions referred
to below (Note: The AGM has been postponed);
2. The Directors Report and Accounts to 30th June 2006; and
3. The minutes of the First AGM of Wycombe Wanderers Football
Club PLC that was held on 1st February 2006.
The Trusts hope to publish a more detailed analysis of the accounts
However, a number of observations can be made immediately:
The accounts make disturbing reading
to shareholders and supporters alike. Two particular highlights
are the large loss for the year and the resultant negative net
value of the Club. The loss for the year is £1,872,681.
This loss comes after the income of £480,016 on the sale
of players (primarily the sale of Nathan Tyson) is taken into
account! The large loss means that the Net Assets of the Club
have been reduced to a NEGATIVE value of -£1,537,821. The
loss for the 11 months to 30/06/05 was £926,040 and the
Net Assets at 30/06/05 were +£106,062.
The losses are clearly unsustainable notwithstanding the fact
that the current directors appear willing to fund the resultant
negative cash flow with ever more loan notes. The debt to loan
notes was £2,958,161 at 30th June 2006 compared with £595,000
at 30th June 2005.
Further, even though it has been possible to fund the losses,
the cost base of the Club appears to be greater than the business
can support. Both this cost base and the negative asset value
of the Club would greatly reduce the ability of the Club to continue
to operate in the event that the ongoing losses were no longer
to be funded by the directors.
It is legitimate for shareholders to ask the directors how they
are planning to stem the losses, turn them into profits and rebuild
the positive asset base of the Club.
As explained above, the AGM has been
postponed.
Shareholders were being asked to approve four resolutions at the
original AGM.
Of these, the Trusts' Boards believe that three are fully appropriate
but are still considering the appropriate course of action on
the fourth.
The ordinary resolutions 1 - 3 would have required a vote over
50% in favour to pass.
The special resolution 4 would have required a vote of over 75%
in favour to pass.
In summary, the Trusts' Boards would have offered the following
advice on voting had the AGM proceeded:
| Resolution | Advice: Vote |
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For |
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For |
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For |
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The AGM was cancelled before the Trusts' views on this resolution had been finalised |
Resolution 2:
To re-elect as a Director Mr. Ivor L. Beeks, who is retiring by
rotation.
Mr. Beeks has made a significant personal investment in the Club
both in the form of shares and loan notes.
Mr. Beeks is a successful businessman, who was a director and
chairman of Wycombe Wanderers prior to the conversion to PLC.
Together with the other directors of the PLC, Mr. Beeks is responsible
for the current situation at the Club, where many changes remain
work-in-progress. It is appropriate that Mr. Beeks continue as
a director to see them through including, at a minimum, ensuring
that the Club is financially viable.
The Trusts' Boards advise shareholders to vote for re-electing
Mr. Beeks as a Director.
Resolution 3: To re-appoint HW, Chartered Accounts as auditors
of the Company following their appointment during the year to
fill a casual vacancy and for their remuneration to be determined
by the Directors.
HW, Chartered Accountants are a reputable firm of accountants.
The Trusts' Boards advise shareholders to vote for re-appointing
HW, Chartered Accountants as auditors.
Resolution 4: To consider and if thought fit pass the following
resolution as a special resolution:
"THAT, notwithstanding the provisions of clause 7.4 of the
Company's Articles of Association, subject to the passing of Resolution
5 above the directors of the Company be and are hereby empowered
pursuant to section 95(1) of the Act until the Company's next
annual general meeting to allot equity securities (within the
meaning of section 94 of the Act) up to a maximum amount of £2,000,000
for cash pursuant to the authority conferred upon the directors
in accordance with section 80 of the said Act by Resolution 1
above, as if section 89(1) of the said Act did not apply to any
such allotment, provided the Company may make any offer or agreement
before the expiry of this authority which would or might require
equity securities to be allotted after this authority had expired
and the directors may allot equity securities in pursuance of
such offer or agreement."
The Supporters Trust and others identified
a number of errors in the wording of Resolution 4. The errors
relate to the reference to other resolutions, which are no longer
relevant, and "the Act", which is the Companies Act
but which is not specified in the wording. The wording of the
special resolution is a legacy of the resolution in early 2006
and is not an appropriate resolution today. These errors render
the resolution null and void. The Board of the PLC have taken
the decision that to avoid all doubt the AGM should be postponed
and rescheduled.
The need to cancel the AGM is regrettable, not least because it
delays a shareholder discussion of the continuing trading losses.
Nevertheless, the Trusts' Boards support the Board of the PLC
in taking this decision, whilst both the need for and wording
of Resolution 4 are reconsidered.
Not withstanding the errors, the intention had been that a special
resolution be passed to dis-apply pre-emption rights - see the
explanation below.
If such a resolution were to be passed then it will give the directors
the power to allocate up to 2,000,000 x £1.00 shares to
new shareholders without first offering them to existing shareholders
or making shares available to supporters in general.
This power would exist until the next AGM of the PLC, i.e. approximately
one year.
The Trusts' Boards believe that it is better that the Club reduces
its reliance on debt financing and are supportive of the principle
of selling additional shares rather than increasing the debt of
the Club.
It is, however, an important cornerstone of corporate governance
that the existing shareholders of an entity should be offered
any shares that are to be issued before they are made available
to others. The right for existing shareholders to be offered shares
first as part of any share issue is known as pre-emption rights.
Since its conversion to a PLC, Wycombe Wanderers Football Club
has had authorised share capital of 4,000,000 x £1.00 shares.
As of 30th June 2006, 1,260,900 x £1.00 shares had been
issued. Hence 2,739,100 x £1.00 shares remain authorised
but not yet issued. These shares can be issued before further
share capital needs to be authorised. The 2,000,000 x £1.00
shares would come from the 2,739,100 x £1.00 shares that
remain authorised but not yet issued.
Clause 7.4 of the PLC's Articles of Association - see the link
below - would appear to dis-apply pre-emption rights because of
the clauses in the Companies Act to which it refers. The Trusts
have been told that the PLC has received professional advice to
the effect that a special resolution such as that being proposed
needs to be passed for the dis-application to be effective. The
Trusts are not in a financial position to incur the costs that
would be associated with investigating this independently and
must accept the statement at face value.
However, it is not necessary to dis-apply pre-emption rights to
offer shares to investors.
If pre-emption rights exist, it remains possible for the directors
to sell additional shares via a so-called rights issue.
In summary, a rights issue involves the directors deciding on
the amount of new capital required by the business and then offering
the required number of authorised but not yet issued shares to
the existing shareholders. If, but only if, the existing shareholders
are unwilling or unable to buy all the shares offered then the
balance of the shares may be offered to new investors. Whether
or not existing shareholders choose to buy more shares is a personal
decision for those shareholders but they should be given the option.
One of the reasons that pre-emption rights exist is that they
serve to protect shareholders against shares being sold to outside
investors too cheaply.
There is no evidence that the intention of the current directors
of Wycombe Wanderers is to sell shares too cheaply to outside
investors. The ordinary shares of Wycombe Wanderers Football Club
PLC have a nominal value of £1.00. Company law prohibits
shares being sold by the directors for less than their nominal
value. Given the negative net asset value of the PLC, the fair
value of the shares may be below £1.00. Hence it may be
reasonable for existing shareholders to approve the sale of shares
to third parties at a price of £1.00 or higher.
Company law in the UK requires that a company issue a prospectus
before it makes a public offering of shares, which is defined
as being to more than 100 people. An offering either to existing
shareholders or to supporters of Wycombe Wanderers would be an
offering to more than 100 people and would qualify as a public
offering. The cost of such a prospectus for Wycombe Wanderers
is estimated as being £40,000 or more. This is a high cost
relative to the level of likely supporter interest that has been
identified to date. For example, in in March 2006, the Trusts
canvassed their members and identified interest amounting to less
that £15,000 worth of shares - see link below.
The reason provided to the Trusts' Boards
for the PLC deviating from the principle of retaining pre-emption
rights is to save the costs associated with preparing the prospectus
to allow sales to a larger group of investors, be they existing
shareholders or supporters generally.
The Directors of Wycombe Wanderers have stated to the Trusts on
a number of occasions that they did not realise that there would
be such limitations to prevent supporters in general from investing
in the Club and that they would like to make shares available
to supporters. The Trusts accept that the directors would like
to allow supporters to invest in the PLC. However, the practical
impact of the special resolution is to allow the directors of
the PLC to issue shares without offering them to supporters as
a whole.
The topic of pre-emption rights may be difficult to understand
for those not familiar with company law and the issuance of shares.
The topic has been studied in some depth by Paul Myners on behalf
of the Department for Trade and Industry (DTI).
A copy of the report that Paul Myners produced can be accessed
via the link below.
Whilst not everything in this report applies to the situation
at Wycombe Wanderers Football Club PLC, Paul Myners concludes
on Page 7 that:
"A shareholder's right to pre-emption is a valuable one.
I agree with all those who see it as a cornerstone of UK company
law and UK capital markets which should not be removed or eroded"
We hope that you find the information above instructive and the
comments and advice both thoughtful and helpful.
If you are not a member of BOTH the Supporters and Founders Trusts
then please join BOTH (subject to eligibility).
This is the best way to stay well informed about this and future
debates at the Club and to ensure that your voice is heard on
matters important to the future of the Club.
Application and eligibility details can be found via the links
below.
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Download
the notice of the 2006 Annual General Meeting Right click on mouse button and select Save Target As ... to download the document |
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Download
the Form of Proxy as an Adobe Acrobat file Right click on mouse button and select Save Target As ... to download the document Note: A Proxy Form was missing from the documents sent out by the PLC. It is to be hoped that a Proxy Form will be included when the AGM is called in the New Year. |
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Download
the Annual Report and Financial Statements as an Adobe Acrobat file ** Beware this is a very large 4.4 MB file ** Right click on mouse button and select Save Target As ... to download the document |
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Download
the minutes of the first AGM on 1st February 2006 as an Adobe Acrobat file Right click on mouse button and select Save Target As ... to download the document |
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PLC Articles of Association |
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DTI Report on Pre-emption Rights |
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Wycombe
Wanderers Football Club PLC postpone AGM Comment from the Trusts |
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