There is more pressure than ever on them to behave appropriately. Directors of limited corporations are responsible for a variety of tasks, the main one being to protect the interests of the owners, or members, by ensuring the company’s success. But stilladditional duties apply also. Under the Companies Act 2006 those duties include to exercise independent judgement, to exercise reasonable care, skill and diligence and to avoid conflicts of interest.
The directors of Everton Football Club Company Limited are Farhad Moshiri, Colin Chong, and John Spellman. The requirements of the Companies Act 2006, however, cannot be viewed in a vacuum. The fiduciary or equitable duties resulting from prior case law, as well as the duties within other Acts, such as the Insolvency Act 1986, remain relevant. The Act includes, among other duties, the question of what to do in the event of insolvency or a reasonable prospect of insolvency. Insolvency arises whenbalance sheet insolvency. An insolvency event can occur suddenly (for example when a major debtor can no longer pay its bills, or funders/lenders/banks decide to cease supporting a company) or more gradually over time as a company’s financial position deteriorates to the point it can no longer meet its obligations.
Directors have a duty to act at this point or beforehand, if there’s there’s no reasonable prospect of meeting current and future obligations. Their duties turn to protecting the interests of their creditors (i.e. the people they owe money to).
Going Concern?
The question for the Everton board of directors is when do they recognise the latter point in particular? It is not enough to point at the last set of audited accounts and point to the “going concern basis”.
The Everton Accounts ending 30 June 2023 were signed off on 14 January 2024 when directors firstly recognised “a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern”. This was qualified with “the board are confident that funding will be secured or refinanced and that they will be able to achieve the levels of revenue and savings to allow the Group to continue in operational existence for a period of 12 months…” It is this belief that permitted the preparation of the Accounts on a going concern basis”.
The question for the board and individual directors to answer is this still the case?
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