Highlights:
- Court has decided that Mr Power has agreed to sell all of his shares in Swinton (and therefore STFC) to Axis
- The judge has decided that Axis is entitled to purchase these shares.
- Court has not today ordered Mr Power to transfer the shares, that will have to be dealt with in a future hearing if Mr Power doesn’t voluntarily transfer the shares
- TrustSTFC urge Mr Power to transfer the shares immediately and handover control of the club to Axis
- With Mr Power purchasing the debentures and owning these it was highlighted that Mr Power is charging the club interest on the debentures he has bought personally, The interest alone would account to the club paying £170k per year
- The Judge today did not order an immediate sale of Powers shares to Clem Morfuni/Axis, instead he has asked for more evidence to be provided by Mr Power relating to him being able to fund the club until Sept and the full court case. Evidence on this has to be submitted a week Friday (June 25th) with a follow up hearing then probably within a further week. This will allow Axis to request transfer of the club shares again. It should be noted this is completely separate to the pre-emption process
- The overall outcome therefore means overall that Axis should now get Lee Power shares to be in a position to own STFC but the key question and unknown is when this will be at this moment in time. We will provide follow up scenarios to the likely outcomes in a follow up article.
What happened at Court on 15.06.21?
TrustSTFC members attended the Court hearing on 15.06.21. This is a summary of what happened. TrustSTFC does not have copies of the evidence filed at Court, so this is based on listening to the oral arguments only.
The key outcome is that the Court decided that Power has agreed to transfer all of his shares in STFC to Axis, and Axis is entitled to become the owner of STFC. The Court has not yet ordered Power to transfer the shares. That will be considered at a future hearing. TrustSTFC urges Power to transfer the shares immediately and give Axis control of the club.
Sorry, this is complicated stuff.
First, a recap on the relevant entities. On paper at least, STFC is owned and controlled by Lee Power. He has an 85% interest in the club. However, Michael Standing claims he actually owns 50% of Lee Power’s shares. That question will be decided at a trial in September. Axis owns 15% of STFC and wants to become the 100% owner. Standing will not stand in the way of a sale of STFC to Axis. Power wants to sell to Able (for reasons that are unclear).
The new legal case: is Axis now entitled to own STFC?
The key dispute between Axis and Power is about “pre-emption rights”. TrustSTFC has previously published a note explaining what they are and why they are relevant to Swindon Town: .
In summary, a company called Swinton Reds 20 Limited (“Swinton”) ultimately owns and controls STFC. As things stand, Power owns 85% of Swinton, and Axis owns 15%.
There is a pre-agreed mechanism for shareholders in Swinton to sell their shares. Before selling to a third party, they must first offer them for sale to existing shareholders. This means before selling his shares in Swinton to his preferred purchaser (Able) Power must offer them to Axis. That process starts with Power issuing a document called a Transfer Notice to Swinton.
On 17 May 2021, Power issued a Transfer Notice to Swinton, stating that he intended to sell all of his shares in Swinton to Able for £250,000. That meant Swinton should have offered all of those shares to Axis.
Instead, Swinton (under Power’s control) issued a notice to Axis saying it was entitled to only 13 out of the 85 shares Power was selling, and the rest would be sold to Able. If that had happened, Able would own and control STFC and Axis would remain as a minority shareholder only.
Axis says Power is wrong and Swinton must offer it all of the shares he intends to sell to Able. Axis therefore formally replied to the Transfer Notice confirming that it will buy all of Power’s shares in Swinton at the price stated in the Transfer Notice.
Power says he made a mistake and has tried to revoke the Transfer Notice. Axis says it is too late as it has agreed to buy his shares, there is nothing left to revoke, and Power must transfer his shares to Axis now.
In any event, only the directors of Swinton can revoke the notice. The directors are Power, Steve Anderson and Clem Morfuni. Power arranged a board meeting on 11 June to decide whether the Transfer Notice should be revoked. It appears that the directors voted 2-1 to revoke the Transfer Notice
Axis says Power has a conflict of interest and wasn’t entitled to vote anyway so the real score is 1-1 and the notice hasn’t been revoked (but it doesn’t matter as it is too late anyway).
Axis therefore issued a new legal claim asserting that Power is now legally required to transfer all of his shares to it. At today’s hearing, Axis asked the Court to decide this claim in its favour and require Power to transfer all of its shares to Axis.
The Judge decided that Axis is right, and that Axis is entitled to all of Power’s shares in Swinton. Once those shares are transferred, Axis will own and control STFC.
Power is entitled to appeal, which would prolong the uncertainty.
Various other key issues were considered at today’s hearing.
Can Power sell STFC other than through a sale of shares in Swinton?
This is another key dispute (but is relevant only if Power isn’t required to sell his shares to Axis under the transfer notice he gave to Swinton).
Axis says that the only way that Power is ever allowed to sell STFC is through a sale of shares in Swinton. If Axis is right, Power can only ever sell through the pre-emption mechanism. That means Power would always have first to offer his shares to Axis, and Axis could either accept the price offered or buy the shares at a fair price assessed by an accountant.
Axis asked the Judge for “summary judgment” on this issue, i.e. it has asked the Judge to decide on the basis that this issue is so clear it doesn’t need to wait until trial in September.
The Judge decided that Axis is right. Again, Power is entitled to seek to appeal that decision.
Should the Court order Power to transfer his shares to Axis now?
Separately from the pre-emption dispute, Axis also asked the Court to transfer Power’s shares in Swinton to Axis now, to safeguard the club. This application was originally made when Power said the club was hopelessly insolvent. Axis argued that the only way to safeguard the club (formally, to preserve any value in the shares in the club) was for Axis to take over immediately before all of the disputes were resolved. It promises to pay all legitimate creditors.
The Judge heard the arguments of both side but decided that it did not have sufficient information on the financial position of the club to justify requiring the shares to be transferred on this basis today. The hearing of this application was adjourned to a later date. Power is required to provide evidence of the financial position of the club and how it is to be funded by 25 June 2021.
TrustSTFC strongly encourage Mr Power to now sell his shares to Clem Morfuni and Axis and allow the sale of the club to be completed and allow the football club to move forward.