Ok, well, as you've asked nicely and your post has been liked by 8 people...
And with apologies to anyone who knows this already, as I said before, this is really not intended to be patronising or condescending, and it doesn't really matter what SHOULD be the situation, this actually IS the situation. Legally.
It really will help I think if there is more understanding of what is and isn't Ron's debt, and the difference between individuals and limited companies.
What is Ron's debt?
Probably nothing. Unless there are any personal guarantees he's given, I would imagine the vast majority of debt is either secured by land or owed to Ron himself, as he is the largest creditor. This means that most of the money owed by the club is owed to him. If he wants to, he can put the club into administration, the administrators (chosen by Ron) will sell the club and all the monies received will be divided out pro rata between the creditors (after payment of football related debts which I think have to be settled in full.
What about Southend United Ltd?
This is the club that facing the winding up petition and, as I understand it, holds the membership of the NL and all the players registrations. It receives all the income (TV money, prize money, sponsorship, ticket sales etc.) and also has to pay all the expenses (rent, rates, utilities, wages, taxes, legal and accountants fees etc.). The assets and income of the company must always equal or exceed the liabilities and expenses otherwise the company is insolvent. That's not allowed and the company is not allowed to trade if that happens.
Because it is a limited company, all liability is limited. That means that if the company dies, the shareholders don't die with it. I'll give an example.
If someone is, say, a freelancer, they probably don't carry any stock and don't need separate premises to work from as they are essentially selling their time and expertise. They can work from home or on the premises of the clients they freelance for. Most freelancers will be sole traders. This means that they are personally responsible for all tax on monies earned through their freelance work. If they make a mistake in their work that isn't covered by either their own insurance or their client's insurance, they can be personally sued and they could lose absolutely everything, house, car, the lot. However, the risks of that happening to a freelancer are quite low and setting up a company is a bit of a faff, it's harder in theory to get money out as it can only be done via PAYE or dividends, all of which are taxed at source, which makes it far less attractive and much more admin-heavy.
Once a business carries stock or owns premises etc. it is probably more advisable for the to be a limited company. This means if anything goes wrong, the company takes the hit and the director/shareholder is protected. They can't be personally pursued for any company debts and they are free to start something else.
That doesn't sound very fair!
Well, I can see why that may be perceived to be the case, but if it wasn't then no-one would ever start anything up because it would be too risky. Plus there would be no businesses that would be able to employ people as no-one would set anything up in the first place, knowing that one day they would potentially lose everything by being made personally liable for any debts.
So when people say "Ron should pay the wages" they aren't his to pay; it's the club's responsibility. And if the club has no money (or a bank account is frozen) then they literally can't pay them. And if by paying them they would potentially be trading insolvently, the such action could be the death knell of the club.
This is why the issue of the season tickets was so important, as it is the only income the club gets in the summer. It could well be that paying the wages for everyone in full meant the club was trading insolvently, which means no more club.
So why doesn't Ron put more in?
He put over £2m in at the end of Feb. I expect this was calculated to see the club through to the summer but fell short, possibly because there were fewer season ticket sales than anticipated. There will be a limit as to how much of his own personal wealth or family assets he will be prepared to risk losing. I don't expect, when he started all this, he thought we would still be at this point 25 years on.
Why don't the other directors put money in?
It depends whether or not they are shareholders. If they are just directors, they have no obligation to do anything at all as they are not financially interested in the club unless they choose to lend it money. That money is then held in a Director's Loan account and can be withdrawn, tax free, at any time (as long as the money is there to do so). Even as shareholders, there is no obligation to do anything unless the company asks them to (note - the company; not Ron) and even then I'm not 100% sure they are bound to do it. Some of the directors will have already put money in, of course.
Let me quote a personal - and very simple - example. My mother died a couple of years ago and I inherited her estate. Part of that was a flat and I put this into a company. The reason for doing this was because the flat was was rented out, and I am a 40% taxpayer, so any rent would be subject to 40% tax. It cost me a few grand in stamp duty to put it into the company and the admin fees of setting up and running it, but the upshot is that there is no Capital Gains Tax (28%), if the company sells the flat the tax is Corporation Tax that is payable (24%) and any income (less expenses) is also taxed at 24%>
Meanwhile, I have "sold" the flat to the company and the amount of the sale sits in my loan account. So I can take that out, tax free, at any time (obviously I can't as the flat would have to be sold to do it, but you get the point). But it does mean that if I want to draw some money, I can take it from the rent, as opposed to registering for PAYE and drawing a salary (taxed at source at 40%) or taking a dividend (can't remember the tax rate on this).
If I hadn't done this, I would have a flat that I could personally sell, but which was generating income payable at a much higher tax rate, plus there would be higher taxes to pay on sale.
This is a really simple example as I say - but extrapolate that up to the SUFC model and Ron's myriad of companies.
There will be company after company that will have been involved to generate the money used to keep SUFC solvent, probably through a series of loans via Ron's directors loan account but those assets must have come from somewhere. Similarly, as he is the landlord of the ground he is perfectly entitled to charge rent (which he is; he's just not collecting it).
When he therefore says that he has lost X million, he probably has; plus the opportunity cost of investing that money in something else. I'll bet he wishes he'd never ever started.
Hope this helps... I also hope this is all done soon and we still have a club to support on Wednesday.
So don't think that new owners Kimura (or whoever) are going to be doing this for the love of the club or the love of football; they have investors who will want a return.
