THE unclear wording of the Scottish Premier League’s rule book combined with Hearts’ unique ownership structure leaves the Edinburgh club’s long-term future open to interpretation. Specifically, the SPL’s interpretation.
Ukio Bankas Investment Group, Hearts’ parent company, declared themselves insolvent on Thursday in Lithuania. Vladimir Romanov’s companies are slowly crumbling and the man himself claims he has lost everything.
It may take several weeks for courts to officially announce UBIG’s bankruptcy, but the SPL must decide whether to take action against the Edinburgh club for “suffering an insolvency event”.
The matter will be examined at an SPL board meeting on Monday. UBIG have 30 days from last Thursday to apply to Lithuanian courts for bankruptcy and for the matter to be reviewed. Then they can be officially declared bankrupt and an administrator appointed. The SPL may decide to wait for that process to be completed. Then again, they may decide to act quickly.
The hard part for Neil Doncaster and his colleagues is League rules do not account for the fact Hearts are owned by UBIG (79 per cent shareholding) but no longer funded by them. Wording of SPL rule A6.12, relating to insovency at clubs, states that the SPL board must protect the integrity and reputation of the league. In the event of any sanctions thrown at them, officials at Tynecastle will question whether a company going bust in Lithuania damages the reputation of Scottish football.
Rules were amended following Rangers’ liquidation last year in order to make the consequences clear for any SPL club suffering insolvency. Yet the implications for Hearts are anything but clear at the moment.
Rule A6.12 states:
“For the purposes of Rules A6.8 to A6.10 (inclusive) all references to a Club taking, suffering or being subject to an Insolvency Event and/or an Insolvency Process as well as including the owner and operator of a Club taking, suffering or being subject to an Insolvency Event and/or an Insolvency Process shall, if the Board so determines having regard to (i) the need to protect the integrity and continuity of the League; (ii) the reputation of the League; and (iii) the relationship between such owner and operator and the Group Undertaking concerned, also include any Group Undertaking of such an owner and operator taking, suffering or being subject to an Insolvency Event and/or an Insolvency Process.”
Not exactly what most would call plain English, something Hearts’ Edinburgh-based lawyers would seek to exploit if necessary.
The club could be deducted 17 points and immediately relegated based on last year’s points total if the SPL decide Thursday’s events in Lithuania constitute an insolvency at Hearts. That decision could even be taken retrospectively with the same punishment applied.
Should they wait until UBIG are formally declared bankrupt, Hearts could then start next season with a negative points total as the insolvency will have taken place during the close season.
If Gary Locke and his players win at Pittodrie today and their club are penalised over the summer, a 16-point deduction would be applied for the start of next season. Losing against Aberdeen would reduce that total by a point.
What the SPL must avoid where possible is allowing this situation to rumble on like the Rangers saga of last summer. Another “Club 12” fiasco would do further damage to a league in an already critical condition due to financial problems.
The absolute worst-case scenario for Hearts would involve two separate sanctions.
They may, again depending on SPL interpretation, be punished for UBIG’s collapse and then fall into administration themselves at a later date – either due to UBIG’s fate or the knock-on effect of Ukio Bankas’ collapse under £300 million of debt. Hearts owe UBIG £10m and Ukio £15m.
That scenario could potentially trigger two points penalties, according to SPL rule A6.10:
“In the event that a Club shall take, suffer or be subject to more than one Insolvency Event during any one Season and the immediately preceding Close Season, which, in the opinion of the Board, are not part of the same Insolvency Process, then that Club shall be deducted the requisite number of points determined in accordance with Rule A6.8 in respect of each separate such Insolvency Event.”
Ironically, Hearts’ own finances are slowly improving following the near-fatal tax bills which threatened the club’s existence towards the end of last year.
All players were paid in full as scheduled on Thursday and there are no outstanding salaries at present. Debt stands at a combined £25m, though, and although interest payments are being met as per finance agreements, there is little chance of that total being reduced in the near future.
Other SPL clubs will be monitoring this situation closely, none more so than Dundee. John Brown and his players would stay in the SPL if Hearts end up relegated as a result of developments in central Europe.
Others have made it clear privately that they would have little sympathy for the Edinburgh club were the worst to happen. Ironically, one of the clubs who may wish for Hearts to remain an SPL team is their Capital rivals Hibs.
They would lose around £250,000 in gate money and possible TV revenue if there were no Edinburgh derbies at Easter Road next season. Ultimately, it will be the SPL’s call. Romanov and his cohorts have let Hearts supporters down with their financial mis-management over the years. Will anyone take responsibility should the worst come to the worst?