The former directors of Leeds United, including FTSE 100 hotels boss Richard North and Royal Mail chairman Allan Leighton, could be facing censure and possible disqualification if the football club succumbs to administration.
The club, which has debts of £81m, failed to secure an extension to a standstill agreement with bondholders on Friday and its shares were suspended from the London Stock Exchange. The failure to roll over the agreement took many by surprise and it is now understood that administration is imminent.
Should this happen, the club - currently at the bottom of the Premier League and facing relegation - will continue trading. But under the Company Directors Disqualification Act, the administrators will have to file reports with the Department of Trade and Industry on the actions of the club's directors.
Administrators file either "clean" reports, stating that the director was not involved in any wrongdoing, or "adverse" ones. These can cover a range of areas, from failing to file accounts on time and not paying Crown creditors, to negligence and fraud. The DTI has the power to disqualify directors and can pursue the matter through the courts if necessary.
Those in the spotlight, should the club go into administration, will include Mr Leighton, who is also deputy chairman of Selfridges, and Mr North, chief executive of InterContinental Hotels. Both men served on the audit and remuneration committees. Mr North left over a year ago while Mr Leighton, who has made several attempts to save the club, stepped down at the end of 2003.
Also under scrutiny would be executive directors David Spencer and Stephen Harrison, who along with chairman Peter Ridsdale are understood to have received £1m in severance payments.
Mr Ridsdale is likely to come in for the most criticism. He is widely blamed for most of Leeds' complicated debt deals, such as the 25-year "lease" on the stadium.
It is understood the board has taken legal advice over its actions and is confident it will escape censure should the club go into administration
Leeds has been looking for a buyer for several months but so far no offer has been tabled. Last week a consortium led by former Huddersfield Town chairman Terry Fisher pulled out. Another consortium, led by ex-Bradford City boss Geoffrey Richmond, is still in talks, but is not believed to have enough money to mount a full rescue. Mr Richmond is believed to have approached the Fisher consortium for assistance last week.
Constructing a deal is complex. As well as having to negotiate with several parties, there is also a risk Leeds will be relegated at the end of the season and lose revenues of around £20m as a result.
In a statement, Leeds said that while it had failed to secure a formal renewal of the standstill agreement, it continued to "retain the support" of its major finance creditors.Reuse content