Bates issues writs against former directors

Bates bought a 50 per cent stake of Leeds in January for around £5m in a complex deal that gave him the option to buy the rest later in the year for a nominal sum. Bates was unable to buy more than 50 per cent in January for technical, legal reasons. Had he done so, his buy-out would have triggered a substantial payment to the club's creditors.

The other 50 per cent remains in the hands of the Yorkshire Consortium Trust, which comprises former directors including the businessman Melvyn Levi and the ex-chairman, Gerald Krasner. As part of the deal that saw Bates installed as the chairman at Elland Road, the YCT members agreed to leave some of their own money (different sources claim between £2.5m and £4m) in the club for up to four years.

For reasons that are not clear, Bates has been unable to exercise his option on the YCT's 50 per cent, and the YCT claim the option has now expired. One source said that Bates wanted to transfer the YCT's half of the club's shares into an offshore holding in the British Virgin Islands, and was unable to provide guarantees that the YCT's cash would ever be returned.

Bates is furious with the YCT and has said their unwillingness to sign their 50 per cent of the club to him is "a disgrace" and that "they are seeking to avoid their obligations on a legal technicality that would not stand up in court. All these people want to do is make a fast buck for themselves." Bates has fallen out with Levi, who has been barred from the club.

The financial dispute essentially boils down to the YCT members wanting repayment - or legally watertight guarantees of repayment - before signing their 50 per cent over to Bates. Bates believes he can wrest control of that 50 per cent through the courts and told The Independent last night: "We've issued writs." YCT sources said no writs had been served by yesterday afternoon.

Bates insists that the row will not disrupt his plans for Leeds, although without 100 per cent ownership, he could struggle to find lenders willing to bankroll the club's development. Bates has never confirmed how much of his money he has invested in Leeds but has made it clear he would welcome other investors.

Summer spending is understood to have come from a £5.5m parachute payment from the Premier League, although the breakdown of where that money has gone has not been made public.

Leeds are now understood to have "manageable" debts of around £10m, although a decline in attendances is hurting the balance sheet. One informed source estimated yesterday that the club will need investment of between £6m and £8m to get through the season without going further into the red.