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Closed Ranks, Closed Doors, Closed Minds

By Christine Foster :  02/07/2009 :  Comments (20) :
The recent announcement by the club that it has no longer the intention of holding AGM’s due to the changes in the 2006 Companies Act (Part 13) is disappointing for shareholders and fans alike. In its place (this year and not as an ongoing commitment) is the shareholders forum. Which it is important to state, has absolutely no rights whatsoever to ask for or be provided with, or challenge and seek a right of reply from the board on ANY matter. It is window dressing in an attempt to appease the already isolated shareholders of the club. Such an announcement by the Company Secretary should not be allowed to pass without questions being asked.

1. The Companies act 2006 Part 13 removes the requirement to hold AGMs for small private companies. Everton FC is not a small company by any means so why hasn’t the club elected to continue with the AGM as it could do so if it wished?

2. The changes to the act also allow the Private company to dispense with yearly financial audited accounts. Is this to be enacted too?

3. The club must see that it is further alienating its shareholder base in taking this action to dispense with the awkwardness of being held accountable or at the very least their answers being a part of a formal record or statement.

It’s a further indication that the club is not looking outward to foster inclusion of its shareholder and fan base but instead looking inward to their own interests. How could it not be interpreted as such?

Yes, it's is a private company, yes they are operating within the law, yes they don’t want to air their dirty washing in public, but now they don’t have to air their washing with their own shareholders either. That’s not right. Where now is the right of shareholders to question and how can this now be enacted?

Changes prior to the current opportunist adoption of the lesser requirements for AGMs have seen the ability to call an EGM from concerned shareholders made an almost physical impossibility, combine this with the abolition by choice to hold AGMs and you have more than a gagging clause, you have taken any voice away from Shareholders (not fans) who until now have had a right of access and question of the board of directors for decision making.

They have elected not to front up to the shareholders in a documented and formalised manner, instead offering a smile and an ear and the age old.. “Your views are important to us.” No they're not.

If they were they would be honest and continue with the Articles of Association requirements that were in place prior to the changes with the EGM. The requirements for shareholders to call a meeting are as stated by the act: “Private companies will no longer hold an annual general meeting. Shareholders can demand a meeting if at least 10% (5% in certain circumstances) wish to. Shareholders still have the right to receive accounts.” Ref. BERR

It is a moot point as to whether or not the changes to the act were intended to cover private businesses with such a high turnover. In the business world, football clubs are an oddity with few being PLC’s but many with £100m businesses and some valued much more. Perhaps the intent was to take onerous red tape from small businesses, which no-one can dispute. But a high-profile Premier League football club is not a three-van courier business with three shareholders and a turnover of £300k pa.

If the club had the courage of its convictions why didn’t they hold this years AGM, open it up to the shareholders for their opinion, and if they where happy to abolish AGM, then so be it? Perhaps because this way they minimise damage to their reputation and the anger of small shareholders, once again?

Another sad little chapter in the club and the commercial reality of where we are being taken. Closed ranks, closed doors, closed minds.

Reader Comments

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Dennis Stevens
1   Posted 03/07/2009 at 19:02:24

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The People’s Club, eh? We’re a long way from one member : one vote now. Another lamentable landmark in the affairs of our club under the current incumbents.
Jason Byrne
2   Posted 03/07/2009 at 18:59:22

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The people to blame for lack of future AGMs and EGMs look no further than half wits like Tony Bennett, Mark Grayson and their buddies. They were threatening to call a new one every few weeks which would’ve been ridiculous, smalltime and abusive of the AGM/EGM regime. I feel agrieved these half-wits ruined what is my right as a shareholder — that is to question the board directly and vote on important club matters. Well done, boys — not!
Kev Wainwright
3   Posted 03/07/2009 at 20:08:50

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There is a little confusion here between supporting the club, which is an emotional investment, and being a shareholder in a business which is a commercial investment.

Individual shareholders' rights — they are not moot but enshrined in law — are very limited unless certain thresholds are reached. This is to protect the majority shareholders from the actions of a small number. In effect, it stops people buying one share; let’s say owning 0.005% of a business and holding the 99.99% to ransom.

Anyone who buys a very small shareholding and thinks that they will have a say in the business is very mistaken. The actions of small shareholders in threatening to call EGM after EGM effective created this action; I am not sure what they expected the Company (not the Club) to do.

The other case in point with previous AGM’s was the increasing use of proxies, a number of which appeared to be attending to put over their own point of view. This is perfectly legal, but again the company is entitled in response to take the steps it has here.

For all businesses, the most important people are the customers, without which the company will very quickly cease to exist. In the case of Everton, these are the fans, and they, as they have in other companies, have the ultimate sanction by taking their business elsewhere. The acid test will be if a substantial number of fans decide to boycott Everton as a business due to this policy relating to AGM’s.

Therefore, the rights of the small shareholders are very minor when compared to the customer and the creditor. If the business declares a profit then the shareholder gets a dividend in proportion to their ownership, they have zero say in the running of the company and have very little entitlements.

No fan is forced to go to Wembley or buy a season ticket. Any shareholder can divest themselves of the shareholding if they are not happy with the policies of the company, or of course attempt to purchase sufficient shares to take control or force action.

I am not certain that the blurring of shareholders and fans really adds anything to the debate.

What I have always struggled to understand is that why people such as Christine who are against the board in relation to Kirkby don’t just call a protest after the game to show the level of discontent with the board. That would be far more effective than creating pressure via very small shareholdings.
Tom Hughes
4   Posted 03/07/2009 at 20:57:52

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Jason,
Half-wits are people without the gumption to see who actually made this decision... Those mentioned above simply exercised their rights as shareholders to call the EGM following their serious concerns, and it should be added that they easily gained sufficient support to do so... and, judging by the overwhelming support voiced at the EGM, would have had no difficulty doing so again.... hence the reason for the club shutting up shop when they didn’t have the answers.

By the way, the people you attempt to smear are highly successful professional people, and bigger blues you will not find! So get your facts straight before you try the ill-informed character assassination.
Tom Hughes
5   Posted 03/07/2009 at 21:13:09

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Kev,
Small Shareholders are representative of the general support. They are just ordinary blues who are committed enough to buy a small stake in the club not as a normal business investment but merely to own part of something they hold dear.

If you attended the last EGM, you will have seen that the vast majority of shareholders supported those who called the meeting, and were even less convinced about Kirkby after the club’s responses to questions. The club was shocked by that strength of feeling and their plans couldn’t afford further demonstrations.

Jason Byrne
6   Posted 03/07/2009 at 21:45:36

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Tom, I don't know how to put this to you but I was there at the EGM, what was it now? 97% of votes in favour of the board - before you say "What about individual shareholders?" well, in my opinion at least 60% of individual shareholders supported the board and the voting figures reflected that. It is not a smear to say Mssrs Bennett and Grayson are half-wits for provoking the club to end the AGM/EGM regime. Now we have to endure Shareholders Forums — thanks a bunch guys. They have a cheek to now complain about what their actions provoked — unbelievable!!
Kev Wainwright
7   Posted 03/07/2009 at 22:10:50

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Tom

I might take a little issue that the guys mentioned in the reply to Jason are the “biggest blues” , as you just can’t possible know that, even if what is a “big blue” for you means the same thing to me. Jason might be right, he might be wrong but as a small shareholder he is entitled to his view as to the cause of this action by the company.

The shareholders you mentioned are businessmen, so they will understand that if you have millions invested (as some of the major shareholders do) you cannot confuse business with pleasure. Further more in their own companies when faced with the threat of the group of small shareholders threatening to call EGM after EGM, if they hadn’t have taken the same action to stop it, I don’t think they would be successful for long.

How can you say that the small shareholders can be representative of the general supporters? I am sorry Tom but that’s out of order. You might say that a number of the more vocal ones agree with your views, or that as a body they have similar views, but to make a sweeping statement unsupported, that coincides with your opinions and pass it off as a fact is poor form.

However, it really doesn’t matter because the law of the land states that the number of shareholders means little it is the percentage of shareholding that counts. I also don’t see how buying a share puts you any more committed then a fan who goes home and away but doesn’t choose to buy a share. I would really like an answer on this one to help me understand, as this put Paul Gregg as a hugely committed fan at one point as he had invested a huge amount of money.

You mention demonstrations and I am still unclear as to why the club AGM should be the vehicle to show the discontent rather then an after or prior to a game or any other type of mass protest. Surely as, I will quote you here, “Small Shareholders are representative of the general support” obtaining numbers of over 30,000 wouldn’t be an issue.

I think that yet again the issue of Kirkby has stopped the real questions over the gross mismanagement and deceit of the current board being asked. There are other major issues regarding the club other than Kirkby, let list a few –

• Where the funding came from for True Blue and where the debt was placed
• The Kings Dock proposal by Paul Gregg
• The Fortress Sports Fund
• The investment made by the directors into the club
• The guarantors of the loans and their nature and what that means to the ownership
• The gross under capitalisation of the company
• The prospect of a new rights issue to raise monies

There are lots and lots and yet this is another example of Kenwright getting off the hook, by diverting all the debate to if Kirkby is technically outside the city whilst being spiritly inside.

I could weep.
Tom Hughes
8   Posted 03/07/2009 at 23:07:46

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"Tom I dont know how to put this to you but I was there at the EGM, what was it now? 97% of votes in favour of the board - before you say what about individual shareholders well in my opinion at least 60% of individual shareholders supported the board and the voting figures reflected that. It is not a smear to say Mssrs Bennett and Grayson are half-wits for provoking the club to end the AGM/EGM regime. Now we have to endure Shareholders Forums - thanks a bunch guys. They have a cheek to now complain about what their actions provoked - unbelievable!!"

Jason, I’m also a shareholder.... 60% supported the board? I suggest you check the minutes of the meeting whereupon you will readily find that next to no-one spoke out in favour of the board throughout the whole meeting. I would also suggest that the refusal of the club to allow a show of hands further refutes your grossly inaccurate claim, and that the ultimate decision by the club to change the rules is also not indicative of a regime confident of carrying majority support..... otherwise why bother? Check the responses on EVERY single poll on EVERY fan website since the vote’s discredited promises have been revealed. Kirkby cannot muster double figures in any one...... so to suggest that 60% or anything close supported the board on that night is laughable.
Tom Hughes
9   Posted 03/07/2009 at 23:19:50

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Kev,
A few hundred committed shareholders is a good sample size and therefore reasonably indicative IMO. Then again, over 10,000 people voted against Kirkby long before the numerous lies were revealed. How many of those that abstained and those that voted yes would have voted NO if they had known the many glaring deceptions? I also don’t think the Kirkby issue has stopped those questions being asked.... I attended numerous AGM’s, not to mention the infamous Samuelson one where they sidestepped and paid lip service time and time again until we went home. Kirkby is simply the last straw, tied in irrevocably with all the previous issues you highlight! Take your pick!

BTW, I only measure the likes of Tony Bennett’s Evertonianess by the simplest of scales.... the mere fact that he is a shareholder and he literally never misses an Everton game anywhere in the world, and hasn’t done for years. He’s probably still trying to sell his Ghana tickets on eBay.
Christine Foster
10   Posted 03/07/2009 at 22:59:55

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I can well understand each point all of you are making, without much in the way of any dispute with them, merely clarification.

Jason, it was the actions of small shareholders who had the right to ask questions of the board that has probably seen the changes come about, but that is NOT the fault of the shareholders, it's the fault of the board who, instead of fronting up, decided to close up. In doing so, removing the right to question all the other just as pertinent questions that Kev points out. That's not the blame of shareholders, that's the blame of the club.

Kev, you made some good and valid points, especially those regarding the other questions that should be asked of the board and now never will. But your assertion that Tom's comment regarding small shareholders being out of order is a little rich. Small shareholders are not in it for large financial returns, they are in it to belong to something special. They at least feel that they had a voice (being realistic how large that voice is hardly going to impinge on a club doing what it wants anyway). The term "bigger blues" which Tom refered to (not Biggest as you state) is I think what Tom means, an emotional (of the heart) which infers they are passionate about the club. They know it's never going to make them rich but I suspect that's not why they chose to buy a share or two. It is not meant to say that they are bigger or better than any other blue, it means they want to belong. They aren’t all businessmen, they are committed supporters.

Kev, you highlighted quite rightly that the catalyst for this action was probably the issue of Kirkby. If ever there has been a more contentious issue that has driven the fans to opposite sides of the fence I don’t know what it was. Like it or not, the club's actions against its own shareholders is not just lamentable — it's a disgrace. The right to protest or question is effectively gone.

I can see (sadly) why the club changed the rules with respect to EGMs — that was because they were embarrassed, and rightly so. The decision to abolish AGMs is very, very different. Yes, AGMs cost money but they were put in place to ensure those shareholders had a voice. The club has removed that voice and any facade of transparency for no other reason than self interest. They have basically told they fans they don’t matter and now the small shareholders they don’t matter.

I really hope this comes back to bite them.

Kev, lastly, my concerns with the board and BK are well known on this forum and yes, they were, initially, largely concerned with the matter of relocation. But having delved deeper over the last couple of years into the decisions of the club regarding other issues, it leaves me with anger and despair. It's almost as if there are two sides to the club, the commercial and strategic management of the club and the team and their supporters.

Both should work together, but there seems to be a faction which do not have the team's, the fans' or the shareholders' considerations at the heart of the club. You know, the bit that a business is built around?? They are looking to the strategic commercialisation and exploitation of those without the need to explain their actions to all but the largest shareholders or fellow directors.

It's a hell of a way to run a company.

In a way, Kev, you are right, just as Tom is, the result though is two fingers up at the shareholders directly.
Glen Strachan
11   Posted 04/07/2009 at 01:02:16

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They OWN the club.

As ’mere’ supporters, we do not own the club and, as such, we have only one way to demonstrate our feelings.

We, individually and collectively, have the weapon that will ruin their cosy little business by simply ’VOTING WITH OUR FEET’.

Stop buying the merchandise and match tickets if you are that unhappy about the way EFC is being run and just walk away from this club IF the conduct of the Board is that upsetting.

Nobody at Board level cares what we as fans think — they appear to believe that, no matter how they treat us, we will turn up and wear the shirts and buy stuff in the new store.

How much crap will the average Evertonian accept?

Watch our gate figures next season — these numbers will tell you the answer.
Mike McLean
12   Posted 04/07/2009 at 07:20:37

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Glen, you’re absolutely right. If we don’t like the piper or the tune he’s playing, then we shouldn’t pay him.

However, the Board and CEO can rest happy that there is no amount of conmanship or simple-minded marketing strategies (the "People’s Club", "Family", "Tradition" ... any word they like to use as a substitute for "Success") that won’t fool the gullible into parting with their money.

Too many older Evertonians have reflected, "They’ll always let you down in the end" ... part of the reason attendances stink for a supposedly "Massive Club".

Here’s my forecast: the biggest news we’ll see in the close season is the opening of Everton Two... another means of taking money from the masses.
Alan Kirwin
13   Posted 04/07/2009 at 13:35:09

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Thought-provoking article, Christine. Whilst I have some sympathy with your position, I also see things from the club’s perspective of running their business in the real & practical world. Seems to be a confusion of emotion versus process.

Kev Wainwright’s repost is an excellent one. Too many assumptions made in too many quarters in such debates. There are always questions to be asked, but then there are different boundaries defined by legal, moral and emotional issues.

Given the club’s current status, I see nothing wrong at all in their position. And I doubt if you will see anything different in other clubs of similar status. But in an ideal world, supporters would have both a greater ownership of clubs and, consequently, a greater say in what we do and how we do it. I’m talking of course about the membership/club concept, which on the face of it has little or no downside but massive upside for a club like ours.

Overall I think too many supporters expect far too much from the club and are often unrealistic. Any comparison has to be a relative one, and by any real objective analysis, we are not really that hard done by at all. Yes, it can always be better. But of course the converse is also true.

Again, good article Christine, but I suggest the real subject you touch in is much broader and worthy of far more extensive and detailed investigation.
Marc Williams
14   Posted 04/07/2009 at 19:48:32

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Spot on Christine, keep up the excellent posts.
Paul O'Hanlon
15   Posted 04/07/2009 at 22:29:20

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It’s worth pointing out that the date of the Shareholders Forum differs significantly from the AGMs. Whereas the AGM would be held AFTER the transfer market had closed, the Forum will held in the middle of July (over a month before the window closes), giving Kenwright the opportunity to rebuff questions about lack of signings with "Watch this space".
Amit Vithlani
16   Posted 05/07/2009 at 18:18:57

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2. The changes to the act also allow the Private company to dispense with yearly financial audited accounts. Is this to be enacted too?

Whilst bank debts are outstanding, I do not think this is possible. I recall that it is a legal requirement for banks to have the latest audited financials statements for loans to Corporates, which, under under the Companies Act, must be filed no later than 18 months after the financial year-end. Unless the club becomes a partnership, I think the requirement to produce financial statements will remain.

Some transparency therefore should remain, even if the club have taken a backward step, in my opinion, in scrapping the AGM.
Christine Foster
17   Posted 07/07/2009 at 11:12:25

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Alan, I tried to look at the view that shareholders are supporters too (usually) and your comments regarding "seeing nothing wrong with the club's stance" is rather demoralishing to the smaller shareholders. It's not an emotional issue, it's a real practical one.

AGMs are a reporting function to the shareholders of a company, a statement of intent and a performance review of the actions of the board for the previous year.

Every shareholder has ther potential to ask a question of any member of the board relating to any activity they, or the club are involved in that may afect its future viability of financial profitability. (No emotion there...)

The fact that the club has decided that they have no need to be accountable to anyone goes against the very principle of shareholding. The fact that others may do it, or the fact that is now legal to do so (although I believe the INTENT of the change was never meant to be used in such a large revenue generating company with such a high profile). Remember, it was brought about to reduce red tape for small private companies. Is that what we claim to be?

This can’t be dressed up as anything other than a mark of disrespect to the small, loyal, shareholders who could at least think they had a say in the clubs affairs.

In a typical press release when you are dropping in the bad news, you dress it up with some good first... Guess what guys! we are having a Shareholder Forum!! Great Stuff!! We want to hear from you and your voice is important!! Oh... BTW, we don’t have to hold AGMs anymore and this forum isn’t exactly a shareholders meeting either, no votes or commitments...

Yep.. the wonders of spin won’t be lost on the shareholders at the Forum I suspect. They should tell them what they think of the forum and the lack of accountability in THEIR company.
David Johnson
18   Posted 07/07/2009 at 11:55:55

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Spot on. Always enjoy your articles, Christine.
Jonathan Gray
19   Posted 08/07/2009 at 23:30:33

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Does anyone know if the option that was taken by the club was the only one available to them? Could they have not just passed a similar agreement that would have limited the amount of EGMs & AGMs to an acceptable amount. Perhaps at most, one of each per year.

It just seems to me that they decided to go with the most draconian of measures because they were tired of answering questions from the small shareholders and specifically those named above.

Christine Foster
20   Posted 09/07/2009 at 01:09:32

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Jonathan, the club has chosen to take advantage of the legal relaxation. They could continue to hold AGMs if they wished. This has been an elective decision with no explanation other than we don’t have to, so we aren’t going to!

As to your second point, I am sure that, if it wasn’t the main reason, it was surely a consideration and seen as a solution to facing critics.

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