Bank moves to keep Liverpool board in place
The Royal Bank of Scotland has obtained an injunction preventing Liverpool owners Tom Hicks and George Gillett from sacking independent chairman Martin Broughton or any other board members ahead of tomorrow's court case.
RBS is the club's main creditor, having lent Americans Hicks and Gillett the money to buy the club in March 2007, and is claiming in the High Court that the pair breached their agreement by trying to replace managing director Christian Purslow and commercial director Ian Ayres on the board last week.
The outcome of the case should decide Liverpool's immediate future, with the club's board having agreed to a £300m (€343m) offer from New England Sports Venture, against the wishes of Hicks and Gillett.
RBS said in a statement: "RBS in its capacity as lender to the Kop group of companies received the benefit of various contractual undertakings from Mr Hicks and Mr Gillett in relation to the corporate governance arrangements that Mr Hicks and Mr Gillett agreed would apply to the Kop group of companies with effect from April 2010.
"Those undertakings provided for the appointment of Mr Broughton as chairman of the board and the appointment of the chief executive and commercial director of LFC to the Kop boards.
"As is well known Mr Hicks and Mr Gillett purported to make changes to those corporate governance arrangements on 4 October. This was in breach of those contractual undertakings.
"In light of that purported breach of contract RBS sought and obtained on Friday 8 October 2010 an interim injunction against Mr Hicks and Mr Gillett until a further hearing scheduled for tomorrow.
"Among other things, that interim injunction prevents Mr Hicks or Mr Gillett taking any steps to remove or replace Mr Broughton from his position as chairman of the board of the Kop companies or from taking any other steps to appoint or remove any directors from the board of the Kop companies."
It also emerged today that Liverpool's owners have been technically in default of their refinancing agreement for some time - despite the repayment deadline of Friday.
RBS have chosen, however, not to enforce that default position which would have led to Kop Holdings going into administration and risk Liverpool incurring a nine-point deduction from the Premier League.
That could still happen if Hicks and Gillett have not repaid their £280m (€320m) debts by Friday's deadline.
The RBS statement added: "The proceedings tomorrow represent the continuation of Friday's proceedings and relates to breach of contract only. These proceedings do not represent steps by RBS to enforce its security or to appoint an administrator.
"We are unable to provide any visibility on timing for resolution of these proceedings at this stage."
Royal Bank of Scotland PLC v Hicks & others is among a number of applications to be heard by Mr Justice Floyd at 1030 in Court 18.
That signals the start of the process which may not be concluded tomorrow but should be by the end of the week.
The dispute to be settled revolves around whether chairman Broughton had the authority to sell the club against the wishes of Hicks and Gillett.
Broughton claims when the owners decided to put the club up for sale in April, RBS requested undertakings from them that only he, as independent chairman, could make changes to the club's board.
However, minutes before a meeting last week to discuss the bid by NESV, which will clear all debt but leave the owners with losses of £144m (€165m), Hicks tried to sack Purslow and Ayre and install his son, Mack, and Lori McCutcheon, who works for Hicks Holdings.
Broughton rejected the proposal and continued with the meeting, with the England-based board members coming down in favour of the NESV bid.
Hicks, however, has denied there are such undertakings in place, and insists Broughton's actions are illegal and therefore the sale is invalid.
As the issue of who has the necessary authority to agree a sale forms the crux of the legal argument, proof of the existence or not of those undertakings is likely to be pivotal.
Last week Broughton said Hicks and Gillett had "flagrantly abused" their undertakings to the bank.
"As part of my appointment, they gave specific undertakings to the Royal Bank of Scotland that said Martin Broughton was the only person authorised to make any board changes," he said.
"They basically flagrantly abused those two undertakings to RBS and removed Christian and Ian from the board and sent us details just before the board meeting saying they had been removed and appointing two others.
"We took legal advice and I determined that the action was invalid."
Broughton's argument, and that of the rest of the England-based members of the board, is that they have acted in the best interests of the club in agreeing a deal which relieves the huge burden of debt on Liverpool - who were responsible for paying £40m (€46m) a year in interest.
The NESV offer does not have any provision to pay off the existing owners, who stand to lose £144m (€165m) - which is why they are so vehemently contesting last week's decision.
His New York-based spokesman Mark Semer, in response to Broughton's claim about the RBS undertakings, last week told Bloomberg News: "There were no such undertakings given to Broughton. The board has been legally reconstituted, and the new board does not approve of this proposed transaction."