Stamford Bridge: The Truth: Richard King

Many thanks to our friends at TheChels.net and to BlueBaby for giving us permission to reproduce their excellent report on the 2013 Chelsea Pitch Owners AGM.

The 2013 Chelsea Pitch Owners AGM was held in the Harris Suite, Stamford Bridge at 11am on 30th January 2013.

Chairman Steve Frankham declared the meeting open as a quorum of Directors were present and made an unfortunate early Freudian slip, telling the assembled shareholders (around 100) that he planned to ‘induce’ the new Directors, Charles Rose and Sean Jones QC.

Mr Frankham also created early controversy when he requested that all mobile phones be turned off and that no-one would be allowed to cover the meeting via Twitter. Dan Levene of the Fulham Chronicle raised an objection to this, stating that this had not been the rule at previous meetings. Mr Frankham replied that the Board had received legal advice that they could enforce this rule.

Clint Steele raised a point of order regarding the availability of a transcript of the meeting. Mr Frankham advised that minutes would be available, but not a full transcript, and that the Board were legally obliged to ‘provide what we have to provide’, but no more.

Gray Smith commented that the Companies Act required only minutes of resolutions and voting be recorded.

Mr Frankham advised that he intended to talk through and update shareholders on matters that had arisen over the last six months, and there would be an opportunity for questions from the floor. He then went on to advise the meeting that since shares had gone back on sale, 403 shares had been sold, 24 shares were in the process of being issued, and a further 19 applications had been received but not processed. Of the 403 shares issued, the breakdown of number of shares sold was as follows:-

292 people had bought one share
11 people had bought two shares
1 person had bought four shares
3 people had bought five shares
2 people had bought ten shares
1 person had bought fifty shares

Mr Frankham described this as a good but not outstanding start to broadening sales, and all shares had been sold under the new vetting procedure. However, the figure still fell short of the 1000 share limit allowed for sale in 2012. Mr Frankham went on to say that Chelsea Football Club had helped advertise shares through the matchday programme, and also at the Annual Lunch. The club were also to include information on CPO shares with next season’s season ticket renewals. With regard to the proposed ‘Pay As You Can’ scheme to enable applicants to pay for CPO shares in instalments, Gray Smith and Sean Jones were still working on this and would provide an update.

Mr Frankham told the meeting that prior to 2011, share sales were the biggest revenue generator for CPO. He then asked Gray Smith to give an overview of where CPO currently were.

Mr Smith advised that CPO made a loss last year, all of which was attributable to legal costs and other fall out from the CPO EGM of October 2011. For instance, in years 2010/2011, meeting costs were £11,423. However, in 2011/2012, these rose to £39,237. Legal costs had also risen hugely, from £2,214 in 2010/2011 to £71,674 in 2011/2012.

With regard to the renewal of the lease with Chelsea FC, this was a straightforward negotiaton and was completed on 23rd November under the same terms. However, in accordance with usual procedure, the new lease was not signed until the day prior to expiry of the old one.

The CPO Board met with Bruce Buck and Alan Shaw of Chelsea FC on 21st January in an ‘open’ and ‘informative’ meeting. Bruce Buck had no significant updates with regard to expansion of Stamford Bridge or possible relocation, and he advised that no new proposal to CPO would be made anytime soon.

Steve Frankham next turned to the appointment of the new Directors. He had asked for applicants to put their names forward at the July EGM. Eight applications were received, and Mr Frankham described the selection process as ‘not easy’. They were looking for individuals with specific skills as the club wanted to see CPO as serious about reducing the amounts currently owed to them. A shortlist of three was drawn up, and eventually Sean Jones and Charles Rose were appointed on a split vote.

Mr Frankham then briefly addressed fundraising issues, advising that prospective events had been discussed with the football club.

At this point, Mr Frankham called for questions from the floor, but advised that in view of the evening’s away game at Reading, he was only prepared to allow an hour for this, after which time the voting would take place. Before this, however, he invited Gray Smith to update shareholders on the issues surrounding the ‘disputed’ shares. Mr Smith advised that whilst the law was not helpful on this, the shares were validly issued.

A speaker from the floor pointed out that the Board of CPO were wrong in addressing Section 993 of the Companies Act to remedy this issue and drew their attention to Article 41 of the Chelsea Pitch Owners Articles of Association, which allowed the Board to remove the voting rights of anyone who failed to respond to a letter asking them to state whether or not they had any connection to the club. The shareholder advised the Board that if they failed to agree to undertake this action, then they would be failing in their duties under Sections 171 and 172 of the Companies Act 2006, and may well find themselves open to a vote of no confidence.

All five board members regarded this as a sensible idea and undertook to send letters to the 25 shareholders.

Shareholder Clint Steele advised that he was alarmed about the legal costs being incurred to the detriment of CPO’s income and whether the CPO Board were liable for these costs. Indeed, he went on to ask if the previous Chairman, Richard King, was liable.

Gray Smith replied that under the loan agreement, reasonable endeavours had to be made to repay the loan, and any shortfall of income impacted this, and unfortunately CPO had to make up the shortfall. Clint Steele argued that it seemed unfair that CPO were going one step forward and one step back in respect of income issues.

Steve Frankham advised that the Board had in fact turned down costs submitted by the previous legal advisors to CPO.

Dave Sadler asked the Board why steps had not been previously taken in respect of ‘carpetbaggers’. Steve Frankham replied that CPO react as a Board, and that they would make the appropriate enquiries.

Julian Eastbrook asked whether given that Chelsea FC had no plans to relocate, were the disputed shares an issue? Mr Frankham reiterated that one way to dilute the influence of these shares was by getting more people to buy shares. Sean Jones added that share sales were important and that he wanted there to be a sufficient level of trust between the Board and shareholders.

Martin Knight stated that he was angry about the illegal shares and surely if the shares were illegal, then the Police should be involved. Sean Jones responded that if either a director or individual person had committed an unlawful act then it might well be a civil offence.

Dave Sadler stated that although he was pleased the Board intended to look into the disputed shares, why they had sat on this issue for 15 months? Steve Frankham responded that it hadn’t been 15 months, as Gray Smith’s report had been submitted in June. Dave Sadler again maintained that the report had been sat on. Steve Frankham responded that there were implications regarding the whole issue. The dogged Mr Sadler persisted, asking why did the Board concentrate on the possibility of buying back the shares, given that what a number of shareholders wanted was the voting rights revoked. Mr Frankham maintained that the Board were attempting to dilute the disputed shares by selling more. He added that what had happened had happened [BB67 - i.e. that events could not be changed].

Mary Phelps asked about checking the address of the owners of the disputed share. Gray Smith acknowledged that the Board could not ‘leave’ the matter of the letters to those holding the disputed shares.

Jim Cowan asked the Board about their strategy for moving forward, commenting that they needed a global strategy. Steve Frankham responded that it was to sell shares. Mr Cowan countered that this was not a strategy. One of the new directors, Charles Rose said that the strategy should concentrate on the accountancy and corporate side of problems. CPO needed to put the issues of the past behind them and get on to paying off the loan. Jim Cowan responded to Mr Rose that this got CPO no further forward as these were structural not strategy issues and it was an error to focus on structure too much without first identifying the strategy that structure should be implementing and/or delivering. Charles Rose accused him of being disingenuous. Mr Cowan went on to say that if the High Street moved as slowly as CPO did, many more businesses would go bust.

Another shareholder, Peter Fordham, asked if there was any possibility of fanzines carrying advertisements for CPO shares, and Steve Frankham confirmed that this would happen.

Robin Crosse asked if all the members of the Board had read the Articles of Association, and why they had appeared to miss the implications of Article 41. Gray Smith responded that Article 41 had not been missed.

Mr Smith went on to say that CPO was not like a High Street company. With regards to which strategy the Board should pursue, their aim should be to pay the loan, sell shares, keep the pitch and keep the asset.

Jim Cowan responded that this was not a strategy, this was an aim. Gray Smith countered that the objective of the company was own and keep the freehold and that they were charged with looking after the asset.

Respected shareholder James Greenbury then addressed the meeting, saying that whilst he was sympathetic to having the 25 shareholders on record denying any connection with the club, he was sceptical as to whether much progress could be made. From his analysis, it looked as if the shares issued recently had been bought by genuine supporters, and he urged the Board to maximise sales but to get as many current shareholders as possible to encourage others to buy shares. In terms of sales, he wasn’t sure whether CPO had had a lucky year or a skilful year. He went on to enquire if many applications had been turned down, and whaat processes had been put in place to prevent block purchases.

Steve Frankham replied that over 100 shares had been sold at the Annual Lunch, which he had attended, and he had asked the individual who had bought 50 shares why he had done this. Charles Rose commented that he had been charged with looking into the share register, with a view to improving maintenance. Sean Jones stated that agreed with Gray Smith’s comments that the objective was principally to sell shares.

Jim Cowan rose again to cite HMV as an example. If they needed to sell 1000 CDs, they couldn’t just go stacking them on the shelves. They needed a strategy. So how could CPO get a strategy that guaranteed a 1000 shares a year would be sold?

Sean Jones commented that they needed to make share ownership an attractive proposition, and that a Pay-As-You-Can option would make it easier to acquire shares, subject to legal checks. Steve Frankham commented that one of the reasons that so many shares were sold at the Annual Lunch was due to a charm offensive by Rick Glanvill, who went around the room and persuaded as many people as possible to buy shares. However, shares couldn’t solely be sold through this method.

Charles Rose told the meeting that they were fire-fighting on a number of fronts and the Directors were trying to sell CPO and provide the right image to put in front of shareholders. He also wanted to improve communication.

Dave Spring commented that if he were a prospective new shareholder, he wouldn’t want to invest in a company which he thought was being run by a concert party. He re-stated a widely held opinion that the 25 shareholders of the disputed shares had simply walked in and bought the shares without proper checks being put in place. Steve Frankham reiterated that the Board were addressing the issues relating to these shares.

Mr Spring went on to suggest that the former Company Secretary, Bob Sewell, should have his remuneration from last year as referred to in the financial accounts for CPO taken back from him and Mr Frankham responded ‘Perhaps that’s going to happen’.

Rick Glanvill stated that he thought the answer regarding the Concert Party impediment was that it would prove an incentive to buy shares. One purchaser of shares at the Annual Lunch stated that he was buying as ‘he didn’t want the club to get away with it’. He also thought that genuine supporters would have an impulse to buy shares in spite of the concert party.

Shareholder Mirek Malevski told the meeting that there had been an unacceptable degree of obfuscation on the part of the board. He added that it was noticeable that none of those named in the concert party were at the meeting, and criticised the quality of the minutes from meetings. Gray Smith reiterated that the minutes were what the Board were legally obliged to supply, and a multi-national, such as BP, would act exactly the same.

Mr Malevski reiterated that the minutes were unacceptable as no-one would remember what had been said at the meeting, there was too much obfuscation and not enough goodwill. Mr Smith responded that the Directors were charged with doing their duty and it was part of their obligation to comply with the demands of the Companies Act.

Clint Steele welcomed the two new Directors and expressed the hope that they would be working in the interests of the shareholders. He then went on to ask Steve Frankham if he had any connection with the CFCTruth blog, as a number of conversations they had previously had, had subsequently been repeated verbatim in that blog. Also, he expressed his concern that Sean Jones and Charles Rose had decided to publicly comment via the CFCTruth blog rather than via the Chelsea Pitch Owners website.

Mr Frankham, with some annoyance, expressed the opinion that this question was not relevant. Clint Steele responded that surely it was better to have information relating to issues such as fundraising and new Directors on CPO’s own website.

At this point, Steve Frankham declared that the hour allotted for questions had elapsed and invited the ERS to set out the voting procedure. There was an interval of an hour whilst votes were cast and counted, and a number of shareholders departed after casting their votes. Around 30 remained until the results were declared at approximately 1.15, which were as follows:-

Resolution 1 proposed to receive and adopt the Company’s annual accounts for the financial year ended 31 July 2012 (ordinary resolution).