Otago rugby union in liquidation

[Constantine]

http://www.nzherald.co.nz/sport/news/article.cfm?c_id=4&objectid=10788454

So, it seems that rugby is indeed a business, and in the deep south that business has failed. The ORFU is going into liquidation, which means they may not be able to field a team for the ITM Cup. The NZRFU isn't going to bail them out, although they will provide money to help out club rugby. This is also a little awkward now there's a shiny new stadium in Otago, and no team to play in it - The Highlanders will still be there though, as they aren't owned by the ORFU.

I know a few people out of a job now, which is sad, and the demise of a once great union is rather disappointing. On the plus side, the WRFU have already theifed four referees from there, and we'll welcome the rest...

 

[Robert Burns]

Will the Other unions just increase in size to cover the area?

 

[Constantine]

Nope. Neither North Otago or Central Otago can afford to expand - they're both amateur unions, and Southland is also cash strapped, and wouldn't move away from Invercargill. Otago just won't field a team.

 

[didds]

?

So the ORFC wouldn't just become a bunch of club chairmen around somebody's kitchen table, picking the best 22 club players in Otago and going out and having a bit of a go against whoever they can get a game with?

Like they used to?

didds

 

[Ian_Cook]

Will the Other unions just increase in size to cover the area?

Nope. Neither North Otago or Central Otago can afford to expand - they're both amateur unions, and Southland is also cash strapped, and wouldn't move away from Invercargill. Otago just won't field a team.

They're only a sub-union anyway.

The NZRU could amend the eligibility rules so that players playing for Clubs in the Otago Provincial Union catchment area could be made eligible to play for North Otago in the Heartland Championship. I'm not sure the other Heartland clubs would be all that keen.

Robert. To couch this in term you might understand, think Scottish Football.

Imagine if Rangers went bust :biggrin: . They're from Glasgow, right? Well so is Queen's Park, so could Queen's Park just take over Rangers, or could Partick Thistle?

 

[Simon Thomas]

Otago RFU (2012) Ltd to get going again ?

This is how some soccer clubs in UK (Aldershot for one) have dealt with a liquidation. Very unfair on creditors of course.

 

[Davet]

Very unfair on creditors of course.

You don't give credit or a loan to a football club in the hope of making money, you are simply paying for your hobby.

 

[Taff]

You don't give credit or a loan to a football club in the hope of making money ....

You do if you're a bank. :frown:

And while Debenture holders don't expect to make any money (they're interest free loans) they don't expect to lose all of it either.

 

[Davet]

If you're a bank you check the books before you make the loan - isn't that sort of stupid lending what got us into this mess in the first place.

English football finances are about as strong as wet tissue paper. A few very big clubs possibly excepted - though Rangers experience may be salutary

If you want support a club then OK call it a loan, but you need to make provision for what is very likely to become a bad debt.

It has always been so - anybody could be chairman of xyz FC, so long as the did not regard it as a business investment.

 

[Simon Thomas]

You don't give credit or a loan to a football club in the hope of making money, you are simply paying for your hobby.

DaveT - total b*llocks.

Yes there are "sugar daddies" who subsidise professional clubs and of course they should never expect to get their money back.

Then there are commercial lenders (banks etc), who take the risk and if they can't read the books correctly or make a risky loan deserve to get burnt (but usually have collatoral anyway). So I agree in both cases no issue of unfairness.

Who I do feel for, and for whom it is unfair are the myriad of suppliers who have serviced such liquidated companies and are in the queue behind the tax and VAT man, and the secured creditors. Usually small local businesses these folks get hit hardest.

This is why RFU has been pushing for some while for clubs in England to become Ltd (as is Hampshire RFU) to do exactly this if they get into financial problems. Poor small ytrader gets hit every time with a bad debt after liquidation. Also CB and RFU run a very tight budget approval and financial reporting governance process and this sort of massive debt would not happen at CB or community club level in England, as there are checks to stop a debt piling up, without liqifiable assets to pay it off (e.g Newbury and Bridgwater L5 have both sold off land for building to clear £300,000 debts). Premiership and Championship is another matter of course.

"The union had 180 creditors in the local business community, owed $180,000 to them - UNFAIR, and union staff would be out of a job on Friday - UNFAIR. The union also had a loan of $1.2 million with the Bank of New Zealand - NO SYMPATHY."

The treatment of these 180 local business creditors is bad and unfair some may go bust as a result I suspect.

 

[Davet]

Then look at D&B, see the credit rating and extend it only so far.

The problem is local companies have a blindspot in relation to local sporting organisations, they feel it incumbent on them to trade with them, they like the idea thay can use the relationship as a reference - and they don't bother take the precautions they would when allowing any other organisation to have a credit account. And they are very poor at turning off the supply tap when the terms of trade are exceeded - you try to buy more supply from a mid range company when you have invoices over 30 days with them.

 

[Robert Burns]

Robert. To couch this in term you might understand, think Scottish Football.

Imagine if Rangers went bust :biggrin: . They're from Glasgow, right? Well so is Queen's Park, so could Queen's Park just take over Rangers, or could Partick Thistle?

I read ORFU to be a Union not a club, so say if the SFA went bust could the FA expand to cover Scottish football...possibly!

If it's just a club, then this is not so unusual.

 

[Davet]

Not actually sure how you have a situation where there is no CB.

Locally Hampshire RFU are the Consituent Body responsible for rugby in the County.

If they simply no longer existed then I don't know how we would play any County games or league games at L9 and below...

Maybe ST can help.

 

[Simon Thomas]

Not actually sure how you have a situation where there is no CB.

Locally Hampshire RFU are the Consituent Body responsible for rugby in the County.

If they simply no longer existed then I don't know how we would play any County games or league games at L9 and below...

Maybe ST can help.

Hampshire RFU are a Limited Company and have an annual budget income £65,000 from RFU, plus a number of sponsors and legacies from deceased members, as well as donations from current members. As a Vice-President of HRFU, I make an annual donation that is used to fund a specific youth programme, and I know others do likewise.

The HRFU Governance Committee and our very able Finance Officer and his team (all volunteers) run a very tight ship in cost control and every year aim for a break-even budget. Occasionally it is a small deficit and this is dealt with in the subsequent seasons' budgets to avoid calling on the retained savings fund.

If the RFU funds are cut back then running the County sides would be cut down and / or alternate clubs /personal funding sought. The CB is run by volunteers, except for one part time paid Director (who has a pension anyway so takes a nominal salary) and so Comps would continue.

The Society is a separate entity and is not a limited company (for many reasons) and the Committee can be technically personally liable, although we are not a club so have no bar revenue, clubhouse etc. We have a balanced budget of £55,000 (no RFU funding) and over my seven year term as Chairman, we broke even and maintained our capital reserves, with always having funds to run the Society for a season without any income. With escalating travel costs, and no sponsorship this is getting harder and harder to do, whilst giving our members the service they need.

 

[Constantine]

What happened is the ORFU had a significant share in Carisbrook, which they mortgaged to raise funds. Carisbrook has sold for 1.2 million less than was needed to cover the debt. Not to mention, the ORFU now has to pay to use the new stadium, which is very expensive - they were not getting enough punters in to cover costs (which is partly SANZAR's fault, due to the over saturation of rugby.) There is now no money to pay players, coaches and staff, or to pay back the loans.

The NZRFU is coming in to run club rugby in Otago, but they won't pay for a provincial team. Right now it looks as though the ORFU will go under, owing a lot of people a lot of money, and a new business will be started up, no debt involved.

This, of course, will make the new union phenomenally unpopular with many people, because the ORFU owe the city council $400k and if they don't pay it then ratepayers will wear the cost.

 

[Simon Thomas]

thanks Constantine - what I suggested in post #6

Like small businesses (who don't have access to D&B DaveT), the City Council (and ratepayer) is an unsecured creditor too.

 

[Davet]

Simon - the basic point is that a small business needs to be careful about to whom and how much it extends credit.

Sporting organisations are notoriously deceptive - they appear far bigger and financially stronger than they are partly because they are embedded into a community, and few can envision life without them. All businesses, and especially small ones need run very tight credit management, the road to hell is paved with the remains of those who don't bother.

Which is why I don't see the unfairness you point out, simply the carelessness.

Although if your point is that the governement should be at the back of the line not the front then I will agree.

 

[Ian_Cook]

What happened is the ORFU had a significant share in Carisbrook, which they mortgaged to raise funds. Carisbrook has sold for 1.2 million less than was needed to cover the debt. Not to mention, the ORFU now has to pay to use the new stadium, which is very expensive - they were not getting enough punters in to cover costs (which is partly SANZAR's fault, due to the over saturation of rugby.) There is now no money to pay players, coaches and staff, or to pay back the loans.

The NZRFU is coming in to run club rugby in Otago, but they won't pay for a provincial team. Right now it looks as though the ORFU will go under, owing a lot of people a lot of money, and a new business will be started up, no debt involved.

This, of course, will make the new union phenomenally unpopular with many people, because the ORFU owe the city council $400k and if they don't pay it then ratepayers will wear the cost.

There is also some issue about the floodlights at Carisbrook. Apparently, some years ago, before Dunedin was looking at building a new stadium, the ORFU took on a
thirty year lease on the floodlights. As one commentator said... "what the hell were they thinking?"

 

[OB..]

The Society is a separate entity and is not a limited company (for many reasons) and the Committee can be technically personally liable, although we are not a club so have no bar revenue, clubhouse etc.

There are already cases on record of referees being sued for negligence resulting in severe injuries to players. Such cases follow the money, so if there is anybody on your committee who is rich enough to be worth pursuing ...

 

[Simon Thomas]

There are already cases on record of referees being sued for negligence resulting in severe injuries to players. Such cases follow the money, so if there is anybody on your committee who is rich enough to be worth pursuing ...

OB - indeed there have been various cases - some high profile, others settled quietly.

I have had the discussion a number of times with RFU and Society Committee may only be liable if they do not show duty of care / are negligent (appointment, assessment, development, training, etc). Hence the strict processes we follow in such areas.

In the very unlikely eventuality that we were liable, yes most Committee members are likely to be 'worth pursuing' as they are home owners - down our way that means £250,000 + as a minimum, in some cases perhaps £1m + property, and some may also have equity investment portfolios.