The Road to Administration for Bolton Wanderers

Now if the club should go into administration this may not be the reason for it. But having spent some time recently studying these issues I think this is the most logical reason why Bolton Wanderers might end up in administration.

The bottom line would likely be that Eddie Davies won’t put his hands in his pockets. Now this could be for two reasons. It could be that Davies is actually running out of money. A lot of Bolton’s £180 million debt is owed to him and no one is completely sure how much he is actually worth. The other option is simply that he is fed up of pumping money into the club and doesn’t want to anymore.

I have no idea which one is more likely and it is not particularly relevant for our purposes. Should this happen and it becomes clear that the club is completely screwed the directors would have no option but to put the club into administration in order to avoid personal liability further down the line.

This all ties into the area of directors’ duties and the controls placed on directors. These are numerous and are ordinarily owed to the company but can be owed to others in very specific circumstances.

The risk here would be that if at some time before the winding up of a company the director knew or should have known there was no reasonable prospect of avoiding insolvent liquidation the director may be found guilty of wrongful trading and have to make a contribution towards the company’s assets.

Clearly no director would want to have to do this. Ordinarily they are not liable in this way due to the principle of separate legal personality. Now at this point I am not saying that I think the club will go insolvent. I have no reason to believe this. But if Eddie Davies does pull the plug completely and there is a risk of insolvency as a consequence the directors would have to take action in order to avoid being hit with wrongful trading.

They could also risk falling foul of fraudulent trading where there is intent to defraud creditors. This would be the case if the directors knew that creditors would not be paid. Again if Eddie Davies will not or cannot put his hand in his pocket again then the directors may be forced to take such action in order to cover their own backs as again they would have to make a person contribution.

In practice fraudulent trading is hard to prove as there needs to be that intention to defraud the creditors. It is also highly unlikely that fraudulent trading would be carried out as it is just stupid. But wrongful trading does not have such a high bar and as such would be an easier trap to fall into.

If it becomes clear that Bolton Wanderers cannot continue to function without outside investment, and that outside investment is not forth coming then the directors may well be left with no choice but to place Bolton into administration.

This though would not necessarily be the end for the club. Another piece by me will go up looking at this and Chris also has a piece looking at administration and how it could affect our club should it come to pass.