Rangers Football Club, the most successful in the history of Scottish football, has been forced to file for bankruptcy protection following their financial woes. On the pitch, this means they will be docked 10 points from their tally in this year's Scottish Premier League Championship.
The 140-year-old club has accumulated a tax debt of £75 million ($118 million), forcing owner Craig Whyte to place the club into administration, a final attempt to save the club from liquidation, on Tuesday.
"Due to its cost structure, the club has been loss-making for many months. This situation has resulted in increasing liabilities and the club has been in discussion with (British tax officials) regarding these liabilities," Associated Press quoted Whyte as saying.
"These liabilities combined with the threat of the outcome of the first tier tax tribunal left the club no option but to formally restructure its financial affairs ... it remains our firm belief that the club's future can be secured and we hope this period of administration will be as short as possible," he added.
The Scottish Premier League's defending champions are still waiting for their exact debt amount, which will be determined after a pending court case. However, it seems clear the club cannot pay its creditors.
Nevertheless, Whyte was quoted in a BBC report as saying the Rangers would "come out stronger" and "always be here".
What is Administration?
Administration is a bankruptcy protection process which comes under the The Insolvency Act of 1986 (a law that deals with bankruptcy) and is designed to protect limited organizations from their collectors, while a scheme to clear the organization's debt is followed and showed to collectors and courts.
A licensed insolvency practitioner is appointed by the court to act as the organization's temporary administrator.
This administrator is the one who is in charge of the company instead of the Board of Directors during the organization's reorganization period. Also, during this period, a court order forbidding any insolvency action without the court's permission is issued.
The Enterprise Act of 2002 made several amendments to the Insolvency Act of 1986 which included abolishing Her Majesty's Revenue and Customs' right to recover unpaid taxes ahead of other creditors.
Now, insofar as the administration process applies to football clubs, there is something known as a "football creditors rule", where the concerned club's first priority is to pay off outstanding debts to other football clubs and players before they are allowed back into their respective league.
Rangers FC Now
Meanwhile, financial advisers Duff and Phelps have been appointed as the Rangers' temporary administrator.
"We fully recognize the great history of this club and what it means to people throughout the world. Whilst today is a sad day for Rangers, it also addresses the terrible uncertainty that has been hanging over the club," Sports Illustrated quoted Paul Clark (Duff and Phelps' joint administrator) as saying.
Meanwhile, the Scottish Football Association (SFA) has said the Rangers' is a very "dire situation" and has made for a bad reflection on the nation.
"I would like to express my deep regret that a Scottish institution should find themselves in the kind of perilous state that has necessitated today's course of action. This is a profoundly sad chapter in the history of Scottish football and we should not underestimate the potential ramifications for the image of the game as a whole," The Globe and Mail quoted Stewart Regan (SFA's Chief Executive Officer) as saying.
As of now, Rangers, even after a ten point deduction, are still in second place in the Scottish Premier League Table with 51 points; just below rivals Celtic who have 65 points.
The Scottish champions have won an impressive 54 domestic league titles (a world record) along with 33 Scottish Cup finals and 27 Scottish League Cup finals.