On Monday 5 January, Jon Hale and Phil Eynon met with the Hereford United Supporters Trust (HUST) Board to discuss the proposal they – alongside Hugh Brooks and George Webb – have put together to launch a phoenix club called Hereford FC to play at Edgar Street from the start of the 2015/16 season.
Having listened to a presentation and then had the opportunity to ask questions, the HUST Board unanimously agreed to recommend that the proposal be presented to their members and that a vote on its acceptance take place on Tuesday 20 and Wednesday 21 January.
The vote will take place after an open meeting on Thursday 15 January where supporters will be able to listen to the proposal from Jon Hale for themselves and then ask questions of representatives from his group and also from HUST.
Ahead of the meeting, to ensure fans have a better understanding of the thinking behind the proposal, below you can find a list of responses to many of the ‘Frequently Asked Questions’ that have been posed online, in open letters and via e-mail.
The questions answered below mainly relate to the ownership model and security of the club because this is seen as the key talking point right now. The group are aware there are other topics people would like to discuss and questions on other matters will be welcomed on Thursday night.
The answers given below are set out to show intentions in fairly plain terms. However, it must be pointed out that appropriate legal advice will need to be taken in order to ensure intentions are carried out correctly.
Before going into detail it is important to state that the business plan put together by the group led by Jon Hale aims to give Hereford FC the best possible chance of on and off field success, while ensuring that no individual can ever seek to make personal gain at the club’s expense.
The business plan that forms part of the proposal is cautious and conservative, as making sure the club is sustainable and self-sufficient moving forward is seen as absolutely vital.
It should be noted that, although the below FAQs give a basic overview of how the club’s ownership model will operate moving forward, within the business plan there are a number of important early decisions that need to be taken between the club’s Board, the HUST Board and all supporters, wherever they are based.
How can fans be confident that what has happened in the past year will never happen again? What are the specific safeguards?
There will be many safeguards in place to ensure that Hereford FC never finds itself in the situation that saw the sad demise of Hereford United Football Club.
Most importantly, specialist legal advice will be taken to ensure that the club’s Articles of Association protect all shareholders and all supporters, while offering reassurance that no individual will ever be able to exploit the club for personal gain.
In specific reference to the Articles of Association, they will only be signed off when agreed by the club’s board, after consultation with the HUST Board.
Specific examples of some of the safeguards are as follows:
- The fact that HUST – as an organisation – have the ability to purchase a 50% shareholding in the club means it is able to prevent anyone else having a majority shareholding. HUST could not sell a single share without the agreement of 75% of its membership, meaning members can retain full control over half of the club.
- The club will use external property agents to agree a lease with the council that protects Edgar Street long-term and does not allow anyone to seek loopholes in it to try to seek personal gain.
- Every share sale will have to be agreed by the Hereford FC Board (subject to ensuring necessary legal processes are being adhered to). This will mean no shares can change hands without being verified by the people charged with looking after the club’s best interests.
- In the club’s Articles of Association it will state that no dividends will ever be paid to shareholders and that every penny of profit will be reinvested in the club. This makes the club’s shares a very unattractive proposition for anyone other than people with a genuine interest in the success and long-term stability of the club.
In terms of the ownership model, why has HUST been given the chance to buy up to 50% of the club, while other ‘benefactors’ can buy into the other 50%?
Firstly, it seems the use of the word ‘benefactors’ may have caused confusion.
The word ‘benefactors’ was chosen in agreement with the HUST Chairman and Vice Chairman simply because it was felt ‘investors’ had, understandably, become ‘poisonous’ in the minds of many fans after the events of 2014 that saw the eventual demise of Hereford United Football Club.
To clarify, the initial benefactors will receive shares for their initial contribution to the funding of Hereford FC at the same price per share as HUST and other investors.
The ownership model in the proposal has been chosen because the group believes it offers supporters (HUST and non-HUST members) the security they deserve after all that has gone on in recent times, while also offering the initial benefactors – and other individuals who would like to buy shares – equal security and protection too.
The model is designed to ensure the events of 2014 can never happen again and the club’s Articles of Association will reinforce that position.
50% of the shares in the club will be ring-fenced and cannot be bought by anyone other than HUST as an organisation.
HUST will have three years to reach their 50% shareholding – if 50% is not reached any left over shares will simply not be sold. However, after three years, the Hereford FC Board could decide to renew the HUST option to buy.
Who can buy shares in the other 50% of the club?
Of the 50% shareholding not ring-fenced for HUST, the three benefactors putting in the £150,000 start-up capital will each receive 10% of the shares.
The other 20% will then be released for any individual to purchase and the group believes it is important this opportunity is available. However, any share purchase or transfer can only be completed with the agreement of Hereford FC’s Board of Directors (subject to ensuring necessary legal processes are being adhered to).
It must be remembered that aside from HUST, no individual or corporate body will ever be able to own more than 24% of the club’s shares.
How many shares are being released in the Hereford FC, how much do they cost and will a share ceiling be included in the Articles of Association?
Subject to legal advice and guidance, the aim is to set the nominal share capital at one million £1 shares.
However, initially it is proposed that only 500,000 shares will be issued. The breakdown of the initial share release will be as follows:
- 250,000 shares will be ring-fenced for HUST
- The three initial benefactors will purchase 150,000 shares.
- 100,000 shares will be available for any individual to purchase.
To ensure the share register does not get out of hand in terms of large numbers of minimal shareholders – as the Hereford United one did over time – the minimum share purchase will be £2000.
Anyone who would like to make a contribution to the purchase of shares, but cannot necessarily afford the minimum share purchase price, is encouraged to do so via HUST.
The timing of the release of additional shares up to the ceiling of one million will be left in the hands of the Hereford FC Board of Directors. However, it is not anticipated that more shares will be issued until the HUST three-year option has expired, unless there is a need for an emergency fund raising. This is thought extremely unlikely in view of the agreed strategy of a sustainable funding business model though.
In terms of extending the ceiling for share capital beyond one million, strong controls against doing this will be built into the company’s Articles of Association.
If this is not done a group of investors could vote to increase the share capital and sell them cheaply, thus effectively ‘swamping’ the rest of the shareholders.
This cannot be allowed to happen.
If HUST has to build up its shareholding from 0% on day one, up to the eventual 50%, what rights does the organisation have as it builds up the shareholding?
The Benefactors Group are offering HUST three positions on the Board of Directors from day one – even before HUST has built up a sizeable shareholding.
These three positions on the club’s board will be retained whether HUST eventually purchase 50% of the club’s shares or not.
Why does the proposed Board of Directors comprise of four people from the business group and only three from HUST?
Although the initial benefactors know they will not get any return on the money they put in to launch the club, they are willing to put in the start-up capital because they believe in the business plan put together by Jon Hale and the other group members.
With that being the case, they want to ensure their money is not wasted and that the people who have put together the plan have the opportunity to put it into action.
It must be remembered that once the board is in place, every Director is legally bound to act in the best interests of the club and therefore the board must work as a group of seven and not four from one camp and three from another.
It is felt that with long-term sustainability at the heart of the business plan that has been put together, there will be very few occasions when the board are not in agreement about the way forward.
With significant HUST representation on the board of Hereford FC from day one – regardless of whether it has bought any shares – all decisions made will have significant input from HUST and will be open and transparent.
Should shareholders not be happy about the performance of the board or individual Directors, all the usual shareholder rights will apply.
Why did Jon Hale and his fellow group members decide to go it alone rather than put this plan together under the HUST umbrella?
The Jon Hale group has not gone it alone – senior figures in HUST were consulted as soon as the idea began to germinate and as soon as it became clear a Plan B may be required to protect football at Edgar Street due to the ongoing decline of Hereford United.
It was only with the blessing of senior figures from HUST that back in June 2014 the Jon Hale group went public with their proposal for a phoenix club should Hereford United cease to exist.
The decision not to put this proposal together from within HUST was based on three primary considerations.
Firstly, feedback from the HUST Board that they did not feel they necessarily had the business experience and resources to run the club.
Secondly the wishes of the benefactors to effectively be able to use their shareholdings to put the type of protections in place to safeguard the future of the club from potential speculators/asset strippers.
Thirdly, throughout 2014, to retain credibility, the HUST Board felt their main focus should be on the situation at Hereford United, rather than actively pursuing a different option.
Who are the four benefactor group members who will sit on the club’s board and how have they been chosen? Will the Directors all own shares?
The four Directors nominated for the Board of Directors from the Jon Hale group are the four individuals who have worked over several months to put a proposal and detailed business plan – including budgets and commercial strategy – in place.
For the avoidance of doubt they are not the benefactors, nor are they benefactor representatives. However the group did think it appropriate to appoint a Governance Director whose primary focus is to ensure that the club is run on its stated principle for the benefit of all supporters and shareholders.
They four are as follows:
Jon Hale – Chairman
Hugh Brooks – Finance Director
George Webb – Commercial Director
Phil Eynon – Governance Director
The HUST Board members and their responsibilities will be:
HUST Chairman – Vice Chairman
HUST Director – Football Director
HUST Director – Community Director (Including schools, UITC etc)
In relation to queries about whether individual board members own shares in Hereford FC, the Chairman will not in order to maintain his independence, but for the other Directors it will be a matter of personal choice.
Whether the Directors hold shares or not, it is simply their job – on behalf of shareholders and supporters – to make decisions that are in the best interests of the football club.
How will the club’s Chairman be decided?
As leader of the group that has spent several months working on the Hereford FC proposal that has the backing of the three benefactors willing to put in start-up capital, Jon Hale is seen as the natural choice to be the club’s first Chairman.
This is based on a combination of the time and commitment he has put into the Hereford FC proposal (including building relationships with the local authority, the FA and the HFA), his business experience and also his long-standing support and fundraising efforts for Hereford United Football Club.
What happens if any of the four benefactor group Directors wants to leave and a new Director is to be appointed?
Any Director can resign in the usual way.
Directors would be appointed in the same way as HUST Directors and this process will be made clear in the Articles of Association.
How will HUST members be able to hold the Board to account each season?
HUST members and all shareholders will be able to hold the board to account as in any other company.
This can be done either at the HUST AGM, where all HUST members can attend, or at the club AGM, where HUST would be represented as a significant shareholder.
Will the initial benefactors be identified?
The benefactors – who are all lifelong Hereford United fans and successful business people – putting up the start-up capital do not wish to be named publicly. This is simply because they do not wish to be courted for further funding, nor do they wish to undermine the HFC board in any way.
However, details of every shareholder will be held at Companies House in the usual way.
The benefactors understand they will see no return on the capital they are putting in, or dividends on the shares they purchase.
Will the existing leases be re-assigned?
We are awaiting confirmation from Herefordshire Council about the lease offer they will be putting together for interested parties. As it stands, we understand new leases will be drafted, and clearly the detail of these will need to be negotiated.
These leases will not contain the weaknesses of the previous ones, which will therefore ensure Edgar Street is protected from speculators or asset strippers.
Hereford FC has secured the services of external property agents to assist in all aspects of the lease negotiation with the local authority and any other relevant bodies associated with the transfer of any assets relating, for example, to the Official Receiver.
It is fair to say the current state of the stadium remains a deep concern and the amount of additional capital investment that may be required as part of the lease negotiations remains unknown.
A full and thorough ‘Condition and Usability’ survey of the stadium is being sought as soon as possible to establish what exactly is required to make Edgar Street ‘fit for purpose’.
This review must include representation and guidance from the various licensing and certification bodies in order to ensure the ‘Ground Action Plan’ that results from this process is comprehensive, accurate and costed.
Why is the group happy to allow Herefordshire Council to take responsibility for the development of the two ends at Edgar Street?
The group has concluded that for too long a ‘property development solution’ has been seen and quoted as the way of dealing with the poor and loose management of the football club in the past.
Hereford FC is not a property development vehicle and the group believes that the landlord is now in the best position to advance and promote the redevelopment of the Blackfriars and Meadow Ends of the ground.
The group would, however, seek to work with Herefordshire Council to secure ground improvements and spectator enhancement through any development schemes.
We are aware that over the past week many other very valid questions have been asked, but feel it is impossible to answer them all here. Therefore, we have attempted to focus mainly on providing answers to questions that relate to the proposed ownership model and how Hereford FC will be safeguarded for future generations.
However, at the meeting that has been organised for Thursday night – which will be attended by Phil Eynon and George Webb alongside Jon Hale – after initial presentations from Jon Hale and HUST, the floor will then be opened for questions so supporters can have their say and seek answers and clarification on any issues they wish to raise, including any further questions relating to the above FAQs.
HUST Chairman, Chris Williams, and Vice Chairman, Martin Watson, will also be on hand to answer questions after the presentations too.