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A deal to allow Ken Bates regain control of Leeds United may face a legal challenge within days. The Bates plan to put him back in charge was supported by three offshore trusts who said they would block other deals, even though they offered creditors a better deal. Two of the trusts denied any connection with Bates. Revenue & Customs, which is owed £7m by Leeds, is furious that it stands to recoup only a tiny fraction of the money owned. Sources close to the Revenue told the Sunday Times, 'We are livid.' The Revenue is taking legal advice on whether to mount a challenge in the courts. Other creditors, as well as consortiums whose offers to buyer Leeds from administrators KPMG were blocked by the offshore lenders, are also considering whether to mount a challenge in the courts, despite legal costs that could top £100,000.
Angry creditors believe that they have found a major flaw in the vote that backed Bates's proposal to buy back the club. Leed's biggest creditor was Astor Investment Holdings, which is based in the British Virgin Islands. It was owed about £13m when the club went into administration; Swiss-based Forward Sport Fund, linked to Bates, was owed £2.4m; and Krato Trust, based in the Caribbean, was owed about £2.5m. Ahead of the creditors' meeting, Astor lodged a proxy backing the Bates takeover. It said it spoke for around £18m of the debt - the money owed to Forward Sport and Krato as well as to Astor itself. Creditors challenging the Bates deal now believe Astor could legally vote only in respect of the £13m it was owed. Forward Sport and Krato should have lodged their own proxies because they had not assigned the debt before the May administration. Under insolvency law, the assignment of debt came too late to allow Astor to vote on behalf of Forward Sport and Krato, according to the aggrieved creditors. Without the backing of Krato and Forward Sport, Bates's bid to reclaim control of the club would have failed.
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