After the recent resolution to the dispute over the 2016 sale of Swansea City. We discuss it in detail with trust chairman Dave Dalton in part 2 of our exclusive interview.
SoS: The Trust recently settled the dispute with the current majority shareholders and previous shareholders. Can you tell us how that came about?
DD: In June 2021 the Trust wrote to all our members to update them on the status of potential legal action to address the issues arising from the 2016 sale of Swansea City Football Club and the impact that has had on our position within the club. It was the expectation at the time that commercial funding and litigation insurance agreements would be signed off (based on offers received by the Trust) and that this was likely to happen before the end of the previous Trust Board’s tenure on 31st July 2021. It was further anticipated that legal proceedings would then commence, not least because at that time, there were no meaningful options available to settle the dispute outside the courts. In short, there were no offers “on the table” and the Trust was heading towards legal action, a step the Trust had always described as being the last resort.
Soon after the newly elected Trust Board convened for the first time in August, I was directly approached by club Director Mr Jake Silverstein. Around the same time as the new Board convened, it also became apparent that the litigation funding and ATE insurance terms needed further consideration and more time to complete. This created some additional time for discussions with Mr Silverstein.
The Trust Board Officers and I met with Mr Silverstein while he was in Swansea for the club’s first two home games of the season. Not long afterwards, discussions also began in earnest with representatives of the former (selling) shareholders. That had proved difficult in previous years.
We continued discussions on a resolution while in parallel our legal team continued to work on finalising the necessary documents with counsel and our funding / insurance providers. In late 2021, these resolution discussions resulted in settlement proposals being received that included important elements that are fundamentally consistent with the aims of the Trust.
From the outset, the Trust has always been clear that it has been willing to listen to offers that could lead to a settlement and so avoid the need for legal action. After advanced discussions, the Trust received a further improved offer from both the current and former majority shareholders which was formally put to the full Board for their consideration. This enhanced offer contained components that are better aligned with the aims of the Trust, including the provision of a permanent 5% non-dilutable share in the club.
During this time, the Trust Board was presented with the final funding/insurance documentation from our partners for consideration. This contained some aspects within its final terms that could potentially impact on one of the Trust Board’s responsibilities – to protect the Trust from financial exposure. Legal action is expensive and uncertain – it should not be forgotten that QC opinion the Trust obtained for the case stated that there was a 60% chance of success in establishing liability. So there was still a high amount of uncertainty.
The Trust Board then held detailed discussions and sought further input from our legal team on the available options. After further lengthy internal discussions, where we weighed up all the pros and cons of the improved offer against the alternative of proceeding with the legal case, the Trust Board unanimously decided to accept the offers from both the current and the former majority shareholders, rather than to proceed with legal action. This was a decision between the actual alternatives available to the Trust in late 2021.
SoS: What are the main positives and negatives of the deal and how does it compare to the one that was pulled in 2017?
DD: I’m not sure you can compare the two really Steve? The 2017 offer was on the face of it a far better financial package but we were of course still in the Premier League at that time. The majority of our members voted to accept that offer but for whatever reason negotiations broke down and the offer was withdrawn before the details were discussed and agreed. The settlement agreement we accepted earlier this year is different in that neither the current majority shareholders or the 2016 sellers of the club were prepared to value our shares at anything like what we were offered in 2017. With that in mind the Trust Board and our legal team focused hard on future protection of the Trust as being long-term shareholders of the club.
Furthermore, the settlement agreement results in the Trust retaining its current shareholding of 21%, and out of that 5% of our shares in the club have been converted to Class A shares and are permanently protected from dilution – this is important as it brings long- term security to the Trust’s position and applies beyond the current majority owners.
The remaining 16% of the Trust’s shares in the club are Class B shares and these are subject to dilution over time, as and when loans made to the club are converted to equity. Based on the current outstanding loans to the club, the Trust understands that its 16% position would be diluted to just over 10% of the shares in the club if all the outstanding loans are converted. That would mean the Trust’s shareholding would become 5% plus 10% which totals just over 15% shareholding in the club.
Beyond just the financial terms of the deal, we should also reflect on the fact that this settlement unblocks a years-long stalemate between the Trust Board and the Directors of the club, which has undoubtedly affected our ability to put across the voice of supporters on a consistent basis. This resolution enables us to truly engage (and be engaged) in the running of the club and will create new opportunities for collaboration and access. This should not be overlooked in the benefits that these opportunities can bring for our members and supporters.
SoS:Many members are angry at the resolution and feel the deal should’ve been put to a members vote like the one in 2017 was. Why didn’t this happen?
DD: The members’ vote in 2019 gave the Trust Board the mandate to pursue legal action. The Trust has said on numerous occasions that it was willing to listen to offers that could lead to a settlement and so avoid the need for legal action – which was always seen as a last resort.
The Trust Board wanted to and would have preferred to consult with our members before taking the decision to settle the shareholding dispute. We held many hours of discussions on this as a Board and with our legal team but were left to conclude that further consultation and a vote from members would not be possible, primarily because of the need to retain our funding and insurance offers – a position that would have been severely weakened should news of a potential settlement offer have reached them. Any disclosure would have severely weakened our position with all parties; it is likely that if details of these discussions became public knowledge, some would have walked away altogether if confidentiality had been breached. This matter of confidentiality was not something that was fully foreseen earlier in the process of securing funding and insurance to initiate legal action. And of course, without the offers of funding and insurance in hand it would probably not have been possible to secure a resolution with the current majority owners and 2016 sellers.
In short, in order to explain the legal and commercial realities of the Trust’s position to members we would have had to disclose information that would have breached confidentiality with the funder/insurer and in doing so would have exposed the fragility of the Trust’s position to the majority owners and 2016 sellers, which would most likely have resulted in withdrawal of the negotiated settlement. Some members also observed that the funding/insurance position for legal action seemed to have changed between the statement to members in June 2021 and the announcement of resolution arising from the 2016 sale of the club.
In our February 2022 statement to members, we included the following sentence about litigation funding/insurance: “This contained some aspects within its final terms that could potentially impact on one of the Trust Board’s responsibilities – to protect the Trust from financial exposure”. I’ll try and clarify this. In June 2021 the funding/insurance terms at a high level appeared adequate. However, it became apparent in the subsequent months as the further details of the funding and insurance agreements were reviewed by the Board and legal team that some clauses were not favourable for the Trust. This included an increased legal budget requirement to cover a costly indemnification as well as a higher level of insurance cover for the funder to remain interested in financing the case.
The funder also required that the Trust must use “all available funding” after the funder’s initial outlay was exhausted to continue with the case to completion, however long or expensive legal action would be, including the costs of an appeal. This would have meant draining bank accounts, selling shares and seeking additional third-party funding/insurance (which would of course eat into funds received in the case of a win in court). This was not what was originally anticipated from earlier discussions with the funder and would have gone against one of our core aims as an organisation.
In summary, while working through the detailed terms of the funding and insurance agreements it became apparent that these agreements were significantly less attractive than they appeared in June 2021. The Trust could have continued to try to negotiate better terms with the funder/insurer beyond their final positions, but after encountering stiff resistance from the funder and passing the recommended deadline for initiating legal action (to ensure compliance with the 6-year statute of limitations), the Trust was out of time to pursue legal action any further.
The settlement agreement also means that the club and the Trust can now move forward in a constructive and collaborative partnership, which would not have been achievable had we become opposing parties in High Court litigation. We would not have been able to adequately represent the views of our supporters at club level either. It also allows the Trust to proceed with its core aims and ambitions, as well as to ensure that the Trust is properly protected in the years ahead.
It’s worth stating again too that there were also discussions between the Trust and the current owners for the purchase of some of the Trust’s remaining shareholding but as no agreement could be made on their sale value no shares were sold. If you have other questions about the settlement agreement, I would suggest you read over the four Q and A’s from my recent release on our website as this addresses many frequently asked questions.
SoS: What stage is the agreement at? We believed it was complete and the club’s constitution was being changed and a board meeting had been called to agree that. But Companies House hasn’t been updated which suggests that isn’t yet the case.
DD: Yes, everything has been completed as previously announced. The club have recently informed us that their legal advisers have now collated and processed the relevant documents and forms, and these have now been duly sent to Companies House. We expect that those documents that are required to be filed with Companies House will appear on the Swansea City Football 2002 Limited filing history for public viewing in the near future, subject to Companies House turnaround times.
SoS: In terms of the £500k which will be paid to the Trust every year (max 3 seasons) if we were to win promotion back to the Premier League, can you tell us where this is coming from?
DD: This detail on the source of any Premier League promotion bonus payments is contained in the new Shareholders’ Agreement, which is confidential as part of the settlement agreement with the majority owners and sellers. We have been asked this question by a few members since the announcement and we have instructed our legal advisors to contact the legal teams representing the current majority shareholders and 2016 sellers of the club to see if they support disclosure of this information. If we are able to provide more information we will advise our members accordingly.
SoS: Members have called for yourself and other board members to stand down as a result of the agreement with many left angry and disillusioned. What do you say to those people?
DD: Of course, I understand the feelings of some members, but I should also say that we have received many messages of support from other members who have perhaps not been as vocal on certain platforms. It’s been a very difficult few months trying to broker any sort of potential agreement with parties that a few months ago seemed impossible. There simply was no golden ticket considering the position the Trust found itself in late in 2021, especially how financially exposed the Trust would have become if the case became protracted or went to appeal. Again, this risk wasn’t as apparent until the funders and insurers came back to us with their final contracts to sign in late 2021.
We had to make a very difficult decision in less-than-ideal circumstances, but the Trust Board ultimately reverted to our founding aims and principles. We firmly believe the settlement offer was in the best long-term interests of the Trust and its members.
For many weeks prior to the settlement agreement the Trust Board and our legal team looked at ways we could have come to a different conclusion in the circumstances we were in and we couldn’t find any better way forward. I have more recently asked supporters to give us their own proposals as to how we could have come up with a viable alternative.
When you honestly and objectively take into account all the factors I’ve raised above it becomes very apparent the difficulties the Trust was in and very clear that the settlement agreement reached was in the best interests of the Trust and its members and Swans supporters.
In terms of standing down, I understand that there is frustration amongst some of our members, but as Board members each of us stood and was elected to improve the Trust and our relationship with the club in the best interests of Trust members and supporters.
Each of us is committed to the long-term success of the Trust and we will continue to do our utmost for members and supporters while we are part of the Trust board. We operate according to the Supporters Direct Model Rules that are available on the Trust website. These rules describe the governance processes that determine how the Trust operates, including how members can put forward a request to hold a special general meeting to propose resolutions such as calling for a vote of no confidence.
In the summer, there will be an opportunity for Trust members to stand for election to the Board – in this election cycle, over half of the current board will come to the end of their current terms of office and those places will be available for all members to stand. We firmly believe in the importance of this annual process and recognise the benefits it can bring through fresh impetus and ideas to help the Trust evolve. If you believe you can bring something new to the Board or would like to help make changes in how things are run, we would like to hear from you and would welcome your applications for the summer elections.
One final note on this. I firmly believe that any new Board Member will be joining a group of dedicated fans who only want to do best by the club and by the supporters. You will be joining at a time where there are no barriers to collaboration between the club and the Trust, which is certainly not something we could have confidently said prior to the resolution of the shareholding dispute. This creates a great opportunity for all of us and one that most other supporter groups of clubs in the football pyramid would dearly love to replicate.
SoS: How can the Trust move on from this?
DD: The Trust is already looking to the future and the current board now see so many opportunities that can ultimately benefit our members and supporters in the years ahead. Irrespective of how the shareholding dispute was resolved, we should all be able to objectively agree that the Trust’s permanent Director on the Club’s board, along with a permanently protected shareholding in the club can only be a positive aspect. How many fans of other clubs would like to have a representative on their club’s Board to provide insight and challenge decisions when required?
The shareholding dispute has taken much of the time of our Trust Board over the past 5 years, sometimes at the detriment of our ability to deliver wider projects and initiatives that advance the interests of our members and Swans fans – we are excited at having more space to work on these projects.
A few weeks ago, I issued a release on our website that included immediate, short term and ongoing priorities that myself and the Trust Board are all focusing on. We hope that our members and the supporters will get involved with us to help deliver these.
We also confirmed that in the coming months we will be launching a consultation with members and fans on the future strategy of the Supporters’ Trust. With the shareholding dispute now resolved and the opportunities for a closer working relationship with the club, it is an important time for members to tell the Board their priorities and what they would like the
Board to act on. This strategy work will ask members and fans to consider the priority working areas of the Trust with the club, and as an individual organisation.
We are currently working through plans for this exercise but know that it will encompass both virtual events and surveys, as well as opportunities for our supporters to tell us their views on match days outside our Trust Pod located next to the club shop. We are committed to sharing the outputs with our members and creating a forward-looking strategy and plan of activity to further the interests of our members and fans within the club and the community.
We hope that this strategy will provide a reference point for the current Board in the remainder of their term, along with any new members who join the Trust Board as part of this summer’s annual election process that I mentioned in an earlier question.
I understand that we all have different interpretations of what a Supporters’ Trust should be and how it should be run and there are times when we won’t all agree on our policies and decision making. That is always a healthy debate to have but the one thing that underpins and binds us all is that we are all passionate supporters of our wonderful club who just want the Swans to be as successful as we can.
It should be remembered that this and indeed all of our Swans Trust Boards over the past 20+ years have been made up of volunteers who dedicate considerable time and effort to the Trust and the club to ensure the voice of our supporters can be heard. I can vouch that every one of the current Board is committed to upholding our values and ethos while striving to work in the best interests of the Trust and Swansea City Football Club.
I’ve mentioned before that we are aware of a very small number of social media and public platform users who have directly contacted myself and other Trust Board members following recent website announcements, social media posts and member updates. Some of the content of these messages is disappointing to witness and unnecessary. While it is of course perfectly acceptable for members and supporters to express their views it should not be in a manner that is personal, derogatory, abusive or confrontational as it can majorly impact not just on the account holder but their family and friends. I know this has happened already and it affects us all.
As a result, most of our Trust Board members have taken the decision to distance themselves from their social media accounts for the time being, including those managing our official @SwansTrust accounts. This is not at all what we want, as it can create walls where there don’t need to be any, but we do understand why such decisions have been made. We want to engage with our members and fans across all mediums and have enjoyed doing so for many years, but we must do so with mutual respect.
We will continue to be available before each home game at the Trust Pod as well as directly emailing members and posting relevant articles and links on our recently relaunched www.swanstrust.co.uk website with links on our social media sites as often as possible. And of course, anyone can email us at email@example.com or via our Contact Us page on our website.