York City's Supporters' Trust board are "strongly recommending" the motion to make JM Packaging 75 per cent - plus one share - owners of the KitKat Crescent-based football club.

In fact, in a letter to its 1,250 members, Trust chairman Steve Beck has stressed that "if additional funding is not put in place very quickly then the club's directors would be obliged to consider the solvency of the club."

A proposal to reduce the Trust's 85 per cent majority shareholding to a 25 per cent (less one share) stake will be put to its members during a special general meeting at the Tempest Anderson Hall on Tuesday, June 6.

The matter will then be subject to a vote and, if the proposal is accepted, then JMP, owned by current City managing director Jason McGill, would increase its current investment of £350,000 in the club to £1million.

In return, it would become the Minstermen's majority shareholders although the Trust will hold additional special rights.

The extra £650,000 JMP is prepared to invest, less money that the Malton-based company has already provided over the last two months, is intended to cover £150,000 losses made over the season that has just ended and provide the club with an annual injection of £100,000 for five years, starting on July 1.

McGill paid £50,000 for a 15 per cent stake in the Minstermen in March 2003 and his company also facilitated a £300,000 loan for the club which, due to the bank's insistence, will now need to start being repaid in January and not when Bootham Crescent was sold as originally envisaged.

This loan, under the proposal, would now be exchanged for 'B' shares in the club, which have preferential rights in the event of a winding up.

The £650,000 of new funds invested would also be treated as a loan with an interest rate of 11 per cent secured against KitKat Crescent.

But this loan would only be repayable in the case of insolvency.

Otherwise, only the interest will be payable on the assumed sale of KitKat Crescent when the club are in a position to move to a new stadium.

In the letter about the special general meeting, Trust chairman Beck, who is also a club director, said: "The Trust board believes that the proposed arrangements are in the best interests for the continuation of professional football in York. It will enable the club's operations to benefit from the significant voluntary input of time and skills by Jason and other existing club directors - which is essential for the leadership and running of the club.

"Various possible alternative funding and management arrangements have been investigated and considered. The arrangement with JMP is the only available option.

"Given the need to swiftly remove the uncertainty overhanging the club, under the JMP proposal there is certainty about the provision of funds and also about the continuity of leadership/management. Working in partnership with Jason, the Trust will continue to promote its vision of a thriving community-focussed York City with a high quality permanent home in the city, managed on a long-term sustainable basis and achieving a good level within the Football League structure.

"Like you, your fellow supporters on the Trust board love York City and want to see it prosper."

About the reduction in the Trust's shareholding under the proposal, Beck added: "Ideally the Trust would like the club to have the additional funding of £950,000, have someone to dedicate the significant management time to run the club and for the Trust to retain 85 per cent ownership. However, the reality is that we cannot achieve such an ideal option.

"To put it bluntly, voting against the motion risks pushing York City into a position of serious uncertainty about its financial future."

What is a 75 per cent plus one share?

A 75 per cent plus one share business stake would normally give the holder greater voting rights and have tax implications than a straight-forward three-quarter interest.

York City's Supporters' Trust chairman Steve Beck has pointed out that the special additional shareholder rights that the Trust have insisted upon under the JM Packaging proposal would override the voting rights issue and added: "The figure has been decided upon for tax reasons."

Updated: 09:27 Tuesday, May 23, 2006