Former Rangers chairman Alastair Johnston has admitted he awarded contractual terms to a director which would not be legally enforceable.

The America-based businessman, who headed up the board at Ibrox from 2009 until 2011, said he initially acted outwith the terms of the Companies Act in awarding a new contract to then-chief executive Martin Bain, and warned him the agreement would not stand up in court if challenged.

But he claimed he moved to rectify the situation to make the deal legally compliant when he raised the issue with another director.

The director in question, Mike McGill, first raised the matter during the fraud trial of Craig Whyte at the High Court in Glasgow in May 2017.

On Tuesday, Mr Whyte was cleared of the fraud allegation in relation to his takeover of the club in 2011.

Mr McGill maintains that Mr Johnston did not tell the board at any point he had awarded a contract of a duration which did not comply with the Companies Act.

Mr Johnston, who took up a new role on the board of the Rangers International Football Club PLC on Tuesday, said he wrote a "letter of understanding" to Mr Bain in 2009, contracting him to the club for 39 months.

The Companies Act forbids contracts of over two years being given to directors, unless a resolution is passed by shareholders.

The Act states that the "civil consequences of contravention" are that the 15 months additional term on the contract is void, and that the whole deal can be terminated with "reasonable notice".

Asked if he feared he was breaching the Companies Act with the agreement, Mr Johnston told STV: "Yes. By saying this letter was not enforceable, that was the concern.

"That letter quite clearly spelled out the fact it was a 39-month contract which was 15 months longer than it could have been to be enforceable.

"But the bottom line was this was a basically a surety that gave comfort to a guy that all other things being equal, he will make this amount of money.

"Notwithstanding the fact I'd asked the majority of the directors about it, I still had made it clear to Martin Bain there was a possibility that letter of agreement would not be enforceable because it could be regarded as being unenforceable under the terms of the Companies Act. He was very aware of that."

Mr Johnston served as director of the Rangers oldco from February 2004 to May 2011, resigning shortly after Mr Whyte purchased the majority shareholding in the club. He was chairman from 2009 until 2011.

Instead of seeking formal ratification, Mr Johnston informed a majority of the nine directors on an individual basis.

"I don't know... I am not familiar enough with the law to the extent that the Companies Act... does this have to be conducted at a formal board meeting, or does it have to be minuted you have discussed this with five directors?" Mr Johnston asked in his interview.

"In terms of allegations that I didn't tell the other directors, that of course is bull****. There were nine directors, I got approval for five of them. In addition to myself there was Dave King, John McClelland, Paul Murray and John Greig.

"There were four other directors. One was Martin Bain, one was Donald McIntyre, whose boss was Martin, so I didn't want to put him in that position. The other two were essentially working for Murray/the bank - Donald Muir and Mike McGill. It wasn't done at a meeting, I individually met with the five directors.

"All the directors would testify I had discussions with them to that effect. They had an opportunity to deny that at the board meeting which I reported what I had done."

Mr Johnston said he felt had to find a way to incentivise Mr Bain to stay at the club.

"The reality is I was able to persuade to Martin to stay, and he wanted to make as much money as [chief executive] Peter Lawwell at Celtic. I said you might deserve it, but you're not going to get it. Rangers can't afford it. So if that's what you want, you will have to go.

"I said I will consider, however, doing a letter of understanding between you and me with respect to paying you over three years what you might otherwise have got in two years. But that is the only concession I will make.

"This agreement between us is not enforceable. If you were able to challenge it or use it, it is not going to be enforceable if it ultimately goes to court.

"Ironically, when Martin Bain filed his case for unfair dismissal, [he] won a court action that basically said we will ringfence your compensation. They ringfenced the compensation based on that letter of agreement.

"The Court of Session saw that letter of agreement and didn't throw it out. The judge basically made the decision that he would look at it from the perspective of what would apply under the terms of the Companies Act.

"For example, this language was not enforceable, but all it had to do was be replaced by language was enforceable and legitimate. That's exactly what happened and that is exactly how it was planned to happen."

Mr Johnston said he then followed the advice of Mr McGill to inform the board of his actions. He claimed Mr McGill then later used the approach taken as leverage against him.

"The irony was Mike McGill came on the board and I told him about Martin's contract but I didn't want to raise the details for the purposes of the minutes of a board meeting.

"He said, 'What you can do is get your agreement down, reference the fact it is in the board meeting, it's in the minutes and any director can go and see it if they want.'

"And that is exactly what I did, on the instructions of none other than Mike McGill.

"These things were only brought up later on when there were issues with respect to Craig Whyte, and trying to cajole me into approving Craig Whyte's transfer of credit from Lloyds Bank to a company in the Caribbean that had palm trees as directors, essentially.

"I basically didn't want to record all the details for the purpose of the minutes. That's when Mike McGill said 'OK, now that you've done that, when you report it at the board meeting, have it minuted that these contracts are available for all the directors to see at their discretion privately."

Responding to the comments, Mr McGill said his "recollection is different" from Mr Johnston's.

"I advised Mr Johnston to disclose the details of the contractual changes to the board and obtain approval from the board with the contract being available to see separately.

"At no point did Mr Johnston advise the board on the length of the arrangement. It is the length of the contract that falls foul of the Companies Act without shareholder approval.

"I do not believe that there were efforts to 'cajole' Mr Johnston as he depicts. Instead, there was simply a refusal to honour the terms of the arrangement awarded to Mr Bain."

In his evidence in court, Mr McGill said he first became aware of changes to Mr Bain's contract in "the early part of 2011".

When defence QC Martin Bain asked what he had discovered, the witness answered: "The chief executive had been awa rded a 39-month contract termination."

Asked who did it, Mr McGill replied: "The chairman of the club, Alastair Johnston."

Mr Findlay further questioned him on whether the chairman had the "power" to sanction the deal. Mr McGill responded: "I don't believe he did. I don't believe the board was told.

"It would breach the Companies Act. Any contract awarded to a director which is more than two years in term would require the approval of the shareholders. That had never been sought."

In court, it was put to him whether he agreed it was "an example of the chairman doing something in breach of company legislation?"

Mr McGill replied: "Yes."

Mr Johnston claimed his actions were ultimately as a result of carrying out the orders of the club's majority shareholder, Sir David Murray.

"The best thing I could do if I wanted to defend myself is the fact I discussed this all with David Murray, who happened to be the 85% shareholder," he said.

"When I inherited the responsibilities for dealing with the contracts, that's when Martin Bain showed me the IOUs he got from David Murray. I called David Murray and said 'what's all this?'.

"So I talked to David Murray and I said, 'I am going to have to deal with this' and he said, 'Do whatever you have to do.' So technically speaking, that is my best defence.

"'Do what you have to do', he said, 'to keep Walter and Martin together'. Essentially by talking to him about it, it was doing it by the book.

"And by the way, I had to find a way of incorporating the IOUs David Murray had put on the books unofficially that I had to inherit. They were significant sums of money to Martin Bain."

Mr Johnston continued: "The rationale was that based on performance, David Murray had verbally made commitments to Martin Bain about performance bonuses.

"These were satisfied but he said 'I will write you an IOU because I can't pay you right now because we are under pressure from the bank.'"

The "IOU" in question is believed to be an arrangement to pay Mr Bain a year's salary if he was involved in the successful sale of Rangers. He received a £360,000 bonus, which was paid by the Murray Group.

Sir David Murray issued a short response to the allegations.

He said: "Alastair Johnston is currently making daily statements on his interpretation of events of his time at the club with a selective memory," he said.

"I presume it is part of his 'return strategy' to the club."

Mr Bain declined to comment.

Mr Johnston latterly contacted STV to further clarify his comments. "I was left to tidy up a situation that I inherited from David Murray pursuant to letters that he had given to Martin Bain pertaining to commitments to compensation that he had deferred paying to him prior to David Murray leaving office only two weeks before.

"I, therefore, discussed the whole issue of Martin's compensation going forward with David to solicit his input and guidance, and he told me to do whatever I had to do.

"As he was the 85% shareholder and someone who had previously handled all senior executive compensation without recourse to the board [I believed] that having a special resolution of the shareholders would not be required in these circumstances.

"In addition, I said I received the approval of a majority of the directors. I didn't just merely discuss it with them.

"The legal advice that I received was that in the event there was any dispute about this issue, then the action that would be prescribed would be limited to imparting terms that would comport with the provisions of the Companies Act which is exactly what transpired when this agreement was considered by the Court of Session when it upheld Martin Bain's case for wrongful dismissal and ringfenced his compensation by Craig Whyte about two years later.

"In these circumstances, that is why references to Martin Bain's employment agreement during the Whyte trial by his lawyer were carefully framed in the context that it "may" or "possibly" was a breach of the Companies Act."