East Kilbride-born McGee famously discovered the band after seeing them play an unbilled set at legendary Glasgow venue King Tut's back in 1993.
But he admits he thought Liam's arrogance and looks pointed to him being involved in crime.
Alan, who will be in Scotland next week to premiere the Creation Records documentary Upside Down, recalled: "I would never have seen Oasis if I hadn't got the licensing laws wrong and turned up at 8.30pm because I expeced the venue to close early.
"It was a Sunday, falling on a Bank Holiday weekend and I was there to see my band 18 Wheeler. No bands were on when I arrived.
"Liam Gallagher was sitting in the bar in a blue Adidas tracksuit. He looked like an 18-year old Paul Weller.
"I'm a bit cynical. I thought he was obviously a drug dealer because he looked both tremendous and arrogant. I thought, rock 'n' roll stars don't look that good.
"I was thinking the bald guy behind him, who turned out to be Bonehead, must be the singer."
So Alan almost didn't bother to catch the short set by Oasis that led him to offer them a deal on the spot and made him a millionaire.
The retired music mogul recalled: "I had heard these mouthy Mancs wanted to get up on stage. That was all I knew about it. I was drinking Jack Daniel's when I was told there was going to be a punch-up with the Mancunians.
"I went upstairs with my sister to check 18 Wheeler were going to be okay.
"Then Liam Gallagher came on stage. As Liam's performances go, it was pretty subdued. He wasn't giving it large.
"If anything, it was Noel and his guitar playing that dominated. I am not even sure they knew I was in the audience."
Alan saw the potential of the band, though even he admits he could never have foreseen the 50 million sales that followed.
He said: "The music business had already passed Oasis by at this point. They had already done a gig at In The City showcase in Manchester that year. Noel and Liam had a tiff on stage, so nobody had bothered to check out if they were any good.
"Six months later, I get the opening times for King Tut's wrong and happen to see them play four songs in Glasgow. It's like it was meant to be. It was that random.
"It was a bit like walking to a bus stop and discovering Elvis Presley."
Alan added: "I thought they were a good band. I never knew they were going to sell so many records.
"I knew they were influenced by The Stone Roses and I was clever enough to think I might do a bit of business. We thought we would be doing well if Definitely Maybe went platinum. We sold seven million."
Alan is back in Glasgow on Tuesday when director Danny O' Connor's film documentary premieres at Glasgow Film Theatre (GFT). It charts the Creation label and the signing of Oasis, Primal Scream, Teenage Fanclub, My Bloody Valentine and many more.
Fresh interviews are mixed with concert footage, including Oasis at Knebworth. The screening at 6.15pm will be followed by an after-party at the 02 ABC in Sauchiehall Street. It will feature a live set by BMX Bandits, a DJ set by Alan McGee and other special guests.
Alan, now 50, admits he snubbed the chance to hold a premiere for the film in London. He said: "We are doing the premiere at the GFT. It's nothing personal against London. I don't mind DJ-ing there but I feel Glasgow deserves this. It's a Scottish story, it's a Celtic story, it's an Irish story. It is basically people from Glasgow, Ireland and Manchester.
"My family came over from Ireland 100 years ago. The Gallaghers are first generation Irish and My Bloody Valentine are Irish. It's very Celtic.
"The funniest part of the film is Manchester. The pivotal moments are obviously the rise of Oasis. Everything Noel Gallagher says is comic genius. Bobby Gillespie's take on it all is very astute.
"The main story centres around Bobby Gillespie and I arriving in London because Andrew Innes, who I was in a band with, wanted to become a pop star.
"The two of them formed Primal Scream and I formed a record label. I had only gone to London because Andrew was going to throw me out of our band!"
Alan is back in talks with the BBC and Channel 4 for a programme based on his time at the label.
He and Scots writer Irvine Welsh hope to persuade them to create a drama based around his own experiences and those of Sex Pistols manager Malcolm McLaren and former Rolling Stones manager Andrew Loog Oldham.
When prompted, Alan wastes no time in listing the bands who defined Creation.
He said: "Oasis, obviously, because they defined the 90s, Primal Scream because they defined Creation and my life in a lot of ways and Teenage Fanclub because Norman Blake is a pop genius.
"Then there's The Jesus And Mary Chain because they helped Creation to get off the ground and My Bloody Valentine because they are still relevant and could headline most festivals in Europe."
Meanwhile, he is certain Oasis will reform, following their split in 2009.
He said: "I think the break-up was meant to be because Liam's band Beady Eye have made a much better record than anybody wants to give him credit for. It is very listenable. It's a feel-good record you want to hear on a Saturday morning.
"But it's not the best record he'll ever make. And having heard the Noel demos, I think this will be his most important record since What's The Story. But Noel and Liam will both suffer when they release albums because they are no longer Oasis.
"They are going their separate ways at this point. Ever since I have known them they have been having bad arguments.
"I don't think you can discount them getting on well in the future and somebody paying them to do an Oasis world tour. I would be shocked if that doesn't happen.
"I think both Liam and Noel needed, creatively, to go and do their own thing. There will probably be fireworks if they get back together but they still share the same management and at some point someone will say, 'there's £200 million. Go do 100 shows'."
Alan recounts one piece of Scottish rock history previously unwritten and not featured in the film.
He said: "Remember the Bungalow Bar in Paisley? The bands who played there were amazing.
"It was incredible and arguably the most important punk venue in Scotland.
"Andrew and I played a Newspeak gig with Lloyd Cole on drums. It was the first time Lloyd had been on stage. I have never told anybody before. Somehow I had become pals with Lloyd Cole. He was our first drummer and we were absolutely rubbish."