Football Management

Commentary on the management of over 160 English football clubs by Dr John Beech, winner of the FSF Writer of the Year Award 2009/10 Twitter: @JohnBeech Curator of Scoop.it! Football Finance

Archive for the ‘Football League’ Category

Pompey and the potential for points deduction

Posted by John Beech on November 29, 2011

Having carefully got through as far as Prescot Cables in the first half of my round up of clubs in trouble below the Premier League, I had rather assumed that I could at least get Part 2 published before returning to the subject of Portsmouth.  Clearly that was not meant to be.  So here are some first thoughts on what will be an ongoing saga of, well, Pompeyesque proportions.

For most fans there will be the question of points deduction, a matter for the Football League.  As it stands, at least for the moment, the company which owns Pompey, Portsmouth Football Club (2010) Limited, is not in Administration, as it is at pains to point out in its official statement (1); it is the parent company, Convers Sports Initiative plc, which is (2).  It is the issue of how closely the two companies are linked that the Football League will have to rule on.

The obvious precedent to spring to mind is that of deadly rivals Southampton, where the decision was that the company owning the club and the parent company were so intimately involved that the club should suffer points deduction on account of the parent company going into Administration.  It’s worth quoting from the Football League’s statement (3) at the time:

The [Grant Thornton] report [on which the decision was based] concluded, among other things, that:

1.The Holding Company has no income of its own; all revenue and expenditure is derived from the operation of Southampton Football Club Limited (SFC) and the associated stadium company.

2.The Holding company is solvent in its own right. It only becomes insolvent when account is taken of the position of SFC and the other group companies.

3.The three entities (the Holding Company, SFC and the stadium company) comprise the football club and they are inextricably linked as one economic entity.

If we compare the situation at Southampton then with the situation at Portsmouth now, there are major differences.  At Portsmouth currently:

  1. CSI does have income of its own and definitely does not derive all its income and expenditure from Portsmouth Football Club (2010)
  2. CSI is insolvent in its own right; its insolvency does not arise because of any insolvency on the part of Portsmouth Football Club (2010)  [I grant you that it’s hardly a cash cow, but it’s not Portsmouth that has brought CSI down]
  3. CSI and Portsmouth Football Club (2010) are not inextricably linked as one economic entity; CSI’s website shows their structure (4) to consist of a number of unrelated subsidiaries: Boom!, DGB Convers, GP Week, Leaders, Power Play Golf, Sportpost and WRC, as well as Portsmouth FC

On this basis, there is a strong case that CSI’s Administration should not result in a points deduction for Portsmouth.

If Portsmouth Football Club (2010) should itself seek protection by going into Administration, that would be entirely different matter, and points deduction would without doubt be incurred.  The Football League has no precise published tariff, but I would expect something in the region of 17 to 20 points.  How likely is that to happen?  The Administrators of CSI will almost certainly be looking to sell off its components, and Portsmouth is in effect already ‘on the market’.  With the added complication of Portpin and Balram Chainrai’s involvement in the insolvency of CSI though, it’s not a club that will be fighting off suitors.  In the meantime, the club “has funding in place for the short term, but will now be seeking alternative investment for its longer-term requirements”.

Not a very encouraging situation, but what’s new for Pompey fans?

[For new readers, I make clear that I am Portsmouth fan and a member of the Pompey Supporters Trust.  The thoughts above are, nonetheless,  my thoughts from the perspective of an academic researcher.]

Posted in Football League, Governance, Insolvency, Points deduction | Tagged: , , , | 16 Comments »

Substitutes and ‘cheating’

Posted by John Beech on July 21, 2011

The Football League has announced that its member clubs have voted “voted to reduce the number of substitutes that can be named on the teamsheet for matches in the npower Football League from 7 to 5” (1).  As a rationale for this change, it was stated that “This was felt to be a sensible and prudent step given the financial challenges facing many football clubs and the commitment made earlier this summer to adopt UEFA’s Financial Fair Play framework“, or, to put it another way, it’s ultimately a good way of cutting costs by employing a marginally smaller squad.

I for one would like to see a change in the rules regarding the actual substitutions allowed.  Nothing imposes such a feeling of anti-climax at the end of a tense game is the tactical (and essentially unnecessary) substitution of players as the final whistle approaches.  It has far more to do with the ‘gamesmanship’ of Stephen Potter than the gamesmanship of what used to be the Beautiful Game.

Musing on this, I turned out an early report by the Football League (but actually published in the FA Yearbook 1966-67, and hence not available online I’m afraid) called “Substitutes: An Experiment Justified“.

It begins “When the Football League introduced its Substitute Rule at the beginning of the 1965-66 season, it was received with misgivings from many people inside and outside the game.  Many of those who were against it chose to ignore the fact that substitution of players for injury has been permitted by the Laws of the Game for a good number of years”.  The second sentence came as a surprise to me.  Did substitution actually take place before 1965?  Surely in that era the culture was for a player to battle on, hiding injury in spite of the danger of exacerbating it causing permanent injury.  Think Bert Trautman.

The report continues: “There were many forecasts of the amount of cheating [sic] and misuse which would follow.  In point of fact, there has been no instance of the Substitute by a manager in order to gain a tactical advantage over his team’s opponents.”  Would that the same could be said today.

Data in the report broadly backs up the claim.  It records that 772 substitutions had been made in 2,028 League games.  These occurred during games thus:

Period of game

Substitutions

Up to 10 minutes

26

11 to 19 minutes

31

20 to 29 minutes

55

30 to 45 minutes

141

Total, first half

253

46 to 59 minutes

182

60 to 69 minutes

100

70 to 79 minutes

110

80 to 85 minutes

106

86 to 90 minutes

21

Total, second half

519

The number of substitutions in those days was limited to one, and, as the report says “If substitution is raised to two, this would increase the danger of substitutes being used tactically, which is really what everyone wants to avoid“.  Substitution was, in any case, only permitted then for injury.

Subsequently ‘everyone’ apparently stopped wanting to avoid the use of tactical substitution, and we have seen the number permitted on the bench grow to 5 in 1996 and then the about-to-be abandoned level of 7 in 2008.  Memory fails me on when tactical, i.e. for reasons other than injury, substitution was first allowed (any offers?).

Do I detect in all of this the idea that the Football League cares less about the game and its enjoyment by fans today than it did in 1965, and cares more about the costs of its member clubs?

Perhaps I’m being a little harsh.  Substitution for injury is a principle I would strongly defend, on the grounds of players’ well-being, and I wouldn’t want a return to pre-1965 practices.  It’s just that it seems to me we have gone too far with tactical substitution, something which I still want to avoid, to use the League’s phrase.

Posted in Costs, Ethics, Football League, Health & Safety, Human Resource Management, Organisational culture, Players' careers | Tagged: , , , , , , | 2 Comments »

Just how slow can a car crash be?

Posted by John Beech on July 3, 2011

On Tuesday we were told that the long-running Plymouth Argyle saga was on the verge of taking a significant turn according to Administrator Brendan Guilfoyle: “at a meeting with the preferred bidder held today, Tuesday, June 21, 2011, the terms of a formal sale and purchase agreement were agreed by both parties” (1).  These terms of course include the separation of ownership of the stadium and the club, invariably bad news for a club.

On Wednesday Peter Ridsdale, as ever the Spinmeister, announced “Our objective is to have [the deal] go through by the end of this week” (2), which, in my book at least, promptly increased the odds on this actually happening.

Sure enough, as I write, no deal has yet been announced.  Nor will any imminent deal have any significant impact on the longer term stability of the club.  There is still the issue of the club’s Golden Share to be resolved, and the potential fly in the ointment is Kevin Heaney, owner of Truro City Football Club and not entirely successful property developer (3).  Ridsdale happily purrs “Mr Heaney would only be the landlord of the [Home Park ground] and would have nothing to do with Plymouth Argyle Football Club. As long as the club is independently owned and financed, there is no reason why the Football League should complain.”  Predictably the Football  League’s chairman has promised that “the governing body will “rigorously enforce” its regulations before giving the takeover the green light” (4).  This is the Football League that rigorously enforced its regulations with respect to the anticipated removal of West Ham to Leyton Orient’s doorstep (5), so perhaps the Spinmeister has reason to be optimistic.  I doubt it however.

There is too the small matter of Ridsdale’s impending court case, which continues to cast a shadow over any new dawn in Argyle’s fortunes (details of the charges here).

As a Pompey fan, I am only too familiar with false dawns.  At present, the consensus among Portsmouth fans seems to be to give the new owners, Vladimir Antonov and Convers Sports Initiatives, a ‘fair chance’.  The Football League apparently have by sanctioning the takeover (6).  The Financial Services Authority were, against their general flow of approval, less inclined to allow another Vladimir Antonov business, the Lithuanian Bankas Snoras, to operate in the UK (7), the problem being a failure to provide all the required information to the regulator.  Another Antonov deal, the purchase of Spyker Cars from Saab attracted attention when there were allegations, strongly denied, that Antonov had links with the Russian mafia (8).

To me, it seems that, not only do we suffer from ineffective ‘Fit and Proper Person’ Tests in English football, we suffer from the lack of any Fit and Proper Governance Test.  While we are quick to (rightly) condemn what has been going on in FIFA of late, perhaps some mote-casting would be in order at the same time.

UPDATE – 5 July 2011

Apparently the deal is “all on track“, although presumably that’s the track with leaves on it.

Posted in Fit and Proper Person tests, Football League, Governance, Ownership, Stadium | Tagged: , , , , | 5 Comments »

The Olympic stadium, the small matter of distance, and the Premier League

Posted by John Beech on January 21, 2011

By the time you read this, it may well be that the post-2012 fate of the Olympic stadium has been decided, with the decision going to one contentious bid rather than the other (I won’t rehearse the pros and cons of Tottenham and West Ham, taking a detour via Crystal Palace – they have been very well summarised by Paul Kelso in The Daily Telegraph).  What does interest me is how either can in fact move there without breaking Premier League rules.

West Ham are currently the closer of the two to the Olympic Stadium, although not as close as Leyton Orient – see Google Maps and enter ‘football stadium London’; Spurs are pin G and West Ham pin F; Orient are the red dot just above Leyton; a scale of distance is shown at the bottom left).

If West Ham or Spurs are to make the move, it’s worth looking at the Premier League rules (the Premier League handbook 2010/11 is downloadable here) on club moves.  In the section on Ground Criteria on page 152 you will find the following:

Ground Registration

5. Each Club shall register its ground with the Secretary and no Club shall remove to another ground without first obtaining the written consent of the Board, such consent not to be unreasonably withheld.

6. In considering whether to give any such consent, the Board shall have regard to all the circumstances of the case and shall not consent unless reasonably satisfied that such consent:

6.1 would be consistent with the objects of the Company as set out in the Memorandum;

6.2 would be appropriate having in mind the relationship (if any) between the locality with which by its name or otherwise the applicant Club is traditionally associated and that in which such Club proposes to establish its ground;

6.3 would not adversely affect such Club’s Officials, Players, supporters, shareholders,sponsors and others having an interest in its activities;

6.4 would not have an adverse effect on Visiting Clubs;

6.5 would not adversely affect Clubs (or Football League clubs) having their registered grounds in the immediate vicinity of the proposed location; and

6.6 would enhance the reputation of the League and promote the game of association football generally.

(The emboldening of para 6.5 is my own little mischief)

The corresponding Rules of the Football League (thus applicable to Orient, and either currently Premier League club should they be relegated before a move takes place) state:

13.6 Each Club shall register its ground with the Executive and no Club shall remove to another ground without first obtaining the written consent of the Board, such consent not to be unreasonably withheld.

13.7 In considering whether to give any such consent, the Board shall have regard to all the circumstances of the case and shall not grant consent unless it is reasonably satisfied that such consent:

13.7.1 would be consistent with the objects of The League as set out in the Memorandum of Association;

13.7.2 would be appropriate having in mind the relationship (if any) between the locality with which by its name or otherwise the applicant Club is traditionally associated and that in which such Club proposes to establish its ground;

13.7.3 would not adversely affect such Club’s Officials, players, supporters, shareholders, sponsors and others having an interest in its activities;

13.7.4 would not have an adverse effect on visiting Clubs;

13.7.5 would not adversely affect Clubs having their registered grounds in the immediate vicinity of the proposed location; and

13.7.6 would enhance the reputation of The League and promote the game of association football generally.

Virtually the same as it happens.

Now, much would hang on the interpretation of ‘immediate vicinity‘ I grant you, but I would have thought that the average fan on the top of a Clapham, or perhaps even Clapton, omnibus might just see the Olympic stadium as in the immediate vicinity of Brisbane Road.  (Yes, I appreciate they themselves moved from Clapton, but that was in 1937 and I haven’t heard any complaints about this recently).

If either Spurs or West Ham move, it would be a headlong rush towards one another as well as towards Orient.  Currently they are less than seven miles apart as the crow flies.  Orient is just three miles from Upton Park and just under four from White Hart Lane.

Will any of this geography be taken into account?  My guess is that it won’t.  The Premier League will enforce their own rules with their usual opportunistic pragmatism driven by a revenues motive.  Mind you, the same Premier League document states on page 9:

The Chairman’s Charter sets out our commitment to run Premier League football to the highest possible standards and with integrity.

We will ensure that our Clubs:

• Behave with the utmost good faith and honesty to each other, do not unjustly criticise or disparage one another and maintain confidences.
• Will comply with the laws of the game and take all reasonable steps to ensure that the Manager, his staff and Players accept and observe the authority and decisions of Match Officials at all times.
• Follow Premier League and FA Rules not only to the letter but also to their spirit, and will ensure that our Clubs and Officials are fully aware of such rules and that we have effective procedures to implement the same.
• Will respect the contractual obligations and responsibilities of each other’s employees and not seek to breach these or to make illegal approaches.
• Will discharge their financial responsibilities and obligations to each other promptly and fully and not seek to avoid them.
• Will seek to resolve differences between each other without recourse to law.

But of course!


UPDATE 25 January 2012

The Premier League have announced that they would not consider a move by either West Ham or by Tottenham to be a breach of their rules (A).

Posted in Football League, Governance, Premier League, Stadium | Tagged: , , , | 38 Comments »

The Portsmouth Soap: Episode 94

Posted by John Beech on August 29, 2010

In what seems to be now a tradition, my being abroad for a week coincided with yet again a bizarre development at Fratton Park.  On Tuesday The Sun revealed that “Lever’s Pomped up for buyout. PORTSMOUTH are wanted by whizkid tycoon Thomas Lever. The 21-year-old Lamborghini-driving son of a wealthy Manchester businessman and local councillor is in advanced talks to buy the Championship crisis club” (1).

On Thursday The Knutsford Guardian had a slightly different spin on the story: “THE son of a bankrupt former Knutsford councillor has put together a £25m takeover bid for Portsmouth Football Club…  His father David was made bankrupt on July 5 at Manchester County Court” (2).  It would not appear that father David is necessarily down to his last bawby though.  According to a report of 14 July in the same newspaper, the bankruptcy arose as a result of a dispute over payment for the framing of 100 pieces of memorabilia by an international art services company (3).  David Lever had paid the company £10,000, but had not subsequently paid a further £3,500 although ordered to do so by a County Court judge in March, prompting the art services company to raise bankruptcy proceedings.

I don’t know why, but I get just a hint of déjà-vu about this in the Pompey context.  Presumably David Lever is free to leave Knutsford without fear of arrest on gun-running charges though.

The pressure is no doubt on Administrator Andrew Andronikou to find a buyer.  His CVA is based on a business model that presumes Portsmouth will stay in the Championship for the next five years, but the thread-bare squad have faced a dismall start to the season, with the club lying joint bottom of the Championship (with, by coincidence, Milan Mandric’s Leicester) after four games.  But will this lead to an ‘any port in a storm’ approach?  In my opinion, having the 21-year-old Lamborghini-driving son of a wealthy (but legally bankrupt) businessman as the club’s new owner would be (let’s be polite) a sub-optimal outcome.  But the actions of previous owners have led the club into this present position, where simply selling to the one potential purchaser is the only option for an Administrator.

There is of course the new toughened-up Owners & Directors test, which replaced the old Fit & Proper Person test, that would have to be passed.  This case would certainly show whether or not the new test has any more teeth than the old one.  It would be interesting to know the thoughts of David Lampitt on the proposal – he is of course Portsmouth’s recently installed Chief Executive, but was formerly the FA’s Head of Financial Regulation.

Surely a time for new script writers of this particular soap, and a re-think of the plot.  The club does not need a re-run of a previous story line, especially one which led to the shambles the club now finds itself in.  Mind you, I’m not holding my breath.


PORTSMOUTH UPDATE - 11 September

Portsmouth did not get their golden share from the Football League yesterday because of incomplete paperwork (A).  David Lampitt explained that the end of the transfer window had made this problematic.  He expects this to be done within the next week.

The delay may have implications – it gives Tom Lever extra time to put his bid for the club together.


PORTSMOUTH UPDATE - 13 September

Thomas Lever is reported as falling out with Chris Dailly of Jumbo Bridging with whom he had been in talks about funding (B).  ‘Soap’ is definitely the right word for the Pompey saga.

Posted in Benefactors, Ethics, Fit and Proper Person tests, Football League, Governance, Insolvency, Ownership | Tagged: , , , , , , | 4 Comments »

The Portsmouth verdict…

Posted by John Beech on August 6, 2010

… or the Great Escape thanks to an own goal.

As a Pompey fan, not surprisingly my first reaction to the verdict of Mr Justice Mann was one of relief, a feeling no doubt shared by all Pompey fans, and especially by those members of the club’s non-playing staff for whom the threat of further redundancies will have been eased.  Creditors, I would argue, should at least been not displeased with the result, as the real threat of liquidation would have left them with even less.

The judgment was based, of course, on narrow but precise points of law, the full details of which have yet to be published.  Matt Slater, who was in court, provides an excellent account of the proceedings on the final day here.  He writes of Mr Justice Mann’s pronouncement:

So HMRC’s arguments about the iniquity of football’s millionaires-first repayment rules, the general iffiness of clubs making “tax efficient” image rights payments to players with dubious “brand value” and the serial nature of Pompey’s antics were irrelevant. This case, in Mann’s opinion, boiled down to one key question.

Was the vote to decide how Pompey get out of this mess (with an agreement to pay creditors a reduced amount of the monies they are owed) organised correctly?

The judgement was an unequivocal ‘Yes’.  Mr Justice Mann found that “none of the five heads of attack by HMRC amount to unfair prejudice nor have they been materially affected.  In my view, HMRC will not be worse off by the situation left by the CVA bearing in mind what the alternatives could be for the club… There is no worthwhile way of money coming into the club other than by the CVA (1).  The reasons for his ruling were “This case turned on commercial validity and not the football creditors rule. This is not the right place to decide whether creditors rules are fair or not. There is no way in which any worthwhile solvency can flow into the club other than the CVA” (2).

One way of viewing this is that HMRC’s fight to get the Football Creditors Rule overthrown scored an own goal yesterday.  I had argued a few weeks ago (3) that HMRC were making a tactical mistake in pursuing this line, but it gives me little pleasure to see them beaten.  The Football Creditors Rule is an absurdity.  If I had a pound for every occasion over the last couple of weeks that I’ve been asked to explain it to non-football followers, well, I wouldn’t have been able to make any impact on Pompey’s tax bill, but I could dine out modestly.  Invariably the reaction has been one of shock, disgust and almost disbelief.  ‘Why should football clubs and players not have to pay their taxes like any other business and its employees?’ is the inevitable question that follows.

The argument the leagues put up, and it is of course their rule, not Portsmouth’s, is that without it the integrity of the transfer market could not be sustained.  Without it, it is suggested that the financial collapse of Portsmouth might have brought down Watford.  I have to say that I just do not think this argument stands up to scrutiny.  It is tantamount to saying that as a club you should be guaranteed payment for a when selling a player whether your customer, the club buying your player,  can afford it or not, that the simple expediency of checking credit ratings is not for you.  What it allows is an unnaturally high level of transfer fee, and this at the expense of HMRC.  Of course normal taxpayers can’t see the sense in this!  As for the ‘Watford argument’, I would argue that, had they collapsed as a result of Portsmouth’s collapse, there would have been significant other factors contributing to that collapse.

There is too the issue of image rights, which now have added legitimisation as a means of tax avoidance,  i.e. within the law, as opposed to illegal tax evasion.  Hardly a good result for HMRC.  (Incidentally, an interesting story on image rights here.)

In a nutshell, a good result for Portsmouth, and a bad result for HMRC.  Hurray and boo respectively!  It was, in the bigger football picture, also a bad result for football.  There seems to a creeping myopia that the specificity of sport should somehow place its participants in a special category which avoids paying the taxes which everyone else pays.  Sam Allardyce’s call yesterday, “If Cameron is listening, drop the tax bracket will you? Then we can get the best players in the world to play in the best league in the world.” (x) seems to me to be singularly ill-timed and out of step with public opinion.

The leagues are beginning to address the reform agenda, but I fear it is ‘too little, too late’.  Given that a consultation process is taking place about the collection of taxes from companies (see Bubbling away in the background), and in the context of the ‘Great Deficit’, the leagues are moving towards their last chance to scrap the Football Creditors Rule before they too face HMRC in court.  Let’s hope they have not been buoyed in their intransigence by yesterday’s ruling.

Posted in Debts, Football League, Governance, HMRC, Insolvency, Law, Premier League | Tagged: , , , , , , | 9 Comments »

The very strange case of Swindon Town

Posted by John Beech on June 5, 2010

Swindon and Salisbury lie rough forty miles apart, so it is quite possible that a Salisbury City fan may have picked up the latest copy of The Swindon Advertiser and read this intriguing report, entitled ‘Town’s CVA finally signed off‘. Quite what their reaction was I hesitate to guess.  They must surely have looked to compare Swindon’s situation with that of Salisbury City (if you are unfamiliar with Salisbury’s current battle, see previous posting Appendix E: Tough Love for Salisbury City?).

It followed a rather terse posting on the Swindon club website (1) on Thursday

At the time that the Andrew Fitton led consortium acquired a controlling interest in Swindon Town Football Company Limited, it immediately met the conditions attached to the CVA (Creditor Voluntary Arrangement) that the club was in at the time.

The club is pleased to announce that after a protracted period of time, the administrator (Hacker Young) has officially confirmed that the CVA has been discharged and that the records at Companies House have now been amended accordingly.

As Chairman Andrew Fitton told the The Swindon Advertiser:

[People] probably though we were out a long time ago, but that wasn’t actually the case.

“It has taken two years and a huge amount of effort to get something to happen which was meant to happen in June 2008. But if you look at the Companies House website we are absolutely clean now.

“It was red tape and just legal issues whereby you cannot close out the CVA until everybody has cashed their cheques.

Now why might people think Swindon were out of a CVA a long time ago?  Well compare that statement yesterday to this one of Andrew Fitton to The Swindon Advertiser on 31 May 2008 (2): “ …if you do a search for Swindon Town you will see we are no longer a club the subject of a CVA.”  So there you are Andrew, mystery solved.  Recycling at its best.

Fitton continued in yesterday’s interview:

There was a letter dated July 2008 saying we had fulfilled all our objectives, but that still wasn’t good enough.

“And at the same time you have people who are not fit and proper going under the radar and getting into other clubs – it just doesn’t add up.”

In the wake of Town’s League One play-off final defeat to Millwall, Fitton hinted that he may have been ready to walk away from football after becoming “disillusioned” with the sport.

And he explained: “This situation is what a lot of my recent frustrations have been based on.

“We spent thousands of pounds on lawyers which has no influence on Swindon Town Football Club.

“It doesn’t help the players or help us win games. It is just crap that has to be swept up.

“Technically we could have been subjected to a transfer embargo, but thankfully the Football League were very good and decided that we had done everything we could and lifted it soon after we arrived at the club.

“I wish I could say the same about the FA though. They suspended our membership, meaning we weren’t even allowed a vote with them because they think we are a club who are financially delinquent.

“Should the FA have spent their time suspending our membership, or should they be sorting out the problems in our game?

“This is something celebrate. But you can now put into perspective my frustrations outside the game.

Three cheers, it would seem, for the Football League, for not being too retentive in the application of its Rules and Regulations.

But surely this can’t be the same Football League that is threatening to expel Stockport County for entering a second season in Administration, not grant Grimsby Town reprieve if that should happen, and then play 2010/11 with a club short, thus depriving very club in League 2 of one week’s match day revenues?  Well, yes it is – rules is rules, you see.

Given that Andrew Fitton is not an entirely reliable source of information, I’ve been trying to make sense of my Swindon Town file to see just how long the club has been suffering an insolvency event.   Clearly it goes back as far as May 2008.  The problems at Swindon predate Fitton, and are complex, with various attempts to bring them out of a CVA.

In January 2008, the BBC website reported that the total transfer embargo had been lifted, being replaced with a ‘flexible’ one, meaning “they can only sign and loan players with approval from the Football League” (3).  The report concluded “The flexible embargo will be removed on 31 May once all agreements have been met between Fitton’s consortium and the Football League“.

Previous contenders to run the club included BEST holdings (a Portuguese consortium), the mysterious Mike Diamandis, Willie Carson and Sir Seton Wills.

In July 2007 when the final payment of the CVA was due, then Administrator Andrew Androikou proposed amending the CVA and delaying a payment of £900,000 until the end of May 2008 (4).

In March 2007 the following exchange appeared on the club’s website (5) in a Q&A session:

Q. Why have no Accounts been produced for over 3 years?
Bob Moore

The only accounts that are overdue are those that relate to the year ended 31 May 2005. They are completed in draft and await the final audit report. Accounts for the year ended 31 May 2006 do not have to be filed until 31 March 2007.

An interesting answer to a different question.

In November 2006, a BBC report cited a Swindon Town board statement referring to “when the CVA was structured five years ago” (6).

In October 2005, the club narrowly escaped a winding-up order from HMRC, the second that year (7).

At the AGM in December 2004 as reported by the Supporters Trust (8), it was reported that:

No accounts were presented as the club is currently trading insolvently and the auditors will not sign off the accounts until an £800,000 cash injection is handed over.

2004 was characterised by continual disputes over planning permission for a new stadium that the club clearly could not afford.

The Trust’s report (9) of the club AGM in December 2003 also mentioned the problematic preparation of club accounts:

AGM brings more questions and answers for shareholders.

Swindon Town’s 2003 AGM was a largely harmonious meeting at the County Ground this morning, with both shareholders and board members keen to look to the future.

The meeting featured a number of questions from the floor regarding the three years of accounts recently delivered to shareholders, and the continued backlog of the remaining years accounts.

2002, on the other hand, was characterised by a spell in Administration, from March to August (10 and 11).  Debts at the time were £1.6m, including nearly £1m to the Inland revenue (now part of HMRC).

In August 2001 the club was reported as being in breach of its CVA (now you hadn’t forgotten had you!) (12), by failing to meet the conditions that “the debt to the Inland Revenue would be settled and sufficient working capital would be channelled into the club to keep it running efficiently“.

It was in fact back in August 2000 (13) that the CVA had been agreed, following the takeover of the club by Terry Brady (14).  This brought the club out of Administration which it had entered in February 2000 (15), when the club was reported as being between £2m and £3m in debt, projected to make a £1.5m trading loss this season, and needing to repay between £250,000 and £500,000 immediately.  The debts include £214,000 due to the Inland Revenue.

Rather a long time for a CVA to run – almost ten years.  The obvious club to be lenient with in the application of rules?  Perhaps not.  Stockport fans (and Grimsby fans) as well as Salisbury City fans might use a stronger term.

No doubt Andrew Fitton will speaking up at the Football League on Stockport County’s behalf.

Posted in Debts, Football Association, Football League, Governance, HMRC, Insolvency | Tagged: , , , , , | 3 Comments »

HMRC v. The Football Creditors Rule

Posted by John Beech on June 2, 2010

It has emerged that HMRC are to mount a legal challenge against the Premier League and the Football League in an attempt to overthrow the Football Creditors Rule (1).

Until September 2003, the Crown, and hence the Internal Revenue (IR) and Customs & Excise (C&E) who subsequently merged to form Her Majesty’s Revenue and Customs (HMRC), enjoyed the legal status of ‘preferred creditor’ – they got paid in full before any remaining money was divided between the remaining creditors.  Because of football’s Football Creditors rule, there was a clear priority on who had claims against an insolvent company:

  1. The Crown
  2. Football creditors (e.g. other clubs, players)
  3. The rest

With the loss of its legally-enshrined preferred status, the Crown then fell behind football creditors in the pecking order.

Accountancy Age summarises the current situation well:

Currently if a club enters administration they are bound by the football creditors rule, meaning some creditors such as players and managers will be paid in full from the administration and the remaining payments divided between the unsecured creditors including HMRC.

The rationale for having the rule is that football clubs need the certainty that they will receive funds for the sale of a player to another club – without the rule, the transfer market would collapse, with selling clubs losing out to defaulting buying clubs.

You can see their point, but there are plenty of other situations in which failing to pay debts in full is problematic.  An obvious example is St John’s Ambulance, who recently got worse treatment than football creditors from Portsmouth and Crystal Palace (in both cases, fans, to their credit, rallied round and paid the debts).  Small businesses who end up being offered 20p in the pound(at Portsmouth) or even 1p in the pound (at Crystal Palace) by Adminstrators find it hard to stomach that clubs such as Chelsea or Manchester City are guaranteed priority in receiving a full pound in the pound.

According to legal expert David Roberts as reported on the Sporting Intelligence website, HMRC have a good chance of having the Football Creditors rule declared unlawful, citing two principles of insolvency law:

  1. The pari passu principle
    This is the principle is that creditors should be treated on an equal basis, being paid pro rata what they are owed.
  2. The anti-deprivation principle
    This is the principle that a legal entity should not be deprived of its assets by reason of insolvency.
    This seems to my unqualified legal eye to be particularly pertinent in the case of VAT, which already belongs to Crown, having been collected on the Crown’s behalf by the club.

If the case is strong, why has HMRC not tried before?  Back in 2004 they did try, but took action against a club, Wimbledon, rather than the League.  The situation was a complex one, with Wimbledon in Administration and in the process of morphing mysteriously into ‘the Franchise’ (aka MK Dons).  Indeed in his judgement Lord Justice Neuberger in the Court of Appeal refers to “the very unusual facts of this case” (2).

To me this suggests why HMRC should now take action against the Leagues rather than against, say, Portsmouth.  Each club’s CVA might be seen as a unique set of circumstances, requiring HMRC to fight each case individually.  If they can succeed in getting the Leagues’ Football Creditors rule declared unlawful – end of story.

If they do turn out to be successful, it will have a major impact on the way transfers are conducted.  Clubs will actually have to consider whether other clubs they are selling players to are credit-worthy.  Clubs seen as credit risks will find it hard to buy new players.  A bit like every other business sector really.  Now there’s radical.

Posted in Debts, Football League, Governance, HMRC, Insolvency, Law, Premier League | Tagged: , , , , , , | 17 Comments »

The Top 91 Clubs?

Posted by John Beech on May 29, 2010

The uncertainty and overall shambles characterising the allocation of clubs next season in the Non-League divisions (see Appendix E: Tough Love for Salisbury City?) is in danger of spreading to the Football League.

Grimsby Town, together with Darlington, occupied the two bottom slots of League 2 at the end of the season just gone, and are therefore relegated.  Stockport County, who finished bottom of League 1 and are thus destined for League 2 this coming season, remain in Administration, having entered that state back in April 2009.  Football League rules state that a club cannot enter two consecutive seasons in Administration, and, unless Stockport County rapidly get their act together to come out of Administration, they will be ineligible to begin the coming season in League 2.

Perhaps not unsurprisingly, Grimsby Town approached the Football League to enquire whether Stockport County’s failure to come out of Administration would mean they (Grimsby, having finished bottom but one) would then be reprieved.

The answer they received from the Football League is that they would not be reprieved should Stockport fail to come out of Administration, and “according to Football League rules, we would operate with 23 clubs in League Two next season” (1).

Now, some might see Grimsby’s attempt to gain a reprieve as clutching at straws and that they should just quietly accept relegation.  That is a matter for debate.  But what is a matter of fact is that Football League rules, designed to punish a club for financial misdemeanours (in this case, Stockport, who are not even actually in League 2), would result in one League 2 club every Saturday next season sitting twiddling its thumbs and failing to take much needed revenue at the turnstiles.  In other words, the Football League would have contrived to hit every club in League 2 financially as a result of the financial misdemeanours of a previous season’s League 1 club!  It frankly defies belief.

No doubt Grimsby would also point to the case of Forest Green, potentially reprieved in the Conference National if Salisbury City are ejected for financial problems.  But then, consistency never was a strong point of football governance.

Posted in Football League, Governance, Pyramid movement, Relegation | Tagged: , , , | 2 Comments »

Premier League v. Football League

Posted by John Beech on May 10, 2010

Once again, the Premier League, or ‘the Wild East’ as Arsenal’s Stan Kronke has amusingly christened them (1), have made clear their naked desire to control football down the pyramid.  They have long attempted to distort competition in the Championship by paying parachute payments (as a reward for failure?!) to their unfortunate ‘old boys’ (see Parachute payments, and Rocket payments?) and more recently have started what they outrageously call ‘solidarity payments’.  If Lech Wałęsa was dead, he’d be spinning in his grave at this abuse of language.

If you do not doubt the sincerity of the Premier League, you might reflect on the fact that the Premier League, threatened by the possible restriction on their money printing press of broadcasting rights, trotted out the argument that “grass roots of sport will suffer and be irreparably damaged through loss of funding” (2).  Threat or promise?  Sky, their ‘partners in crime’, claimed that OFCOM’s involvement was an “unwarranted intervention“.  Warranted by Act of Parliament actually, even if unwelcome by Murdoch’s media empire.  ;-)  The intervention follows a three-year enquiry by the way.

In 2007 the Premier League offered the Football League a ‘solidarity package’ of over £90m, in the context of almost £3m windfall for their television deals (both figures covering a three year period) (3).   The latest outburst of Premier League hegemony started at the end of March (4).  The ‘offer’ that was put to the Football League was increased parachute payments to PL relegated clubs of £16m per year for four years, and non-parachute payments offered were £2.2m per season (an increase from the previous £830,000) for Championship clubs, £325,000 for League 1 clubs, and £250,000 for League 2 clubs (5).

Now, on the face of it, this may sound a generous offer.  But there are a couple of obvious problems with it.

First, it would at least be theoretically possible that a club might suffer three consecutive relegations and find itself in the Conference with a PL parachute payment of £16m.  Now that would seem really fair to the other Conference clubs.  It’s an unlikely scenario I grant you – the club would have had to have been really bad to have suffered three consecutive relegations with all that extra money splashing around with which to buy players.  But that is exactly my point – this extra money is precisely designed to distort competition and save the PL old boys from suffering too much in the harsh reality of the Football League.

Secondly the Premier League is giving the money not to the Football League but to its clubs, defining how much, and to whom, and when. Surely those are issues that the Football League should have control over rather than the Premier League.  If you doubt this, consider the logical corollary for the redistribution of wealth between the two – the Football League imposing a levy on clubs promoted to the Premier League, for up to four years.  Of course it’s not going to happen – the difference in affluence and hence power is way too great.

Which brings us to the third point.  The rates at which the Premier League has set the payments to Tiers 2, 3 and 4, is likely to increase the wealth differentials and make it harder for the lower clubs to climb the pyramid.

It was a ‘take-it-or-leave-it’ offer, such is the arrogance of the Premier League, which might perhaps have just nudged the decision to the ‘accept’ decision which the Football League came (6) to at what has been reported as a rather stormy meeting .  Already League 2′s Lincoln City chairman Steff Wright has stuck his head above the parapet:

Wright told BBC Lincolnshire: “It was a take it or leave it deal we were given.

“League One and League Two clubs felt the money should have been more fairly distributed throughout the Football League and that hasn’t happened.”

Wright added: “I think it’s a massive disappointment. Fairness and equality have gone out of the window.”

And he fears the system would create a second-level Premier League by stealth.

“In a few seasons’ time the top of the Championship will be dominated by teams who’ve benefited from these parachute payments”, he said.

“Nobody’s arguing against the idea of more money coming down but it’s the way that that will now distort the Football League.

“Instead of there being a problem between the clubs that have the money in the Premier League and the clubs without in the Championship, you now have that problem moved further down the league.

“It will make it more difficult for clubs like Lincoln to get promoted to League One and eventually find their way into the Championship.” (7)

Well said, Steff.  Let’s hope Spain’s La Liga are listening.  Incredibally they have just announced that they are to form a breakaway copy of the Premier League – “The new system of organisation and development will allow a much more attractive and better-run competition than the current one” they reckon (8).  If only, if only…


PL v. FL UPDATE – 10 May 2010

An interesting example of how the power positions of the governing bodies are viewed – VisitBritain is jumping on the World Cup bandwagon with a series of interviews of players from overseas, getting them to talk about where they like to visit in Britain (1).  To do this, they’ve partnered not with the FA or even the PFA, let alone with governing bodies other than in England, but with the Premier League.

The promotion is online at http://www.visitbritain.com/football, but when you click through the URL you are auto-redirected to betrays how VisitBritain, ‘the official website for travel and tourism in the UK [sic] (2) view, and promote,  ‘Football in the UK’ and ‘Premier League’ as synonyms. Mind you, given that they seem to treat ‘England’, ‘Britain’, and ‘United Kingdom’, theyare at least consistently inaccurate.

Posted in Ethics, Football League, Governance, Premier League, Pyramid movement | Tagged: , , , , | 1 Comment »

A scarcely noted Football League failing

Posted by John Beech on March 30, 2010

While the media have focussed strongly on the failings of the FA in the last week and disseminated the calls for reform from a wide variety of sources, scant attention has been paid to a very basic failing by the Football League – its refusal to increase ticket allocations for Carlisle and Southampton fans to the League Cup final last Saturday.

Southampton were allocated 44,000 seats, which were all sold well before the match (1).  Carlisle had to cope with a 13:30 kick-off on the day the clocks had just gone forward, and the number of coaches that travelled overnight showed their fans’ dedication.

On the day a superb turn out of 73,476 was recorded, with the League crowing “That’s more fans than were in Istanbul last season to watch the final of the UEFA Cup, between Shakhtar Donetsk and Werder Bremen and more than watched the domestic cup finals in Italy, Spain and Holland.” (2).

True, but why were there still blocks of seats unoccupied with fans eager for tickets?

Click to enlarge

A lonely steward contemplates the 73,476 spectators in other parts of the stadium

The League were certainly neither keeping fans happy by refusing further tickets, nor were they revenue maximising – a lose/lose scenario if ever there was one.  Yes, I appreciate it would have tipped the balance of support even further Southampton’s way, but that is the sort of issue which the FA should have thought about when they decided not to move the national stadium to a more equitable location.  The choice of date hardly helps with equity in any case.

All of that said, it was a tremendous event which I thouroughly enjoyed (even as a Pompey fan!).

[I was there by the kind invitation of Supporters Direct.]

Posted in Fans, Football Association, Football League, Revenues, Stadium | Tagged: , , , , | 5 Comments »

 
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