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

Posts Tagged ‘Football Conference’

A day of reckoning

Posted by John Beech on May 23, 2011

I managed to follow the great play-off between AFC Wimbledon (to whom, many congratulations) and Luton Town (to whom, commiserations) at least live online.  Football at its most exciting.  I wonder if Andy Burnham chose quite the right words though when he tweeted “Wimbledon back in Football League. Brilliant. A great victory for all football supporters over the money men. Well done to all at AFC.”  I’m sure he wasn’t referring to Luton as ‘the money men‘, although his comment would have been entirely appropriate if Wimbledon had beaten Crawley Town.

Yesterday, with the final day of Premier League games, unfortunately found me in the Tirol in a hotel room, arriving and logging on just after the games had started.  Heady stuff, and probably the most exciting afternoon in the PL all season.  As Alan Hansen was moved to write (1), “The big winner has been the Premier League itself, because this season has shown it to be the most exciting of the lot. ”  I’m not sure that I would enirely agree with his argument.

It struck me, particularly as I was feeling somewhat removed from the action, that it was distinctly odd that all the excitement was over who would or wouldn’t be relegated.  Aston Villa v. Liverpool, Everton v. Chelsea, and Fulham v. Arsenal were attracting very little attention from the twitterati.  Is this the grand scheme of things that the greedy breakaway Chairman of the old First Division envisioned some twenty years ago?  I came to the conclusion that in fact, yes, it was, had they bothered to think their plans through.  To me it is yet another symptom of what is wrong with the governance of English football.  Who is or isn’t relegated is clearly an important part of the general excitment of football, but it surely shoudn’t be the major focus.

The sacking of Ancelotti (2) because “this season’s performances have fallen short of expectations and the club feels the time is right to make this change ahead of next season’s preparations” to me provides yet more evidence of just how dysfunctional the Premier League has become.

Relegation from the Premier League undoubtedly puts serious financial pressure on a club.  When the drop in broadcasting revenues is netted off against the parachute payment, one is looking at a drop of £30m-£25m in revenues.  To this must be added a drop in matchday revenues (reduced attendance and lowered ticket prices) and a drop in merchandising sales, although these will vary from club to club, depending on the loyalty of their fans, in particular how large the core of ’till I die’ fans is.  Clubs may face a contractual drop in sponsorship fees, and may or may not have had the wisdom to include relegation clauses in their players’ contracts.  In other words, any club relegated faces a financial problem, but some may face significantly harder problems than those who had planned for the eventuality.  Clubs will also be in different states of financial health to start with.

Last week I was asked by BBC West Midlands to review the prospects for Wolves and Birmingham City should they be relegated.  On virtually every financial measure Wolves looked far more resilient to facing the drop than Birmingham City.  West Ham will undoubtedly face serious difficulties too, and only Blackppol look reasonably equipped to face the drop.

The Football League season is not quite finished, but further down the pyramid things are clearer with respect to next season.  AFC Wimbledon and Crawley Town are joining the Football league, the epitome of fan ownership and ‘benefactor’-induced financial doping respectively.  At the other end of the Conference National, it’s goodbye to Southport, Altincham (whose luck in benefitting from other clubs’ financial problems finally ran out, Eastbourne Borough, and Histon.  I’m sorry to see Eastbourne Borough go down as they were the most senior English club which is a Community Interest Company (CIC).  As an interesting aside, the Scottish Premier League may well have a CIC as a menber in the coming season – St Mirren (3).  This is a case that is well worth following, as the current owners are seeking to sell the club in a way that was  “making sure it remained sustainable and debt-free” (4).

Lower down the pyramid, the upcoming movements are plotted here.  Good to see resurrection clubs AFC Telford and Farsely on the way up.  It’s interesting to note that Ilkeston are listed as ‘reinstated’, good news for their fans following their resurrection (5), but I wonder what, for example, King’s Lynn fans or Grays Athletic fans will make of the reinstatement decision.

Finally I turn to a football story that is relevant to me in my immediate circumstances, but which does not seem to have well covered by the English-speaking  media, although due credit to Yahoo! Sport (6) for being an exception.  The story quite simply is that a major derby match between Rapid Vienna and Austria Vienna was abandoned after 26 minutes following a major pitch invasion – see here and  here.  Disturbing images that we hope we will not see moving further northwards and westwards.  After thirty minutes of disruption, the police felt unable to guarantee the safety of the players in a resumed match.  We seem to have moved onward from such dark days in England, and it was good to note the Birmingham City fans staying on at White Hart Lane to show what they had in common with Spurs fans (7).

Mind you, I suspect that “Thursday night, Channel Five” is not really going to catch on on the terraces.

Posted in Broadcasting rights, Costs, Economic impact, Fans, Football Conference, Governance, Merchandising, Premier League, Promotion, Pyramid movement, Relegation, Revenues, Sponsorship | Tagged: , , , , , , , , , , , , | 2 Comments »

Appendix E: Tough Love for Salisbury City?

Posted by John Beech on May 23, 2010

This is the time of year that anorakies like me start to change our data files to reflect the promotions and relegations which are about to take place officially.  If you think that is already a straightforward task, barring the odd play-off final, then you are forgetting what is happening in the Conference and lower leagues.

The bottom of the Conference National table finished thus:

18  Histon – 46 points
19  Eastbourne Borough – 46 points
20  Gateshead – 45 points
——————————————
21  Forest Green – 45 points
22  Ebbsfleet United – 44 points
23  Grays Athletic – 26 points
[24  Chester City - folded; record expunged]

A close run thing then, but, given Chester’s unfortunate demise, you would expect to see Forest Green, Ebbsfleet United and Grays Athletic heading for the Conference Regionals.  But apparently “there are still a number of outstanding issues to be resolved and the listing my be subject to subsequent change.”  Well, indeed there are, and even the FA list (1) is not up-to-date given various appeals that may or may not be made.

Here is the most glaring of the complications:  Salisbury (12th; 58 points).

Salisbury’s recent troubles came to a head last year, when Chairman Neville Beal and the rest of the board resigned, putting the club up for sale with the price tag of just £1 (2), although with the condition that any new purchaser would have to pay off all debts.

Two initial prospective buyers fell by the wayside (3), but sponsors In-Excess stuck with the club(4).  In early September however, HMRC sought a winding-up petition for approximately £200,000 (5), and the club sought the protection of going into Administration (6), bringing with it the inevitable ten-point deduction.  (Without this, Salisbury would have finished the season just outside the play-off zone.)

After protracted negotiation, in January a consortium led by William Harrison-Allan bought the club (7), and a transfer embargo was lifted, and an agreement with HMRC was reported to have been reached (8). By the end of February a CVA had been agreed (9), and the climb onwards and upwards, both on the pitch and financially appeared to have begun.

However, at the beginning of April the owners of the club’s stadium, Old Sarum Stadium Ltd., rather unhelpfully announced that they wanted to develop 150 houses on the site (10).  Far worse was to come – the club was to become a victim of Appendix E.

How is it then that the club should find itself precluded from playing in the Conference next season?  After all, the club’s directors stated this week (11) that:

During this period [since they took over the club] all salaries, payments to suppliers and other liabilities have been met in full. We have upgraded the floodlights system as directed by the FA and Football Conference to meet BSP status, paid all football creditors, and also met our requirements under the CVA and all other footballing responsibilities to the Conference and FA.

Appendix E had been used by the Conference against Northwich Victoria last season, but that club successfully appealed.  An FA panel ruled that Appendix E, which ordered expulsion as punishment for entering Administration, contradicted another rule that said a ten-points deduction was an appropriate sanction (12).  Appendix E was reviewed at the Conference AGM last July, but quite what happened is not clear, as this Non-League Paper report (13) of the AGM suggests:

John Palmer [of Farsley Celtic] said: “I do not believe this was voted upon. I have spoken to two or three chairman in this league and they know nothing about the amendment.”

Northwich chairman Jim Rushe agreed. “I don’t care what they say, they did not change any rules,” he said.

“It was in the agenda, but when the item came up they said that in light of the FA not ratifying Appendix E, it would not be debated and nobody voted on it.”

But a Conference source says the clubs were duped.

“The AGM agenda was a shambles. They were referring to Item 8, which was actually Item 6, and then Dennis (Strudwick) got his knickers in a twist when it
came to talking about rule changes.

“There was no debate, no discussion, nothing. In the end, all the rules were voted through – and people didn’t even vote! People simply didn’t realise what they were doing.”

So quite what the exact situation is with regard to the rules and regulations in Appendix E is open to doubt.  What a shambles, and even more so as Appendix E is due to be discussed again at the next AGM in July.  Here’s hoping some sensible and clear decision is made.

Which brings me to a second complication:  Darlington, relegated from League 2, and thus due to join the Conference.  Darlington went into a CVA in June 2009 which did not see full repayment to the club’s creditors (14).  Football creditors got full repayment, but all other creditors received only 0.9p in the pound.  Salisbury fans will look at Darlington’s acceptance into the Conference with incredulity.  According to Appendix E:

…In the event of a Football League club entering the competition subject to any Insolvency Event then…that shall not make the club ineligible from membership.

In the event of any Football League club suffering, undergoing or entering into an Insolvency Event in its first season in the competition and being still subject to that Insolvency Event by the date of the annual meeting at the end of its first season in the competition then that…shall not make the club ineligible for membership the following season.

In other words, less stringent conditions apply to a club dropping down to the Conference than apply to clubs such as Salisbury already in the Conference!

If Salisbury do end up being expelled, Forest Green will be the lucky recipients of a reprieve, and, again Salisbury fans may find this hard to stomach.  Forest green have not exactly been an exemplar of best practice in football finance and management of late.  At the end of March they came within a hair’s breadth of a winding-up order from HMRC (15) over a debt of £42,000, and admitted to needing investment of £250,000 to £300,000 to survive.  Just over a week ago they were advertised as for sale in the Financial Times (16).

Before any Forest Green fan finds it necessary to leap to the defence of their board, let me make clear that I am not directing my criticisms in that direction (in this posting at least!).  What I find ludicrous is that

  • promotion and relegation in the Conference National is increasingly being decided by matters that have nothing to do with on-the-pitch performance;
  • rules are being applied that many seem unsure were clearly posed and democratically voted in;
  • new regimes trying to bring clubs to a healthier financial state are being impeded from doing so;
  • different, slacker, rules are applied to clubs coming down from the Football League;
  • rules in the Conference are significantly different from those in the Football League and the Premier League.  Where would Portsmouth and other financial miscreants find themselves if they were subject to Conference rules?  There needs to be a tad more consistency in the rules as they are applied across the three governing bodies.
  • football creditors must get full repayment of debts, at the expense of HMRC and a club’s suppliers who are small businesses and even charities.

The shambles being faced by these clubs in the Conference National is repeated further down the pyramid.  Northwich Victoria are falling foul of Appendix E and are considering a joint appeal with Salisbury (17).  Grays Athletic find themselves in free fall rather than moving to the Conference South (14).  But if I don’t leave those extensive issues to a later posting, I’ll not keep this posting to even a semi-reasonable length!


CHESTER UPDATE – 26 MAY 2010

Chester’s resurrection club is over half way to raising the £100,000 it needs to get up and running (A).  It is not being helped by the FA’s indecision in finalising which tier it is to play in.  Without that decision, the club cannot sell season tickets, thus it has a cashflow problem.

The new club website is here.


SALISBURY UPDATE – 10 JUNE 2010

Salisbury City have lost their appeal and will now be demoted two divisions (B). As a result, Forest Green have been reprieved in the Conference National, and Weston-super-Mare have been reprieved in the Conference South.

Ridiculous!

Posted in Debts, Football Association, Football Conference, Governance, HMRC | Tagged: , , , , | 4 Comments »

Whither Chester?

Posted by John Beech on February 28, 2010

The decision of the Football Conference Chairmen to expel Chester City at last showed a will to take the decisive step to bring to an end the sorry tale of this club (see postings passim).

Well, probably that is with respect to Chester City Football Club 2004 Limited.  It can of course apply for membership of a lower league, but is still due in court to face a winding-up petition from HMRC on 10th March.  Not that Director of Football Morrell Maison seems too deterred (1).  He has presented his analysis of what has gone wrong:

Where Chester failed was the fundamental principle of football, they were unable to play games. Other club keep going because they play games.

“There is a lot of shock around the club at the moment but we have been in talks overnight to look at the options because there is still a business there, it still has a ground.

“I do not know what the Vaughan family are planning but I do know that the club could continue, get on an even keel, pay off it’s debts and apply for re-entry further down football’s feeder leagues.

“There are people who say they can get this club going well let’s see if they can.

Well, there you go, sorted!  Mind you, he also says “My first reaction was shock, but when you think, there are probably six or seven clubs operating at the moment in a similar position.”  I’d love to know which six or seven clubs he thinks have been expelled by their respective Leagues, have an owner who has called the fans ‘idiots’, and are trying to sell the club to a group of Danish fans.  Well worth a look, with respect to the last, is a great spoof website Project Brøndby (2 and 3).

Equally of course a new AFC Chester could apply.  More power to City Fans United!  Let’s hope they can bring football back to Chester on a realistic and fan-driven basis.

Posted in Football Conference, Governance, Resurrection | Tagged: , , | 2 Comments »

A Conference Chairman explains…

Posted by John Beech on February 22, 2010

… the key issues surrounding Friday’s meeting to discuss the fate of ‘stricken’ Chester City, in an interview with the Cambridge News (1).  (‘Stricken’ is an odd choice of adjective by the reporter concerned – surely the point of the meeting is to decide whether they will be ‘stricken’.  OK, I’ll move on from Percy Picky mode.)

The Chairman concerned is Histon’s Tony Roach and he makes clear just what a Herculean task they face:”We’ve been told there’s a meeting on Friday and that we have to vote. I don’t think it’s particularly right.

“Clubs have been asked to vote on the future of another football club and we’ll have the blood on our hands if we vote Chester out. I don’t necessarily agree with it at all.

“Teams above us could lose up to six points (if Chester are expelled) and that could give us an outside chance of reaching the play-offs, so there could be a benefit there to us.

“But we didn’t get to play Chester on Saturday and we’ve lost out on revenue because of that. So it’s all a bit of a mess.

So, absolutely nothing to do with the particular club under consideration, and its catastrophic recent history of mismanagement.  It’s to do with the rational decision of whether you want ‘blood on your hands’ apparently.

Let’s just hope that his approach is not typical of those voting.  They would do rather better with the quality of their decision-making if they simply focus on Chester City Football Club 2004 Limited, and put their squeamish haemophobia out of their minds.

Posted in Ethics, Football Conference, Governance | Tagged: , , | 4 Comments »

The suspension of Chester City

Posted by John Beech on February 11, 2010

As Stephen Vaughan seems unwilling to do the decent thing and fall on his sword, the Conference have given him a shove in the right direction by suspending the club, ostensibly for failing to fulfill fixtures (1).  The suspension is for seven days, but as the police will no longer man matches at the Deva because of an unpaid bill, the players will no longer play because they haven’t been paid for three months, and the club, in the Conference remember, has debts of £700,000 (see Ian King’s excellent TwoHundredPerCent scoop for details), it’s going to take a EuroLottery rollover win to see the club back on the pitch in its current format.

Trading solvently?  My arse, as Jim Royle would put it.  (See previous posting)

May Chester City 2004 Ltd. be confined to the dustbin of history, and let’s hope to see AFC Chester arise very shortly.

Posted in Debts, Football Conference, Governance, Insolvency | Tagged: , , , | 4 Comments »

King’s Lynn down a key player as they face HMRC

Posted by John Beech on November 23, 2009

King’s Lynn, who face a winding-up order in court this Wednesday from HMRC over a debt of £65,000, have just seen the resignation of their recently appointed Financial Director David Handley (1).  This is clearly a cause of deep concern to Linnets fans, but it might the bigger picture behind this might just pick up some resonances for fans at many another club higher up in the pyramid.

The nearest Football League clubs are Peterborough (roughly 30 miles away), Norwich (roughly 40 miles away) and Lincoln (roughly 50 miles away).  To see a Premier League game you would have to travel just over a hundred miles to watch Spurs or Arsenal, or almost 110 miles to Hull. So with a population of 135,000 in the town alone, it would not be unreasonable to have aspirations of being at least in the Conference or even League 2.  Carlisle, for example, is in a similar position in terms of local competition, and has a smaller population.

The Linnets have however spent most of their life in the various divisions of the Southern League, but were promoted to the Conference North in 2008.  The beginnings of fulfilling their not unreasonable ambition?  Sadly not.

The first of a number of problems arose with their stadium, which is owned by the local council. The Conference decided at the end of last season that the Walks Stadium did not come up to their standards, and announced that the Linnets would be demoted. This, in spite of the fact that King’s Lynn Borough Council had given their unconditional undertaking that all required alterations would be completed by the start of this season (2) and West Norfolk Council had earmarked £250,000 towards the cost of new changing rooms and floodlights (3).  The Conference was given written undertakings that the work would be completed by the start of the season, but chose to take an uncompromising line and the appeal against demotion was rejected (4).  The milk of human kindness was not to flow as it was for Chester City but a few months later – one attitude to those coming down the pyramid and a different one to those trying to climb it, it would seem.

One immediate outcome was that the manager and his assistant resigned (5), followed by their Director of Football (6) on the day that the HMRC winding-up petition was announced (7).  In September the new Assistant Manger resigned (8) saying that the club owed him ‘a considerable sum of money’ and that the club had “been taking advantage of me“.

Clearly financial matters in the club were, let’s say, suboptimal.  David Handley arrived in October.  At the time he told the Lynn NewsThis is a massive and dream job for me, but I’ve got big plans for the future and on the financial side of things the buck will still stop with me.I want the fans to judge me at the end of the season, but I’m determined to get the club in a good financial position and move forward from there. When I took the job on I had two aims. The first was to get an adjournment with the Revenue, which we’ve done, and the second is to repair and fix the financial position of the club. You have to remember that the outstanding debt with the Revenue goes back a number of years and because players have been overpaid in the past. There’s no reason whatsoever why I can’t get the club where I want it to be financially when you look at the fan base and if we can achieve success on the pitch with a good, young side.

Handley is a realist, saying on 22 October: “I don’t think we can expect to get any outside investment within that sort of timeframe. Added to that we haven’t got many home games within this period either so I guess the burden will fall on me and the other directors. I’ve already put some money in initially to get a place on the board and I managed to get us an adjournment result in the High Court, and let me tell you that was by no means a guaranteed outcome. This situation is solely down to unpaid tax on high wage-earning players but I’m pretty confident we can clear the debt and stabilise the club so it can move forward.” (9)

A month later, and his views are rather different: “I feel I have been brought to the club under false pretences. I have put in £23,000 and I feel I am going to be made a scapegoat for all the problems. I had a pact with the other directors but it seems I was paying for everything and there was a hell of a lot coming out of the woodwork.

To be fair, the facts are disputed by 40% shareholder, director and ‘benefactor’ Michael Chinn, who now says of Handley “We’ve wasted six weeks because of him. He came in making all sorts of promises and basically he hasn’t been able to deliver” (10) and disputes Handley’s claim of £23,000 investment.  As the club prepares for the High Court hearing Chinn says “I have got a Plan A and a Plan B and I’m confident we’ll be okay. I’ll be talking with a number of friends and I’m hopeful they will lend me the money I need to pay off the tax bill” Ah, an almost seamless switch from benefaction to borrowing.  At least he has two plans, which is two more than some Chairmen, but let’s hope neither involve disappearing from the dugout at this vital time – in January he resigned from the board (11) only to reappear by June (12) promssing to take the demotion issue to the Court of Appeal (which he decided eight days later not to [13]).  Borrowing may get HMRC off the club’s back but it’s hardly the way to be going forward – borrowing from Peter to pay Paul is not a sustainable business model.

There is one small glimmer of good news – the Blue and Gold Supporters Trust was launched earlier this month (14 and 15).

There is a cautionary tale here for any club that has aspirations to climb the pyramid, has become dependent on a benefactor model, or has not kept up payments to HMRC.

That doesn’t really cut it down much though, does it?

Posted in Benefactors, Debts, Football Conference, Governance, HMRC, Insolvency, Ownership, Trusts | Tagged: , , , , , , | 8 Comments »

Should Steven Vaughan be worried?

Posted by John Beech on November 18, 2009

Well, obviously he should about the future of Chester City, but I was thinking rather more of the implications of his signing an undertaking banning him from acting as a company director until the year 2020 (1).  The specific implication is that “may no longer act as either an active or inactive director, or exercise control over an individual who is a director, of any company” according to Companies House.

Although Vaughan had been a director of Chester City Football Club Ltd, the company which went into Administration in May, he is not a director of Chester City FC (2004) Ltd, the company which now owns the club.  He is, however, the owner of Chester City FC (2004) Ltd.  We are thus moving into the shadowy world of what is known as a ‘shadow director’, defined as a person upon whose instructions the majority of the board of directors of a company are accustomed to act.

It is because of the potential existence of shadow directors that expressions like “exercise control over an individual who is a director” appear.  Indeed, the FA Fit and Proper Person Test rules and regulations include the following within the definition of a director of a football club:

  • a person in accordance with whose directions or instructions the persons constituting the management of the Club are accustomed to act; or
  • a person who exercises or is able to exercise direct or indirect control over the affairs of the Club. For the purposes of this definition, a person shall be regarded as being able to exercise direct or indirect control over the affairs of the Club in particular but without prejudice to the generality of the preceding words if that person owns or is entitled to acquire 30% or more of the share capital or issued share capital of the Club or the voting power in the Club.

It was because of this last sentence that the FA has just required Vaughan to reduce his shareholding (2).  It is the rather more open to interpretation first bullet point that there will be dispute.

A look at possible precedents paints a rather one-sided likely outcome.

I’ve blogged before on Spencer Day (formerly Trethewey), ruiner of Aldershot, convicted fraudster (six counts, plus one of obtaining credit while bankrupt), and now owner and team manager of Chertsey Town FC, and also on the brothers Muduroglu.  Sami, disqualified from being a company director, used the cover of his brother Eren, who lived in Turin, as Chairman to run Fisher Athletic into the ground.

There are other examples of driving a bulldozer through the spirit of the Fit & Proper Person test.  At Salisbury City, Peter Yeldon, who had been severely reprimanded and fined for malpractice by the Professional Standards Office of the Institute of Chartered Accountants in England and Wales (3), served as a director.

Reading through my files when preparing yesterday’s posting, I was reminded of the case of Mike Diamandis at Swindon Town.  He “supplied management and financial support on a day-to-day basis” by the club’s own admission (4) and, in meetings with potential investors, was “at the forefront of these discussions” (5).  He attended meetings alongside the board members (6).  The BBC described him in december 2006 as “the man who – behind-the-scenes – has effectively run the football club for the last five years” (7).  Diaminidis was not a director of the club – he had been disqualified from acting as a company director in 1992 (8), and had been “in breach of a director’s disqualification between 1997 and November 2004 which later became the subject of criminal investigations” (9).  The authorities seemingly did not see him as “a person in accordance with whose directions or instructions the persons constituting the management of the Club are accustomed to act“.

Vaughan, it would seem from precedent, does not have much to fear.  Once again, the Fit and proper Person test proves to be neither fit nor proper.

Perhaps the pressure has got to him nonetheless.  The Liverpool Daily Post carrys a report that Chester City is in talks with a consortium interested in buying the club.  This was revealed by Chairman Ian Anderson rather than the ‘presumably about to be ex-owner even if the consortium doesn’t buy the club’ Stephen Vaughan.  He was, I would imagine, too busy arranging the transfer of shares, not that he is inexperienced in the procedures, having once famously and quite openly sold his Chester shares to a local painter and decorator and promptly bought them back again once a tie against Barrow had been played, Vaughan still being the owner of Barrow at the time (10).

This latest move against Vaughan is not really a scalp, maybe a short-back-and-sides, but definitely not yet a scalp.

Posted in Fit and Proper Person tests, Football Association, Football Conference, Governance, Ownership | Tagged: , , , , | 2 Comments »

Northwich Victoria: A cautionary tale

Posted by John Beech on November 8, 2009

To apply the term ‘troubled’ to transfer-embargoed and ‘in Administration but without a CVA yet’ Northwich Victoria would be something of an understatement.  Even today’s televised win against Charlton in the first round of the FA Cup (1) will do little to help their present predicament (see postings passim).

Briefly in Football League Division 2 over a century ago, much of their subsequent life has been at the level of the Cheshire County League, before climbing back to what is now the Conference in 1979.  Financially things have regularly be tough even at this level – Customs & Excise sought a winding-up order in 1983, and the Inland Revenue (who with Customs & Excise formed HMRC) sought one in 1993.

In 2003 construction began of the new Victoria Stadium, and the Vics said farewell to the Drill Field after 125 years (at that time the Drill Field was the oldest-continuously used football ground in the world).  Before construction was complete, however, the club was forced into Administration in 2004 (2) following the serving of a winding-up order by stadium building contractors Tarmac over a debt of £17,000.  The Drill Field had been sold for £2.3m, and the cost of the new stadium had been projected as £1.8m, so a winding-up order over £17,000 was not a scenario that fans or shareholders might have expected (Liverpool Daily Post, 16 September 2004).  A grant of £500,000 towards the new stadium was made by the Football Foundation (3).  A rental of £1,000 to groundshare with Witton Albion in the interim was said to be to blame for the financial embarrassment.

Swiftly a consortium led by local businessman, and father of the Vic’s goalkeeper, Mike Connett bought the club from the Administrator (This is Cheshire, 29 September 2009). Completion of the new stadium was promised by Connett, and plans would now include bars, restaurants and all-weather facilities.  Connett ran a company called Beaconet, and has been described as owning a document-shredding business (4).  He was reported as having put £2 million into the club.

The new stadium opened in August 2005, and included an entire terrace transported form the Drill Field (5).  By then the club had just been demoted for failing to transfer their Conference membership from the old company to the new company by the deadline of 31 May (6). An appeal was unsuccessful.

By March 2007 rumours had begun to circulate that the Vics were in financial difficulty and Connett was looking for a new owner (7). These rumours were denied by Connett.  In October 2007 he announced that he was indeed looking for a new owner (8), on the day that HMRC sought a winding-up order for unpaid taxes of over £350,000 (9).

In December it was announced that a new consortium headed by Jim Rushe had completed a deal with former owner Mike Connett and agreed terms with creditors, including HMRC (10), the deal including a 25-year lease on the new ground (11).  Rushe offered “a sustainable future going forward“. Debt level, however, was reported as being at the £500,000 level, and to be paid off over an unspecified number of years (12).

At the end of July 2008 a winding-up order was sought by Belgrove Services (13), but this appears to have been settled.

Over the summer Rushe agreed a deal to buy the Victoria Ground from Connett for £3.2m (Connett had bought it in 2004 for £225, 000, and had subsequently borrowed money from three lenders using the land as surety) but had failed to find backers to fund the deal (14). Unfortunately, one of these lenders, the Clydesdale Bank (through its subsidiary the Yorkshire Bank), was now seeking recovery of their loan of £1.25m from Connett.  To add to the complicated situation that was unfolding for the Vics, HMRC was becoming restless over the remaining tax debt of £300,ooo (15), this notwithstanding the fact that Rushe and former director Nick Bone had pumped half a million pounds into the club.  Money was flowing out of the club at a worrying rate – over the summer the now full-time players had been paid £70,000.

To add to the Vics’ woes, a football creditor, AFC Telford, appeared last December (16), prompting an FA probe (17) into a sum said to be around just £3,000.

January this year saw a rapid escalation of the problems – crisis meetings with the Conference (18), a transfer embargo (19), a lock-out from the stadium, which had been dependent on a generator for electricity after the mains supply was cut off, by landlord Connett (20), and a winding-up petition from HMRC (21).  Meanwhile Connett’s company Beaconet was also facing a winding-up order (22) (his insolvency problems had led to the lock-out and hence pressure to get the club to pay its rental arrears).

Connett proceeded to start gutting the stadium, and the club had real problems be able to play fixtures, moving home games to other grounds.  Things turned to low farce; witness the following:

On a day of acrimony in Wincham, Connett:

  • Banned Rushe and club secretary Derek Nuttall from the ground
  • Fired groundsman Joe Biddle after accusing him of talking to outsiders on the phone about his plans to strip the stadium of it’s fixtures and fittings
  • Demanded £2,000 off the club in cash to pick up the first team strip, currently locked in a cupboard inside
  • Allowed workmen to play a makeshift match on the pitch, joined by his pet dog
  • Boxed up every item of safety equipment needed to host a game, from fire extinguishers and handheld radios to luminous stewards’ jackets
  • Issued a list to Cheshire Trading Standards of everything he intended to take away from the Marston’s [Victoria] Arena, including the goalposts.”

On 28 January, Connett’s Beaconet was struck off (23).  Almost a month later the club got the keys to the stadium from Beaconet’s Receiver (24) under a temporary Licence to Occupy.  No such good news with staff unfortunately; within a month manager and six players had left (25).  Connett meanwhile was declared bankrupt on 26 February (26).  For the club, there was another HMRC winding-up order on 25 March (27).

On 29 April at last came some good news – agreement was reached between Rushe and Deloittes (the Beaconet Receiver) over the purchase of the stadium (28), but on 18 May the club entered Administration again (29).

The Conference’s response?  To expel Northwich for going into Administration too late (30) – the Vics had breached that well-known regulation, Appendix E, not quite showing the support they were to show Chester City shortly!  This decision was overthrown upon appeal to the FA (31), and the Vics were allowed to start this season in the Conference North with a ten point deduction (32).  Football creditors will still need to be paid before the transfer embargo is lifted and the club can enter a CVA.

The transfer embargo was lifted in July (33), only to be reapplied on 25 October (34).  Rushe meanwhile is still optimistic over the purchase of the stadium (35), but the CVA remains problematic, with HMRC unwilling to agree to the offers being made.  Ironically today’s FA Cup fixture, and the games which led up to it should facilitate a better offer.  But there is a Catch 22 – the club will not be paid the roughly £100,000 rewards until the club exits Administration (36).  The same will apply to their 2nd Round tie at home to Lincoln City on 28 November.

So, this is a club which in five years has gone from a sure-fire way to profit from a new stadium, through two Administrations, to a situation of tragi-farce.  Plenty to reflect on there, including the weaknesses of the benefactor model, and some lessons to be drawn.

Perhaps even by a certain other club in the news with continuing plans for a new stadium in spite of insolvency issues?

Posted in Benefactors, Broadcasting rights, Debts, Football Association, Governance, HMRC, Insolvency, Ownership, Points deduction, Stadium | Tagged: , , , , , , , , , , | 1 Comment »

Chester City drinking at last chance saloon

Posted by John Beech on October 21, 2009

It was less than a fortnight ago that I was blogging on the Stephen Vaughan approach to management, and some of the odd theories he proposed on how to run a club (1).

The Conference is now running out of patience with the way Chester City is being run.  This afternoon they published this blunt statement:

In accordance with Membership Rule 11 – for the non-payment of football creditors – Chester City FC have been placed under an immediate player embargo, in as much that:

“1. Chester City FC has not complied with the terms of the compromise agreement set by the Football Conference to allow the club to participate in the competition at the commencement of the current season; and further to that fact, the club has been given 7 days, operative up to 5.30pm 26th October 2009, in which to meet the said payment terms of that agreement, otherwise they face the threat of expulsion from the Football Conference.

“2. Chester City FC has failed to pay monies owing to Wrexham FC for away ticket sales relating to their fixture played on 27th September 2009 and further to that fact, the club has failed to meet a 7-day payment deadline imposed by the Football Conference.

“3. Chester City has failed to pay Vauxhall Motors FC monies owed in relation to the loan of Paul Taylor, which should have been met no later than 14th October 2009.

“The Football Conference will not be making any further statement on this matter at this time.

So, pay up by Sunday evening, or be expelled from the Conference.  Quite where they could go if expelled mid-season is unclear.

Not paying football creditors is of course considered to be the ultimate sin by the governing bodies – it led to Halesowen Town being banned by the FA in July (2) under Morell Maison (who, incidentally, has been arrested on suspicion of fraud in an investigation “in relation to various allegations concerning matters in relation to Halesowen Football Club” [3]).

This all needs to be seen in the context of Chester City coming out of Administration on 26 May via a CVA which saw creditors being paid 15p in the pound (4).  It has to be asked – was allowing this a wise decision on the part of the Administrator, Martin Shaw of Refresh Recovery?  Refresh Recovery are relative newcomers to the football Administration scene, but also provide the Administrator of Northwich Victoria.

It must also raise questions regarding the Fit and Proper Person tests, the FA variant being the one applicable to Conference clubs.  The position of Ian Watmore, Chief Executive of the FA, at least as he expressed at the Supporters Direct Conference (5), will ensure that the vital issue of the harmonisation of the variants of the Test is addressed.  However, the fact that the pass rate is similar to that of, say, O Grade Breathing, does not seem to be a matter of concern to him.

As for Stephen Vaughan at Chester City, surely it is time for him to bow out before the club hits an ultimate low.  However, unless a miracle happens by the end of this week, he may have no option but to put the club back into Administration, a bigger blow to the long-suffering club than to him!  It’s time the FA addressed this paradox – we saw the iniquity of punishing the club rather than the perpetrator at Luton.

On the present evidence, I have to say it doesn’t look likely that any changes are imminent.

Posted in Debts, Fit and Proper Person tests, Football Association, Football Conference, Governance, Insolvency, Ownership | Tagged: , , , , , | 4 Comments »

Three cheers for the Premier League!

Posted by John Beech on September 21, 2009

Mind you, that is three out of a possible six, for two recent developments…

Certainly two cheers are deserved for the PL’s decision to make a one-off payment to the Conference of £1 million, this being in the context of the Conference’s loss of their Setanta contract for broadcasting rights (1). As the PL’s Richard Scudamore  put it “The Conference is an integral part of the football pyramid. It was absolutely the right thing to do.”  Spot on!  So why my reluctance to give this noble attempt to reduce this financial disparity up and down the pyramid a full-blown three cheers?  Well, it represents £50,000 from each of the twenty Premier League clubs – less than one weeks wages for a star striker.  I don’t feel then that I am being curmudgeonly in holding back that third cheer – a curmudgeonly approach would be to point out they are collectively in debt to the sum of over £3 million, and shouldn’t sensibly be giving any money away.  Perhaps two and a half cheers might be fairer.

Debt, of course, brings me to the even bigger news that the PL is finally taking action to stop their members living on Debt Mountain (2).  Last Monday Scudamore announced new financial measures to restrain the wilder excesses of member clubs, the day before UEFA announced action.  These PL measures are rather light on detail regarding sanctions, and fail to re-establish HMRC as preferred creditors.  Still the PL ‘vows to fight’ UEFA’s curbs on spending powers (3).

I’m afraid I can only raise half a cheer for half-hearted measures introduced unwillingly.  In any case, they lock in the inequalities that have grown rapidly since the PL’s formation.

Posted in Broadcasting rights, Debts, Football Conference, Premier League, Sanctions | Tagged: , , , , , | Leave a Comment »

 
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