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:
- CSI does have income of its own and definitely does not derive all its income and expenditure from Portsmouth Football Club (2010)
- 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]
- 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.]