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! Football Finance

Archive for the ‘Points deduction’ Category

Pompey – the turning point?

Posted by John Beech on November 20, 2012

I’ve not blogged recently on the Pompey basket case.  Not because there wasn’t much happening, but rather because there has been almost too much happening to stop and take a coherent view.  In fact, the last time I posted was back in March 2011, when I commented “Portsmouth City Football Club Ltd. is dead – long live Portsmouth Football Club (2010) Ltd.!” (1), and it reads today like some historical piece, and at least a tad ironic to boot – the tagline was “Onward and upward at Portsmouth?

The announcement that a conditional sale to the Pompey Supporters Trust has been agreed (2) brings at least some sort of turning point.

That the alternative bid from Balram Chainrai was turned down by the Administrator can only be good news – just how many times can the same person ‘save’ a club?  Trevor Birch’s choice may or may not have been influenced by the blogs of Micah Hall (3), but certainly the lack of response to the questions Micah posed to Tavistock Communications, Portpin’s PR company, spoke volumes.  Micah’s digging deserves an award, and shows how far a fan can go in the bigger picture of financial decision-making.

The fly in the ointment of the sale is, of course, the issue of the value that Chainrai is trying to place on Fratton Park.  Unless he finally decides to bow out gracefully, accepting that he made a very bad business call, the matter will go to court.  With independent valuations at a much lower level, the Trust stands a very good chance of getting the desired result.

There is also the matter of a potential further ten points deduction on coming out of Administration.  Here I am less optimistic.  I fear it will be yet more evidence that the deduction of points is an entirely dysfunctional sanction, but let’s not burn our bridges before we come to them.

All-in-all, there does finally seem to be a light at the end of the tunnel, and this hopefully will prove a turning point in the club’s miserable fortunes.

In the bigger picture, it may well prove to be a turning point in the road to fan ownership of clubs.  It does need to be seen though as one of many turning points, as I’m sure Brentford. Chester, Exeter Wrexham, and Wimbledon fans, and that’s not a definitive list, would be quick to point out.  It’s significance will depend on how well the hybrid model involving High Net Worth Individuals will work in practice.  If it does work, it will doubtless encourage the Supporters Trusts at bigger clubs such as Liverpool, Manchester United and Newcastle.

As a member of the Pompey Supporters Trust, I feel considerably more confident regarding the future than I have for a very long time.  I’ve even put a bottle of bubbly in the fridge, but I’ll not actually open it though until Fratton Park is in the fans’ hands.  The only certainty is the debt of gratitude Pompey fans owe to the PST Board.  Let’s show our gratitude by uniting behind them.

Posted in Community, Fans, Insolvency, Ownership, Points deduction, Sanctions, Stadium, Trusts | Tagged: , , , , , , , | 3 Comments »

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 »

Some rather late and ineffective justice for Luton fans

Posted by John Beech on September 11, 2011

There was some small crumb of comfort for Luton fans in the news that four of the directors of the previous owners of the club had been banned from being company directors (1) (and hence now fail the Fit and Proper Person Test).  Former chairman Bill Tomlins was disqualified for six years; Derek Robert Peter, the former CEO and a chartered accountant was disqualified for seven years, and Richard Sidney Bagehot and John Mitchell were each disqualified for three years.

The official statement from the Insolvency Service (2) who investigated Luton Town, or more exactly the old company, Luton Town Football Club Limited (“LTFC”) – which is not in any way connected with present owners Luton 2020 – makes clear the scale of what had been going on under the club’s previous owners:

The investigation by The Insolvency Service found that the directors of LTFC had breached Football Association (FA) and FIFA rules and caused LFTC to trade at the risk and detriment of HM Revenue and Customs (“HMRC”), being in arrears with PAYE and NIC within a few months of commencing to trade and recently not declaring or paying its VAT liability.

Between July 2004 and February 2007 LTFC acted in breach of FA and FIFA rules and regulations on payments to football agents. The FA enquiry found that the company had dealt with unlicensed football agents and made payments totalling £157,000 through its holding company Jayten Stadium Limited (‘JSL’) using funds provided by LTFC which should have been paid by LTFC itself and routed through the FA.

During the same period of July 2004 and February 2007 the directors individually either caused or allowed the company to trade at the risk of and ultimate detriment to HMRC which was owed £3,578,661. The Court heard there was a pattern of non-payment and chasing from HMRC.

Why I say “small” crumb of comfort is for two reasons.  First, the club has had to suffer as a football club for the misdemeanours of these previous owners (see previous posting where I wrote of Luton’s ‘unfair disadvantage’) in terms of points deductions and the resultant relegation to the Conference.  Seeing four people just banned from being company directors hardly results in an overall balance of justice being seen to be done.

Secondly, the perceived lack of balance in justice is exacerbated by the fact that these goings-on came to light as a result of whistle blowing from within the club, which should have in part mitigated the punishments handed out to the club.

The success in bringing about these bans must give HMRC a good feeling for their ongoing fights with football clubs.  These currently include the major fight North of the border against Rangers (a blog worth a look at on this is Rangers Tax Case as is The Scotsman), their attempt to have the Football Creditors Rule thrown out by challenging the leagues in court rather than taking action against individual clubs, and the ongoing cases against Harry Redknapp, Milan Mandric and Peter Storrie.  Some interesting reading coming up there’s no doubt, and the various court rulings may have significant implications for all clubs.

Posted in Debts, HMRC, Insolvency, Points deduction | Tagged: , , , | 5 Comments »

The points deduction lottery

Posted by John Beech on May 13, 2011

As we move towards the end of the season and the state of ‘ups’ and ‘downs’ begins to harden, I am, as usual (here are my earlier findings on this topic), looking more closely at how the deduction of points impacts on the particular clubs who are promoted or, more typically, relegated.

The impact (or lack of it) can be five-fold:

  • No impact even to a club at the top of the table.  A classic example is that of Arsenal who were still Champions of the old Division 1 in 1990 in spite of having three points deducted.
  • Points deduction results in a club failing to be promoted, as happened to Leeds United in 2008, when a 15 points deduction moved from a guaranteed promotion spot into the play-offs (where they failed to gain promotion).
  • The position of the club is so ‘mid-table’ that the deduction of points is irrelevant other than to their final position.
  • A club is forced into relegation because of the points deduction.
  • The deduction of points is irrelevant because the club was going to be relegated anyway, as was the case when Portsmouth were ‘punished’ with a ten points deduction last year.

You can see where I’m going with the reference to ‘lottery’.

It’s too early yet for a systematic survey, but some examples are all too apparent already.  Plymouth Argyle have been relegated because of their ten points deduction (1), and St Albans have been relegated anyway (2), although by a narrow margin.  Their fans must look enviously north of the border to Dundee, where, in spite of a massive 25 points deduction (3), the club has managed to escape relegation.  Their fans may not necessarily see this as ‘a lucky escape’ however, as, without the deduction, Dundee would have finished a single point behind champions (and automatically promoted) Dunfermline.

The most interesting case is one in which no points have been deducted – that of QPR.  A disgracefully slow investigation finally concluded with a massive fine but no points deducted for 7 alledged breaches of FA financial regulations (4), five of which were found ‘not proven’.  As QPR finished the season as Champions, and 8 points clear of the play-off places, any points deduction would have proved highly contentious to whichever set of fans affected.  The saga may yet continue, as Swansea, who would have been automatically promoted had QPR been deducted nine or more points, are, at the time of writing, undecided as to whether to mount a legal challenge (5), preferring to wait until the full judgement is published.

The use of points deduction as a sanction is unarguably dysfunctional.  The real question is whether it is the ‘least bad’ alternative.  Certainly alternatives need to be explored, and thought given to whether it is possible to distinguish between offences that affect performance on the pitch and more technical financial or administrative offences which have no impact on sporting performance.

Posted in Ethics, Governance, Points deduction, Sanctions | Tagged: , , , | 6 Comments »

Meanwhile on Planet Pompey

Posted by John Beech on October 15, 2010

Or is that two different planets?

Latest development is that the Football League has again declined to return the club share (1).  The statement from the club says:

Following a meeting of The Football League Board today, Portsmouth Football Club have been informed that the League are not yet able to approve the transfer of The Football League share to the club.

The League have indicated to the club that there are four further requirements that need to be satisfied.

The club will now take time to consider the feedback from the meeting ahead of further discussions with The Football League.

No indication then of what exactly the ‘four further requirements’ are – bureaucratic detail or major stumbling blocks?

The response from Administrator Andrew Andronikou has been a tad less considered than the club website might suggest if one goes with the report in local newspaper The News (x):

Pompey’s administrator fears the club could go out of business after the Football League refused to allow it out of administration.

Andrew Andronikou said it was now ‘virtually impossible to keep trading as a club’.

And he said it could see potential owner Balram Chainrai walking away from Pompey.

Meanwhile Manager Steve Cotterill preferred the emotive approach, telling BBC Radio Solent: “We need to blow some of these dark clouds away from this club. We’ve had them over us for more than 12 months now.  Let somebody else have the spotlight for a while. We’ve been under it perhaps for the wrong reasons, and lots of people want to throw mud at you.  When you haven’t got a lot to bat back with, some of that mud will stick.” (x)

All this, especially Andonikou’s dire warnings of the virtual impossibility of continuing to trade, made the next report to emerge from The News strange reading (x).  Far from planning the demise of the club, recruitment to strengthen the ‘threadbare squad’ is being planned.  On the club website latest news is of ticket sales.  Plans are pressing ahead to create a ‘noisy section’ to enhance the Fratton Roar (x).

Whether it’s ‘teetering on the brink’ or ‘business as usual’ is thus far from clear.  And before anyone adds a comment, it does of course have to be said that these two have seen little daylight between them for far too long at Fratton Park.

In terms of a necessity for change, time is still on the club’s side in the sense that they can go until the end of the season as they are without suffering further points deduction.  The possibility of Balram Chainrai giving up on the club is a far more worrying proposition.  On the one hand, he is unlikely to unless he is prepared to write off a large amount of money.  On the other, the Football League may be wanting to push him into further commitments he isunwilling to make.

If Andronikou is to be believed, there is no alternative to Chainrai, no John W Henry or Peter Lim about to enter the mêlée – hardly surprising, as Adronikou seems to be saying that the club is still not operating solvently.

One of my correspondents suggests that we may be heading for a repeat of the Leeds United scenario, with a further points deduction for not following Football League rules on clubs entering administration.  I certainly have my concerns, but Chainrai is looking to rid himself of the club, unlike Ken Bates, who proved a role model of tenacity-to-retain which must have proved an inspiration to Tom Hicks.

An interesting development has been reported by Accountancy Age: “HMRC has “invited” the administrators of Portsmouth City FC to give their opinion on what “stance” they take on the football creditors rule.” (x)  This relates to HMRC’s upcoming court challenge against the Leagues, although Accountancy Age suggests that UHY Hacker Young are unlikely to attend court.

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Coincidentally, the performance of Administrators in general was earlier this week raised by BBC Radio 4’s File on 4, although this was not specifically related to football and I stress that I am not in any way casting aspersions on the conduct of Portsmouth’s.

The programme raised worrying issues however to do with the lack of transparency and the potential for conflicts of interest for insolvency practitioners.  If they are, as the programme suggests, poorly regulated, put that together with the poor record of transparent regulation in football, and it makes a heady cocktail.  How much longer can the governing bodies just sit back as the likes of Portsmouth and Liverpool unravel so publicly?

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UPDATE TO MAIN STORY – 15 October 2010

New statement from the club website (A):

Portsmouth Football Club can confirm that agreement in principle has now been reached between the Administrators, prospective new owners and The Football League over the four further requirements that were notified yesterday, and that need to be satisfied before the transfer of The Football League share to the club can be approved.

The necessary additional documentation is now being worked on so that the transfer of The Football League share can take place once these conditions have been fulfilled.

This will then allow the sale of the club by the Administrators to the new owners, at which point Pompey will exit administration.

Portsmouth Football Club would like to thank supporters for their patience, steadfastness and loyalty as the club look to complete this complex process over the coming days.

Here’s hoping!

Posted in Debts, Governance, HMRC, Insolvency, Ownership, Points deduction | Tagged: , , , , , | 1 Comment »

Denouement at Liverpool?

Posted by John Beech on October 7, 2010

The long-running saga of Messrs Hicks and Gillett’s failure, first, to bring Liverpool’s level debt down, and, next, to find a purchaser of the club willing to pay the unrealistic price they were asking, has until the last few days been, to me at least, a soap in which there is constant speculation on how the plot might develop but with very little meaty activity – a soap on an obscure satellite channel that I really couldn’t excited about enough to pay a subscription to view it.  Suddenly, on Monday night, all that changed.  Not only did  Twitter erupt into seemingly more unlikely and dramatic messages, even the club website sprung into unusual communicativeness, although it rapidly emerged that it was telling only one side of what was rapidly becoming, to use the now standard cliché, a civil war.  To see how little had actually happened up to this week, see the timeline provided by Sky Sports.

After the first round in the contest for ownership, we now have a break in activity until the matter of who does or doesn’t have the right to change the membership of the Liverpool board is heard by an English court, with most observers predicting that Hicks and Gillett will fail.  I’m certainly inclined to that view but a) I’m not a legal expert versed in the intricacies of this rather obscure area of the law, b) I’m not privy to what if anything was written down when the newer board members moved in and c) decisions by English courts still manage to be entirely unpredicted.  We shall see, although it seems likely that even if Hicks and Gillett win, short of them suddenly coming up the money to repay the Royal Bank, they are still likely to lose control as the bank will force Liverpool’s parent company into Administration, and the club will then be sold to John Henry as currently planned.  One big surprise in this scenario would be the fact that the Premier League have indicated that the 9 points would not be deducted for the parent company going into Administration – entirely the opposite view to the Football League in such circumstances, and not a view that will be well received in Southampton.  I have frequently railed against points deduction as a sanction (see my Working paper on the subject), but, if we must have it, we surely should see the rules being consistently applied across the leagues.

With this post-Dunkirk phase of the confrontation, most commentary seems to be around whether Liverpool would be moving out of the frying pan of one American ownership into the fire of another.  I really can’t get my head round this as an issue – is the nationality of the owner really the over-riding variable that determines whether it will be good for Liverpool?  Might it not just be to do rather more with the effectiveness of the new management team (and not just the owner), the ability of whoever emerges as (football) manager, and the skills of the playing squad to bring success on the pitch, and hence revenues?  To assume that all these factors are a function of the owner’s nationality is a nonsense.

Equally nonsensical is to extrapolate from Henry’s track record.  Turning the Boston Red Sox round is one thing, turning Liverpool round is an entirely different kettle of fish – different game, which he has virtually no experience of, different set of business rules, different governing bodies, different organisational culture, etc. etc.  You might as well argue that Virgin Trains would follow the success of Virgin Atlantic.

If Henry gains control, we will have to wait and see how he chooses to have the club run.  Certainly there are no contra-indications in his business record, but there is still plenty of scope for notching up his first big failure, not least because he is moving into a different ball game (pun intended).  He may emulate the failure of Hicks and Gillett to get to grips with running an English ‘soccerball franchise’, perhaps picking up some tips on the way from the Glazers, or he may follow in the rather more successful footsteps of Aston Villa or Derby County.  Only time will tell.

Speculation on the subject of new American investor-owners simply draws discussion away from the real issue here.  Do we want investor-owners at Liverpool, or any other club for that matter?  Or do we want a fan-owned co-operative in charge of Liverpool?  By now, if you are a regular reader, you will no doubt have guessed my preference.

Posted in Debts, Investors, Organisational culture, Ownership, Points deduction | Tagged: , , , , | 4 Comments »

An Austrian digression…

Posted by John Beech on January 3, 2010

… which I would justify in a blog on English football management on two grounds.  First it makes an interesting contrast with my recent posting on what the future might hold for Portsmouth (see How much more benefaction can Pompey take? and its comments), and secondly it provides supporting evidence for my mantric moan about points deduction being dysfunctional as a sanction (1).

News reaches me from an old friend in Vienna regarding Liebherr Grazer Athletik-Sport Klub (more commonly known as GAK), and familiar to fans of Liverpool, Rangers, and Middlesbrough back in 2004/05.  GAK went into Administration during 2006/07.  A second bankruptcy followed shortly afterwards – as a result GAK were penalised with a 28 points deduction and demoted from the top flight to the third tier in the Austrian pyramid, a bit of a come-down for a club which had done the double as recently as 2004.

Did these sanctions get the club back on the right tracks?  Well, they have just filed for bankruptcy for the third time in three years (2 [in German]).

As my friend wryly commented, ‘Considering how hard it is to achieve consistency in the world of sports these days, that’s quite an accomplishment.

Posted in Insolvency, Points deduction, Sanctions | Tagged: , , | Leave a Comment »

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 »

Progress at Crawley Town

Posted by John Beech on October 3, 2009

In another unusual case of transparency, Crawley Town have released an insightful interview on the club website with Bruce Winfield, ‘major shareholder’ (1).  This comes in the context of the dropping of proceedings by HMRC to wind the club up, which prompted the Crawley Observer to announce a ‘Fresh Start for Crawley Town‘.

To understand this optimism needs an understanding of not just the recent history of the club, and its mismanagement by the Majeed brothers, but also a little further back.

Crawley certainly ‘has history’ with the tax authorities.  The Inland Revenue sought winding-up orders in July 1973, May 1974 and May 1977, when the club was in the Southern League Division 1, having turned professional in 1962.  By 1984 the club had not only achieved some form of financial stability, but had been promoted to the Southern league premier Division.  In 1997 they moved to the new 5,000-capacity Broadfield Stadium, built at a cost of £5m by Crawley Borough Council.

Off the pitch, matters were taking a different turn.  The Inland Revenue (one of HMRC’s two predecessors) sought another winding-up order in April 1998, and the club went into Administration with debts of £400k.  They were rescued by local businessman John Duly, who turned the club into a mini-family business.

Promotion to the Conference prompted a new strategy – going full-time.  In the summer of 2005 Duly sold the club to brothers Azwar and Shafqat ‘Chas’ Majeed, operating as the SA Group, and the club entered the worst period in its history.

By March 2006 the entire squad was up for sale, employees were told they would have to take a 50% pay cut, and it had emerged that Chas Majeed was an undischarged bankrupt, thus geing ineligible as a director under FA rules.

A period of mayhem followed.  Board members shuffled round, and Steve Evans was appointed manager.  Evans ‘had history’ with Boston United, and with the FA, who had previously banned him for paying a witness to mislead an FA enquiry.  Points deductions for financial irregularities, a transfer embargo, wages slashed, and the entire squad up for sale (2) were a prelude to the club entering Administration again in June 2006 (3), with debts of over £1m, a very high figure for clubs at this level in the pyramid.  This figure included a debt of £400k to HMRC.  The Majeed brothers were claiming over £750k owed to them by the club.  In August they tried, unsuccessfully, to buy the club back from the Administrators (4).

Somehow the club lurched on until August 2007, when a CVA was finally accepted (5).  All was far from well financially, and in March 2008 another winding-up order from HMRC, by now presumably tearing their hair out at the mere mention of Crawley or the Majeeds, was served (6).

This proved the lever that finally shifted the Majeeds. Within a week, Prospect Estate Holdings had bought the majority shareholding, and a consortium led by John Duly (with Phil Jarman) was in control (7) and the Majeeds had severed all links with the club (8).  To achieve this, Duly wrote off £200k still owed to him from when he had previously sold the club to the Majeeds (9).

Phil Jarman stepped down last November (10), and subsequently Bruce Winfield has become a major shar-holder.  Apart from the predictable wobble generated by the collapse of Setanta, the club’s affairs have taken a very significant turn for the better, and this last week has seen the announcement that the outstanding winding-up order has been formally dismissed (11) as noted above.

Bruce Winfield’s interview on the club website is at the same time upbeat and realistic, and hence a tad cautious.  Undoubtedly Crawley Town fans should be sleeping much sounder in their beds than they were under the Majeed era.  There is just one thing that would worry me slightly in their position.  Winfield talks, on the one hand, of the club being debt free “apart from the Directors loans [my emphasis]”, and, on the other hand, as part of the club’s core strategy, to “attract additional shareholders and investors“.  Put these two together and you get a picture of the current shareholders being perhaps reluctant to convert their loans into shares.  I am wondering then a) just how ‘soft’ these directors loans are as club debt and b) just how big they are.

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Chester City latest

Posted by John Beech on August 6, 2009

Chester City will play in the Conference in the upcoming season, but with a further 15 points deducted, in addition to the 10 for going into Administration (1).

This immediately suggests comparison with the 15 points deducted from Leeds United, where Ken Bates bought the club back from the Administrator, and the 10+20 points deducted from Luton Town.

If Chester follow the path of Luton Town, this second punishment will lead to the club playing in the Conference North in 2010/11.

Yet again, the club is receiving a double punishment which impinges seriously on the club’s future sporting performance, instead of punishing the director(s) responsible for the financial problems of the club. The only word for this is ‘ludicrous’. In the case of Luton it was ludicrous because the directors responsible were no longer in charge of the club. In the case of Chester it is ludicrous because the person who should bear the responsibility is still in place.

Yet again, clubs suffer because an effective fit-and-proper-persons test is not in place. When exactly is the lesson going to be learned?

[See also Luton Town and an unfair disadvantage]

Posted in Governance, Insolvency, Ownership, Points deduction, Sanctions | Tagged: , , , | Leave a Comment »

Developments at Chester City

Posted by John Beech on June 18, 2009

The latest developments at Chester City seem to have attracted surprisingly little comment, let alone criticism. Regular readers will recall that Chairman Stephen Vaughan took the club into Voluntary Administration a month ago (1).

Former player David Jones got as far as requesting due diligence with the Administrator, but did not reach a deal to buy the club (2). Then on 29 May Stephen Vaughan revealed his cunning plan – he would buy the club back from the Administrator. He argued “… if I take the club through a CVA (Company Voluntary Arrangement) the debt will be £290,000. But if the club goes to another bidder the debt will be £4,290,000” (3). In a nutshell, he was prepared to write off the debt the club owed to him if he was allowed to buy it back, but not if anyone else bought the club.

To no-one’s surprise there were no new bidders.

At a meeting with creditors on 11 June, a CVA was agreed. The club was to bought by the slightly perversely named Chester City 2004 Ltd (owned by the Vaughan family) – surely that should be Chester City (2009) Ltd – and creditors to be paid 15p in the pound over a four year period (4). The shuffling around of share ownership is not unknown to Vaughan. In 2001 Chester were drawn against Barrow in the FA Cup and Vaughan happened to own both clubs. To allow the match to go ahead, Vaughan sold his Barrow shares to a local painter and decorator three days before the match and promptly bought them back two days after the match (5).

With remarkable good luck in at least one sense, Chester had not only been relegated a tier, but from the Football League to the Football Conference. Unlike the case of Leeds United, where Ken Bates bought the club back from the Administrators, Chester City would need to placate a new governing body.

The following day the Football Conference held their AGM and decided to accept Chester City with a 10 point deduction for going into Administration, news which appeared on the Chester City website that very afternoon (6) but, as I write, has yet to be announced on the Conference website.

So far the only criticism I have found has come from Woking Chairman Shahid Azeem (7). He said “For a club to have £7m worth of debts and then go into administration, only for the same chairman to buy back the club at 15p in the pound, including all the assets, is wrong.We were told they hadn’t broken any rules though because they were not a Conference club until they were accepted at the AGM on Saturday”. This seems a strange a logic when Chester will start the season with a ten point deduction for going into Administration, which also occurred before they went into the Conference!

It should be noted that Woking had a vested interest in Chester’s application to join the Conference – Woking were relegated at the end of this season. It reminded me of Hereford United’s Chairman Graham Turner’s condemnation of Stockport County (8), who went into Administration but survived in League 1, unlike Hereford who were relegated.

What bothers me in all of this is the lack of any criticism, Azeem’s excepted, of Vaughan’s action. The Chester Evening Leader, apparently suffering from short-term memory loss as to how the club came to be in its present situation, has billed Vaughan as ‘CHESTER CITY SAVIOUR’ (9). Vaughan himself is quoted as saying “I would expect a big influx of new players in the next seven to 10 days.” (10) and “We’re coming into the division in a healthier situation financially” (11). It’s as if the last month had never happened.

Posted in Debts, Insolvency, Ownership, Points deduction | Tagged: , , , | 5 Comments »

Vodkat vexation

Posted by John Beech on May 9, 2009

Sometimes things need no commentary, especially when you couldn’t make them up.

The following is taken verbatim from the Vodkat League website (1) where it was posted yesterday:


    Earlier in the season, Flixton had four points deducted for fielding an ineligible player, three points for the offence and one for the point they collected from the game in question. This decision was made in accordance with a rule passed by clubs at the League AGM four years ago.
    However, it has been brought to the League’s attention that the referee for the game in question has now admitted that he failed to report an alteration to the team sheet, and has confirmed that the player in question did not participate in the game.
    The FA has also informed the League that FA rules state that additional points should not be deducted from clubs when an offence of this nature takes place. The FA’s rules state that only points gained from a game in which an ineligible player took part may be deducted. The FA has therefore instructed the League to reinstate the four points deducted from Flixton, as no offence took place.
    As a result, Flixton now move out of one of the relegation places at the bottom of the Premier Division.
    However, on a separate issue, the FA Technical Panel have informed the League Management Committee that Flixton have not obtained Ground Grading F standard to enable them to compete at Step 5 in the National League System. The League has therefore been instructed by the FA that Flixton should be relegated to the Vodkat League Division One for season 2009-10.

    John Deal, Secretary, The Vodkat League

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