Football League tightens up insolvency rules

Insolvent Football League clubs will now face an immediate 12-point deduction following new football insolvency rules introduced at the competition’s annual conference, an increase of 2 points.

The new regulations were part of a package of new measures brought in to tackle the damaging effects of insolvency to competitions, clubs’ futures and local communities. Clubs will now face stricter sanctions in the event of insolvency and be forced to provide a better return to its unsecured creditors.

At Portland we are well aware of the plight of insolvent football clubs, having been appointed on both sides of the fence; the appointed insolvency practitioner and a member of a creditors’ committee.

football insolvency rules

How does this affect creditors?

While the well known and often thought to be unfair Football Creditors’ Rule, guaranteeing 100% repayment of debts to clubs and players for transfers and wages, will be retained, bidders will also be obliged to pay a minimum 25p in the pound to all other unsecured creditors. This sum must be paid upon takeover of the clubs’ assets or, if not possible, the sum payable rises to 35p in the £ and must be paid over a maximum of three years. Failure to comply will result in a further 15 point deduction at the start of the season following the insolvency exit.

An appointed administrator will now be required to market the club for at least 21 days during which time they will have to meet with the club’s supporters’ trust and provide it with the opportunity to bid for the club.

The league has removed the requirement for the purchaser to achieve a Company Voluntary Arrangement (CVA) meaning that it will work with the administrators to transfer the club’s share in The Football League to the preferred bidder, subject to their compliance with the league’s other requirements.

The new regulations introduced propose to reduce the insolvency period and the associated professional costs whilst provided greater certainty that the club will continue and deliver a better return to its creditors. It should also prevent the administration process being controlled by the club’s previous owner who in some instances will be the only party able to achieve a CVA.

Insolvencies down and new guidelines

The League has now gone two full seasons without a club suffering an insolvency event which is an encouraging sign. The use of Financial Fair Play regulations in all three divisions, the requirement for new owners to demonstrate the source and sufficiency of their funding and the ongoing monitoring of club’s tax affairs have helped bring more stability to club finances.

As well as the regulations mentioned above the league has also introduced new guidelines providing more opportunity for coaches and managers from Black, Asian and Minority Ethnic (BAME) backgrounds. For youth-development positions that require a minimum qualification of a UEFA B Coaching Licence it will become mandatory for clubs to interview at least one applicant from a BAME background.

The beautiful game, not so beautiful

As it currently stands football doesn’t have a very good record for recruitment. Shortlists and interviews very often didn’t happen and new appointments were often by way of word of mouth. The new regulations should hopefully provide a transparent and open recruitment process and may ensure that those applying for jobs, and who are qualified, have some hope of an interview to present their abilities to the board.

For me personally, I have been falling out of love with football for a while now, partly the politics and partly the players attitudes, it is therefore pleasing to see that steps are being taken nationally and internationally to clean the game up. I just hope that these new regulations don’t result in more club liquidations due to purchasers not willing to pay the 25p to the unsecured creditors and therefore local communities losing their football team altogether.