Football League updates rules relating to insolvent football clubs

On 5 June 2015, the Football League (FL) amended the regulations that apply to insolvent football clubs (FL regulations). The changes come into effect from 8 August 2015, being the start of the 2015-16 football season.

A core asset of a company that trades as a football club is the club’s share in the FL (FL share). Only a company holding an FL share may field a team in FL competition. The FL regulations prescribe the consequences if a company owning a club goes into administration, and the conditions under which the FL will allow the transfer of an FL share from an insolvent company to a purchaser (thus allowing the club to continue to participate in the FL under its new ownership).

The revised regulations provide that:

• A football club owned by a company that enters administration will have 12 points deducted (the previous regulations imposed a 10-point deduction).
• The administrator of an insolvent football club must market the club’s business for sale for at least 21 days. During this marketing period, the administrator must meet the club’s supporters’ trust and allow the trust the opportunity to bid for the club’s business and assets.
• The FL will impose a further 15-point deduction unless any purchaser of the club’s business and assets agrees to pay unsecured creditors either:
  • a minimum of 25 pence in the pound immediately upon the transfer of the FL share to the purchaser of the club’s business; or
  • a minimum of 35 pence in the pound within three years of the transfer to the purchaser of the FL share.

The revised FL regulations no longer require an insolvent football club to exit administration by means of a company voluntary arrangement. However, they preserve the so-called “football creditor rule”, which makes the transfer of an FL share from an insolvent club to a purchaser conditional on the purchaser repaying in full all debts due to other football clubs and players.

Source: The Football League, Football League clubs focus on the future (5 June 2015).