Football League Insolvency Regulation Changes: A Brief Summary

Introduction

This note sets out a summary of the new insolvency regulations that the Football League (FL) has agreed to implement in time for the upcoming 2015/16 season. Although at the time of writing, the FL has not published the express wording of its new regulations, it recently circulated a press release[1] providing the high level details. These details are set out below.

FL Insolvency Policy Changes

Points Deduction Increase

  1. Any FL club that enters Administration (as defined in the FL Regulations) will be penalised with a 12 point sanction. This has increased from the previous 10 point deduction.

Obligatory Marketing Window

  1. Once appointed, an Administrator will be required to market the club to prospective buyers for a minimum of 21 days. Within that period, the Administrator is obligated to meet the club's supporter's trust and provide the trust with the chance to bid for the club.

CVA Requirement Dropped

  1. The requirement to exit an Administration via a Company Voluntary Arrangement (CVA) has been removed[2]. The FL has stated that it will allow the transfer of the FL 'golden share' so long as the additional requirements detailed in this briefing note are followed[3].

Creditor Repayment

  1. The entity that takes control of the club from the Administrator will be required to pay creditors a minimum of:

  2. 35 pence in the pound over an initial 3 year period; or

  3. 25 pence in the pound as an immediate payment at the time of the transfer of the FL 'golden share' to the new owner.

If this requirement is not complied with, the FL will have the power to deduct a further 15 points (in addition to the new 12 point deduction on entry into Administration), at the start of the season following the Insolvency Event (as defined in the FL Regulations).Football Creditor Rule Remains

  1. The FL reiterated its intention to use its Football Creditor Rule to ensure full repayment to football clubs and players alike. Therefore the transfer of the FL 'golden share' from an insolvent club to a purchaser will remain conditional on the purchaser repaying in full all debts due to other football clubs and players.

[1] http://www.football-league.co.uk//news/article/2015/football-league-clubs-focus-on-the-future-2483914.aspx[2] The FL's rationale for this change appears to be that this new procedure will "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".[3] However, only once the regulations are published will a comprehensive understanding of the rule changes become clearer.

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