Updated rules for insolvent football clubs

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Posted in:Banking and Finance, Corporate and Commercial, Litigation|July 9, 2015 | Join the mailing list

From the start of the new football season, 8 August 2015, the Football League’s changes to the regulations governing insolvent football clubs (the “Regulations”) will come into effect.

In order to field a team in a Football League competition, a company that trades as a football club must hold a share in the Football League (the “Share”).

If a company which owns a club goes into administration, the Regulations set out the conditions under which the Football League will allow the Share to be transferred to a purchaser and the club to continue to participate under new ownership.

The updates to the Regulations provide that:

1.    A club owned by a company that enters administration will have 12 points deducted (rather than 10, previously).

2.    The administrator must market the club’s business for sale for at least 21 days, during which the club’s supporters’ trust must be met and given the opportunity to bid for the club’s business and assets.

3.    The purchaser of the club’s business and assets must agree to pay unsecured creditors either:

·    a minimum of 25 pence in the pound immediately upon the transfer of the Share to the purchaser; or,

·    a minimum of 35 pence in the pound within three years of the transfer of the Share to the purchaser.

    Failure to pay the unsecured creditors in these amounts will result in a further 15 point deduction.

Despite unsecured creditors of insolvent football clubs only being guaranteed a minimum of 25 or 35 pence in the pound, the “football creditor rule” is preserved. This means that the transfer of the Share from an insolvent club is conditional upon the purchaser
repaying in full all debts due to other football clubs and players.

Furthermore, an insolvent company trading as a football club is no longer required to exit administration by a company voluntary arrangement.

Should you have any queries regarding the subject matter of this article please contact
Stephen Foster, Partner in the Corporate and Commercial Department at
stephenf@berg.co.uk or by telephoning 0161 829 2599.

The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice.  No responsibility for its accuracy or correctness is assumed by berg or any of its partners or employees.  Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.

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