Football League Clubs Agree Changes to Insolvency Policies

Clubs in the English Football League have agreed to a series of rule changes in relation to the issue of insolvency and the ways in which clubs are sanctioned for failing to maintain financial sustainability.

Perhaps the most eye-catching of the rule changes is that which means any Football League club entering administration will in future receive a 12 point deduction within the context of their tier of competition.

The ‘Sporting Sanction’ rules relating to insolvency have previously left clubs liable to a deduction of 10 points as a penalty for entering administration.

The Football League’s insolvency rules also now insist that an administrator, once appointed to a particular club, must meet with a relevant supporters’ trust wherever there is one and offer an opportunity for that trust to make a bid to take over their club.

Additionally, any purchaser of a football club that enters administration will not now be obliged to pursue a Company Voluntary Administration (CVA) as had previous been the case. Instead, the Football League will transfer the club’s share in the league to a preferred bidder as nominated by administrators as relevant.

Hopes are that the new rules will reduce the period during which a club is considered insolvent and help reduce the professional costs incurred during administration.

The rule changes are designed in part to prevent an administration process from being controlled primarily by a club’s former owner, while creditors can expect to see more of their debts repaid when football clubs become insolvent.

“The league has now gone two full seasons without a club suffering an insolvency event which is an encouraging sign,” said Shaun Harvey, the Football League’s chief executive.

“However, we cannot be complacent and this is the right time to strengthen our Insolvency Policy and also refine its effects, so that it is as fair as it can possibly be for clubs, creditors and supporters,” he said.

The league’s new insolvency policies require purchasers of football clubs to pay creditors 35 pence in every pound owed for a period of three years, or 25 pence on the transfer of shares. Failure to stick to these terms will see the club start its next season of league football with a 15 point deduction.