The not-so-beautiful game

“How did you become a millionaire?” the football club owner was asked.
Answer: “Simple, I started off as a billionaire and then I bought a football
club.”

Therein lies the problem, fans’ expectations force the business entrepreneur
who buys a football club to leave all his sound business principals outside the
boardroom.

Emotion takes over and the chase for the league title and promotion becomes
the fixation, not just of every fan, but the directors too.

Which successful business spends more on salaries than it gets in turnover
each year? Where some of the employees earn more in a year than the customers –
or supporters – earn in a lifetime?

Football can’t continue to be run in this way; sound business principals need
to be adopted and football clubs, as limited liability companies, must be
subject to the same scrutiny as every other business in the land.

A report by the University of Coventry suggested that between 1986 and 2008,
56 clubs went insolvent and in the past two years that figure will have risen
dramatically.

In the event of an insolvency, the ‘football creditors’ rule states that
players wages must be paid (to the end of their contract) and transfer fees
owing to other clubs must all be paid in full, irrespective of the position of
other creditors.

However, other creditors are getting increasingly irked that players and
other clubs are being given preferential status (not something usually
enforceable under insolvency law) at the expense of everyone else.

HMRC has unsuccessfully challenged this rule (Inland Revenue v Wimbledon FC
[2004]). HMRC now votes against any CVA as a matter of policy where money owing
to them is more than 25% of the total.

The casualties of the tension between the Football League’s insistence on a
CVA and HMRC’s refusal to agree to one are, of course, the clubs.

Peter Sargent is president of R3, the insolvency trade body