Court test for football creditor rule

Link: Football Clubs unprepared for risks

Exeter wants to overturn the rule ð used by the conference, the football league and the premiership ð that in the event of an administration a club must first pay ‘super creditors’, often players or managers.

One insolvency expert said the case could prompt a rethink of the whole system of club administrations. Alastair Beveridge, a partner at Kroll, said: ‘A potential knock-on effect is that the league has to rewrite its rules on football creditors.’

When the case kicks off on 29 March at the High Court in Bristol, Exeter will sue the conference for ‘unfairly prejudicial treatment’ over two key football administration rules: the imposition of a 12-point penalty for going into administration and super-creditor status.

Insolvency practitioners believe that the super-creditor rule has so far hampered efforts to rescue the finances of the many clubs that have faced insolvency, because it compels them to pay off contracts with players, managers and other teams ð whatever the fiscal position of the club. A poll of football finance directors for Accountancy Age in August showed 43% thought the rule should be scrapped immediately.

Beveridge said: ‘If the league loses, it will have to decide whether to change the rules, but they have not bent to pressure so far.’

Ian Huxham, managing director of Exeter City, said: ‘If we were Leeds, the whole nation would be watching. But the test case is little old Exeter City and this is life or death to us.’

He said Exeter was in a catch-22 situation. ‘The Inland Revenue wants to revoke our corporate voluntary agreement if we pay football creditors in full, but the conference is threatening to expel us if we don’t.’

A spokesman for the football conference said: ‘They are dragging football into the courts by wrapping the issues [of points deduction and football creditors] together.’

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