BusinessCorporate FinanceFootball clubs face financial form test

Football clubs face financial form test

Football League clubs should face a ‘solvency test’ to gauge how likely they are to collapse during a season, according to restructuring experts

Independent testing of clubs’ ability to operate through a season could avoid
skewing the league tables when points are deducted after a club enters
administration, or protect the League from making parachute payments to help
insolvent clubs.

‘An independent overview is required and the league should consider this,’
said Grant Thornton’s Joe McLean.

However, the test could prove too onerous for many clubs. An arbitration
panel, which ruled on Leeds United’s appeal against its 15-point deduction, said
as many as 40 clubs were in or near to insolvency.

‘There are 72 League clubs and half of them might be bust,’ McLean added.

Several Football League clubs entered insolvency during the 2007/2008 season.
Luton Town faces a further points penalty for deciding against entering into a
CVA after administration – a breach of League rules.

Another concern is how clubs use debt financing to buy players. UEFA
president Michel Platini outlined last week how success was ‘often built on an
unsustainable level of debt’.

The intention would be to have books that balance before a club is allowed
into European competition.

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