Football League toughens insolvency rules
Unsecured creditors will now receive a minimum of 25p in the pound under new, tougher insolvency rules
INSOLVENT Football League clubs will face stricter sanctions and be forced to repay the majority of their debts to unsecured creditors under new rules agreed at the competition’s annual conference.
Clubs entering administration will be slapped with an increased 12-point deduction, which could rise to 15 if they are found to have flouted new rules around repaying funds to creditors.
The Football Creditors’ Rule, which guarantees 100% repayment of debts to clubs and players for transfers and wages, will be retained but unsecured creditors will now receive a minimum of 25p in the pound, which must be paid upon takeover of the clubs’ assets, or the sum rises to a minimum of 35p in the pound over three years. Failure to comply will result in a further 15 point deduction at the start of the season.
On appointment, administrators will also be required to market the club for at least 21 days during which time they will be required to meet with the club’s supporters’ trust and provide it with the opportunity to bid for the club.
The League has also removed the requirement for a Company Voluntary Arrangement (CVA) meaning that it will transfer the club’s share in The Football League to the administrator’s preferred bidder subject to their compliance with the league’s other requirements.
This is expected to reduce the insolvency period and the associated professional costs, provide greater certainty that the club will continue and deliver a greater return to creditors. It will also prevent the administration process being controlled by the club’s previous owner who in some instances will be the only party able to achieve a CVA.
The Football League’s chief executive, Shaun Harvey said: “The League has now gone two full seasons without a club suffering an insolvency event which is an encouraging sign. The use of Financial Fair Play regulations in all three divisions, the requirement for new owners to demonstrate the source and sufficiency of their funding and the ongoing monitoring of club’s tax affairs have helped us bring more stability to club finances.