Insolvency and the Insolvency Act 1986
When any form of business has gone into such financial trouble that it has become insolvent the revenues recouped during the insolvency proceedings must be distributed between the creditors in accordance with the Insolvency Act 1986.
Football clubs and insolvency
When football clubs go through insolvency proceedings is there anything which is done differently?
Football clubs in many ways are regarded by the law of England and Wales as a business along the same lines as any other company operating in any industry in the United Kingdom. This means that when a football club suffers insolvency this must be done in accordance with the Insolvency Act 1986.
This means that the law does not impose anything different on the football clubs. However, the football regulators do impose something different upon football clubs going through insolvency proceedings. This is termed the football super creditors rule.
What is the football super creditors rule?
The football super creditors rule is a rule imposed by the football authorities through the Football Association Premier League (for clubs playing in that league) and says that when a football club suffers insolvency the Premier League itself may divert the club’s share of revenues from media right and sponsorship to football creditors.
What is meant by football creditors?
Football creditors will include the following bodies:
- The clubs
- The players
- The management
- The Premier League
What is the problem with this?
The problem with this is that this is done over the priorities of other unsecured creditors such as HM Revenue and Customs which will be owed sums through the non-payment of tax.
As a consequence of this when a Premier League club recently went into administration HM Revenue and Customs will probably only see around 20 per cent of the £17 million of which it is owed by the football club.
For more information on:
- Is it legal for the Premier League to do this?
- On what grounds is it claimed that this rule is illegal?
- What does the Premier League have to say on this matter?
- Is the claim of HM Revenue and Customs likely to succeed?
- What happened in the previous case?