[Archived] Fit And Proper Test

[Iceman]

I thought i would take this out of the Takeover thread, as some people might ask the same question about what exactly is the fit and proper test all about.

Im not sure if this is accurate, or if it has been updated, but it gives a good idea of what Syed will have to go through, if he wishes to own the club

Ownership of a Football Club

What are the requirements for owning a football club?

Football is the biggest sport in England in terms of fan base but also in terms of commercial value meaning that it is an extremely attractive business enterprise for many wealthy businessmen. The top flight of football in England – the FA Premier League – has attracted huge amounts of investment in recent years with much of this being from overseas. One of the major problems with the ownership of football clubs has been the lack of transparency in the ownership and deals that are made etc. As a consequence of this since 2004 a test has been introduced in English football which all owners and directors must pass.

This is called the fit and proper test.

Strict Requirements

Since the introduction of the fit and proper test it has ensured that the ownership requirements for football clubs in England are the strictest of any industry throughout the country. The tests are deemed to go beyond any requirement of company law.

This is due to the previous requirements being the same as they were for any other company in England and Wales, therefore being governed by UK company law.

Prior to 2004 there was no test at all in relation to the ownership of a football club. Since 2004, however, there have still been many problems in relation to the ownership rules as for example one Premier League football club has had a total of 4 owners during one season leading to financial difficulties and eventual administration.

The Fit and Proper Test

One of the initial problems with the application of a fit and proper test for English football is that due to different bodies existing in the running and organisation of English football has led to different test being applied across different leagues.

Structure of English Football

The structure of English football is as follows:

The Football Association Premier League governs the Barclays Premier League

The Football League governs the Coca Cola Championship, League One and League Two

The Football Association governs the Blue Square Premier League and the lower leagues

The FA Premier League, the Football League and the FA all have different versions of the fit and proper test due to the FA Premier League strengthening theirs while the others did not.

The Test

One aspect which applies across all the different above bodies is that the fit and proper test must be passed by all directors of a football club and any owners who own a share of 30% or more.

Elements of the Test

There may be slight differences in the tests adopted by the different governing bodies; however, all fit and proper tests include the following elements:

Individuals will be disqualified from acting as directors or becoming an owner if they:

Are prohibited by law from being a director

Are involved or have the power to be involved in another football club

Have unspent criminal convictions

Are bankrupt

Have incurred administration twice as a director of the same or different football clubs

Inconsistencies

What are the differences between the different tests?

The tests from the above bodies differ in relation to the following elements:

The types of criminal convictions

A ban by another sporting body

The application of the test

The timing of the test

The types of criminal convictions

The tests established by the FA Premier League and the Football League prevent individuals from becoming directors or owners if they have unspent criminal convictions which relate to crimes of dishonesty or for a crime which resulted in an unsuspended sentence of twelve months or more imprisonment.

On the other hand the test applied by the Football Association only prevents individuals from becoming directors or owners if they have unspent criminal convictions which relate to crimes of dishonesty.

As a consequence this means that individuals convicted of criminal acts such as murder or rape do not fall foul of the fit and proper test and can take over or become directors of football clubs. This is extremely problematic considering the fact that football clubs are deemed to represent the local community especially when concerned with the lower and amateur leagues represented by the Football Association.

Ban by another Sporting Body

If an individual has been banned by a Sports Governing Body from any sport in relation to the administration of sport they will be deemed to fall foul of the fit and proper test for both by the Football League and Football Association. This requirement, however, is not a requirement under the fit and proper test established by the FA Premier League.

As a consequence of this an individual who may have been given a life ban from involvement in another sport will still be able to take control of a Premier League club.

The application of the test

Since the fit and proper test has been brought into the Premier League and Football League in 2004 it has applied to all instances prior to its inception when dealing with matters of administration. For example if a potential owner or director has been a director of a club which has gone into administration twice then he fill fail the fit and proper test regardless if one or both of these instances of administration were before the test was introduced.

The Football Association rules however, do not apply to instances of administration which occurred prior to the 1 February 2005. Therefore if an individual has been involved in two instances of administration with one happening before 2005 he would be deemed fit and proper under the FA’s test but not for the Premier League or Football League.

The Timing of the Test

When the test takes place also varies according to which body is applying the test. For example under the FA Premier League fit and proper test the test will be conducted prior to a takeover of a club being approved whereas under the Football Association and Football League fit and proper test will be undertaken once the takeover has happened.

This is a major problem as if a new owner of a football club is deemed to have failed the fit and proper test following the takeover the club would be thrown into financial turmoil as a new owner would be required immediately.

Possible Reform

Many believe that due to the above inconsistencies and despite the test for football being the most stringent for any UK industry that the test should be reformed to make it even stricter. There is, however, feeling that if this were to be the case then the new test would face challenge under European Union Law.

The first step, however, may be for the different bodies governing the different leagues in England to align the tests thus reducing the inconsistencies.

Read more: http://www.inbrief.c...m#ixzz0yMQr0FVD

[den]

Hasn't this now been replaced by the ‘owners and directors test’ Iceman?

[Iceman]

it probably has Den, but i thought it would basically give an idea of what might happen in that new test. I cannot think, that it would be much different to this original fit and proper test.

I thought we may as well have the PL rules for reference, as it may become a topic of conversation shortly. Mods feel free to delete it you think it's waste of space.

------------------------

SECTION D

DIRECTORS & DIRECTORS’ REPORTS

Definitions

1. For the purpose of this Section of these Rules:

1.1 “Auditors” means registered auditors appointed by a Club to audit its accounts who

have not been disqualified by the Board under the provisions of Rule D.36;

1.2 “Auditors’ Report” means a report in Form 3(1);

1.3 “Bankruptcy Order” means an order adjudging an individual bankrupt;

1.4 “Bankruptcy Restriction Order” and “Interim Bankruptcy Restriction Order” mean

orders made under the provisions of Schedule 4A of the Insolvency Act 1986;

1.5 “Club” includes any Associated Undertaking, Fellow Subsidiary Undertaking, Group

Undertaking, or Parent Undertaking of such Club;

1.6 “Concert Party” means any person with which any relevant person is acting in concert

within the meaning of paragraphs (2) to (5) (inclusive) of the definition of “acting in

concert” in the City Code on Takeovers and Mergers, or would be so acting in concert if

the City Code on Takeovers and Mergers applied in the relevant case;

1.7 “Connected Person” means any Person who directly or indirectly possesses or is

entitled to acquire more than 30 per cent of:

1.7.1 the issued ordinary share capital of the company; or

1.7.2 the loan capital (save where loan capital was acquired in the ordinary course of

the business of lending money) and issued share capital of the company, or

1.7.3 the voting power in the company, or

1.7.4 the assets of the company which would be available for distribution to equity

holders in the event of winding up of the company.

1.8 “Control” means the power of a Person to exercise, or to be able to exercise or acquire,

direct or indirect control over the policies, affairs and/or management of a Club, whether

that power is constituted by rights or contracts (either separately or in combination)

and having regard to the considerations of fact or law involved, and, without prejudice

to the generality of the foregoing, Control shall be deemed to include:

1.8.1 the power (whether directly or indirectly and whether by the ownership of the

share capital, by the possession of voting power, by contract or otherwise

including without limitation by way of membership of any Concert Party) to

appoint and/or remove all or such of the members of the board of directors of

the Club as are able to cast a majority of the votes capable of being cast by the

members of that board; and/or

1.8.2 the holding and/or possession of the beneficial interest in, and/or the ability to

exercise the voting rights applicable to, shares or other securities in the Club

(whether directly, indirectly (by means of holding such interests in one or more

other persons) or by contract including without limitation by way of membership

of any Concert Party) which confer in aggregate on the holder(s) thereof 30 per

cent or more of the total voting rights exercisable at general meetings of the Club;

For the purposes of the above, any rights or powers of a Nominee for any Person or of an

Associate of any Person or of a Connected Person to any Person shall be attributed to that

Person;

1.9 “Declaration” means a declaration in Form 2A;

1.10 “Director” means any person occupying the position of director of a Club whose

particulars are registered or registrable under the provisions of section 162 of the Act

and includes a shadow director, that is to say, a person in accordance with whose

directions or instructions the directors of the Club are accustomed to act, or a Person

having Control over the Club, or a Person exercising the powers that are usually

associated with the powers of a director of a company;

1.11 “Individual Voluntary Arrangement” means an arrangement made under the

provisions of Part VIII of the Insolvency Act 1986;

1.12 “Material Transactions” has the meaning set out in Rule D.26;

1.13 “Objectives” has the meaning set out in Rule D.34;

1.14 “Report” means a report in Form 3(2);

1.15 “Shares” includes securities;

1.16 “Spent Conviction” means a conviction in respect of which the offender is treated as

rehabilitated for the purposes of the Rehabilitation of Offenders Act 1974 or, where this

Act does not apply for any reason, a conviction which would be so treated had the

provisions of the Act applied.

1.17 “Third Party Payment” means any payment made or liability incurred (other than

Compensation Fees, remuneration or payments to or for the benefit of Agents referred

to in Rule D.26) by or on behalf of a Club in respect of a Player, including an Image

Contract Payment.

PART 1 - DIRECTORS

Owners’ and Directors’ Test

2. A Person shall be disqualified from acting as a Director and no Club shall be permitted to have

any Person acting as a Director of that Club if:

2.1 either directly or indirectly he is involved in or has any power to determine or influence

the management or administration of another Club or Football League club; or

2.2 either directly or indirectly he holds or acquires any Significant Interest in a Club while he

either directly or indirectly holds any interest in any class of Shares of another Club; or

2.3 he becomes prohibited by law from being a Director (including without limitation as a

result of being subject to a disqualification order as a director under the Company

Directors Disqualification Act 1986, or being subject to the terms of an undertaking

given to the Secretary of State under that Act, unless a court of competent jurisdiction

makes an order under that Act permitting an appointment as a Director); or

2.4 he has a conviction (which is not a Spent Conviction) imposed by a court of the United

Kingdom or a competent court of foreign jurisdiction:

2.4.1 in respect of which an unsuspended sentence of at least 12 months’

imprisonment was imposed; or

2.4.2 in respect of any offence involving any act which would reasonably be

considered to be dishonest (and, for the avoidance of doubt, irrespective of the

actual sentence imposed); or

2.4.3 in respect of an offence set out in the Appendix 12 Schedule of Offences or a

directly analogous offence in a foreign jurisdiction (and, for the avoidance of

doubt, irrespective of the actual sentence imposed); or

2.5 he makes an Individual Voluntary Arrangement or becomes the subject of an Interim

Bankruptcy Restriction Order, a Bankruptcy Restriction Order or a Bankruptcy Order; or

2.6 he is or has been a Director of a Club which, while he has been a Director of it, has

suffered 2 or more unconnected Events of Insolvency (and for the purposes of this Rule

D.2.6 and Rule D.2.7 a person shall be deemed to have been a Director of a Club which

has suffered an Event of Insolvency if such Event of Insolvency occurred in the 30 days

immediately following his having resigned as a Director of that Club); or

2.7 he has been a Director of 2 or more Clubs or clubs each of which, while he has been a

Director of them, has suffered an Event of Insolvency; or

2.8 he is subject to a suspension or ban from involvement in the administration of a sport

by any ruling body of a sport that is registered with UK Sport or Sport England, or any

corresponding national or international association, whether such suspension or ban is

direct or indirect (for example a direction to Persons subject to the jurisdiction of the

ruling body that they should not employ, contract with or otherwise engage or retain

the services of an individual); or

2.9 he is subject to any form of suspension, disqualification or striking-off by a professional

body including, without limitation, the Law Society, the Solicitors’ Regulation Authority,

the Bar Council or the Institute of Chartered Accountants of England and Wales or any

equivalent body in any jurisdiction outside England and Wales, whether such suspension,

disqualification or striking-off is direct or indirect (for example a direction to Persons

subject to the jurisdiction of the professional body that they should not employ,

contract with or otherwise engage or retain the services of an individual); or

2.10 he is required to notify personal information pursuant to Part 2 of the Sexual Offences

Act 2003;

2.11 he is found to have breached (irrespective of any sanction actually imposed), or has

admitted breaching (irrespective of whether disciplinary proceedings were brought or

not):

2.11.1 Rule V.26; or

2.11.2 Rule E.8 of the Rules of the Football Association (as amended, or replaced from

time to time); or

2.11.3 any other rules in force from time to time in relation to the prohibition on

betting on football matches played in England and Wales.

Submission of Declaration

3. Not later than 14 days before the commencement of each Season each Club shall submit to

the Secretary a duly completed Declaration in respect of each of its Directors signed by the

Director to which it refers and by an Authorised Signatory, who shall not be the same person.

4. Within 21 days of becoming a member of the League each Club promoted from the Football

League shall likewise submit to the Secretary a duly completed Declaration in respect of each

of its Directors signed as aforesaid.

5. If any person proposes to become a Director of a Club (including for the avoidance of doubt

by virtue of being a shadow director or acquiring Control of the Club):

5.1 the Club shall no later than 10 Working Days prior to the date on which it is anticipated

that such person shall become a Director submit to the Secretary a duly completed

Declaration in respect of that person signed by him and by an Authorised Signatory;

5.2 within 5 Working Days of receipt thereof the Secretary shall confirm to the Club

whether or not he is liable to be disqualified as a Director under the provisions of Rule

D.2, and if he is so liable the Board will take the steps set out in Rule D.7; and

5.3 he shall not become a Director until the Club has received confirmation from the

Secretary pursuant to Rule D.5.2 above that he is not liable to be disqualified as a

Director under the provisions of Rule D.2.

Change of Director’s Circumstances

6. Upon the happening of an event which affects any statement contained in a submitted

Declaration:

6.1 the Director in respect of whom the Declaration has been made shall forthwith give full

written particulars thereof to his Club; and

6.2 the Club shall thereupon give such particulars in writing to the Secretary.

Disqualification of a Director

7. Upon the Board becoming aware by virtue of the submission of a Declaration or in the

circumstances referred to in Rule D.6 or by any other means that a person is liable to be

disqualified as a Director under the provisions of Rule D.2, the Board will:

7.1 give written notice to the person that he is disqualified, giving reasons therefore, and (in

the case of a person who is a Director) require him forthwith to resign as a Director; and

7.2 give written notice to the Club that the person is disqualified, giving reasons therefore,

and (in the case of a person who is a Director) in default of the Director’s resignation, it

shall procure that within 28 days of receipt of such notice the Director is removed from

his office as such.

Disciplinary Provisions

8. Any Club which fails to comply with its obligations under the foregoing provisions of this Section

of these Rules or which submits a Declaration which is false in any particular shall be in breach

of these Rules and will be liable to be dealt with in accordance with the provisions of Section R.

9. Any Director who fails to comply with his obligations under the foregoing provisions of this

Section of these Rules or who fails to complete and sign a Declaration and any Director or

Authorised Signatory who signs a Declaration which is false in any particular shall likewise be

in breach of these Rules and liable to be dealt with as aforesaid.

Suspension of the Club

10. If a Director who receives a notice under the provisions of Rule D.7.1 fails to resign and his

Club fails to procure his removal from office as required, or if a Club proceeds with the

appointment as a Director of a person to whom Rule D.5 applies despite having received a

notice under the provisions of Rule D.7.2, the Board shall have power to suspend the Club by

giving to it notice in writing to that effect.

11. A suspended Club shall not play in:

11.1 any League Match; or

11.2 any Premier Academy League Match; or

11.3 any Premier Reserve League Match; or

11.4 any of the competitions set out in Rules E.10 and E.11; or

11.5 any other match.

12. For the purposes of the League competition, the Board shall have power to determine how the

cancellation of a League Match caused by the suspension of one of the Clubs which should

have participated in it shall be treated.

13. Upon being reasonably satisfied that the Director of the suspended Club has resigned or has

been removed from office, the Board shall have power to withdraw the suspension by giving

to it notice in writing to that effect.

Appeal against Disqualification of a Director

14. Any person or Club who receives notice under Rule D.7 above has a right to appeal the

disqualification notice(s) in accordance with the following Rules. However, for the avoidance

of doubt, unless and until any such appeal is upheld, the disqualification notice(s) will take full

effect.

15. Any person or Club wishing to appeal a disqualification notice must, within 21 days of the

date of that notice, send or deliver to the Secretary a notice of appeal, setting out full details

of the grounds of appeal of that person or Club, together with a deposit of £1,000.

16. The only grounds upon which a person or Club may appeal a disqualification notice are:

16.1 none of the Disqualifying Events set out in Rule D.2 apply; or

16.2 in respect of a conviction of a court of foreign jurisdiction under Rule D.2.4, or a

suspension or ban by a sport ruling body under Rule D.2.8, or a suspension,

disqualification or striking-off by a professional body under Rule D.2.9, there are

compelling reasons why that particular conviction, suspension, ban, disqualification or

striking-off, should not lead to disqualification; or

16.3 it can be proven that the Disqualifying Event has, or will within 21 days of the notice of

appeal, cease to exist;

16.4 the Disqualifying Event is a conviction imposed between 19th August 2004 and 5th June

2009 for an offence which would not have led to disqualification as a Director under

Premier League Rules as they applied during that period;

16.5 the Disqualifying Event is a conviction which is the subject of an appeal which has not

yet been determined and in all the circumstances it would be unreasonable for the

individual to be disqualified as a Director pending the determination of that appeal.

17. An appeal under the provisions of Rule D.14 shall lie to an appeal tribunal which shall hear the

appeal as soon as reasonably practicable. The appeal tribunal shall be appointed by the Board

and shall comprise 3 members of the Panel including a legally qualified member who shall sit

as chairman of the tribunal.

18. The chairman of the appeal tribunal shall have regard to the procedures governing the

proceedings of Commissions and Appeal Boards set out in Section R of these Rules but, subject

as aforesaid, shall have an overriding discretion as to the manner in which the appeal is

conducted.

19. The person or Club advancing the appeal shall have the onus of proof of the matters set out

in the appeal on the balance of probabilities.

20. If the members of the appeal tribunal are not unanimous the decision of the majority of them

shall prevail.

21. The appeal tribunal shall give written reasons for its decision.

22. Members of the appeal tribunal shall be entitled to receive from the Company a reasonable

sum by way of fees and expenses.

23. The appeal tribunal shall have the following powers:

23.1 to allow the appeal in full;

23.2 to reject the appeal;

23.3 if it determines that a Disqualifying Event exists, to determine that the individual

concerned should not be banned for that period during which they will remain subject

to it and substitute such period as it shall reasonably determine, having regard to all of

the circumstances of the case.

23.4 to declare that no Disqualifying Event ever existed or that any Disqualifying Event has

ceased to exist;

23.5 to order the deposit to be forfeited to the Company or to be repaid to the appellant

person or Club;

23.6 to order the appellant person or Club to pay or contribute to the costs of the appeal

including the fees and expenses of members of the appeal tribunal paid or payable under

Rule D.22;

24. The decision of the appeal tribunal shall be final and binding on the appellant person and Club.

Persons Prohibited by Law from entering the United Kingdom etc

25. No Person may acquire any Holding in a Club if, pursuant to the law of the United Kingdom

or the European Union:

25.1 he is prohibited from entering the United Kingdom; or

25.2 no funds or economic resources may be made available, directly or indirectly, to or for

his benefit.

PART 2 - DIRECTOR’S REPORTS

Material Transactions

26. For the purposes of a Report Material Transactions shall comprise any payment or financial

obligation (or any series of connected payments or financial obligations relating to the same

transaction) made or undertaken by or to or in favour of a Club and recorded in its accounting

and administration records which exceeds (or in the case of more than one payment or

financial obligation in the aggregate exceed) in value £25,000 and which is (or are) in respect

of any of the following:

26.1 Compensation Fees, Contingent Sums or Loan Fees; or

26.2 remuneration of Players (including, for this purpose, any benefits they are entitled to

receive); or

26.3 payments to or for the benefit of Agents; or

26.4 Third Party Payments

and remuneration of and payments to or for the benefit of Players or Agents shall in each case

include payments made by or on behalf of a Club to or for the benefit of a Player or Agent (as

the case may be) including, for this purpose, to any company or trust in which the Player or

Agent (as the case may be) has an interest.

Record of Material Transactions

27. Brief particulars of each Material Transaction sufficient to identify its date(s), its amount(s)

and the nature of it shall be recorded by a Club and the record shall be made available on

demand to its Directors, its Auditors and the League.

28. Directors of a Club (including non-executive Directors) shall take such steps as are reasonably

necessary to satisfy themselves that their Club’s record of Material Transactions is complete

and correct.

Preparation of the Report

29. At the end of each of its accounting periods the Directors of each Club shall prepare or cause

to be prepared a Report.

30. Subject to Rule D.31 below, upon a Report having been prepared it shall be signed and dated

by each of the Directors of the Club.

31. Any such Director who for any reason is unwilling to sign the Report shall note the Report to

that effect, giving full reasons.

32. Any Director signing a Report who knows or ought reasonably to know that it or any part of

it is false or misleading in any way and any Director noting a Report knowing that such note

or the reasons given by him are false or misleading in any way will in either case act in breach

of these Rules and will be liable to be dealt with in accordance with the provisions of

Section R.

33. Managers, Players and Officials shall cooperate fully with the Directors and Auditors of their

Club in the preparation of Reports and Auditors’ Reports.

Objectives

34. The Objectives referred to in the Report are to ensure that:

34.1 in relation to Compensation Fees:

34.1.1 the Club has formally adopted a written transfer policy identifying who on its

behalf has authority to negotiate Players’ transfers and the terms of Players’

contracts, what approvals (if any) are required before such authority is exercised

and who is the Authorised Signatory;

34.1.2 Material Transactions have been entered into by the Club strictly in accordance

with its transfer policy and the provisions of these Rules;

34.2 in relation to remuneration of Players, details of their remuneration and any benefits

they are entitled to receive are fully disclosed in the Players’ contracts and the terms

thereof have been strictly observed;

34.3 in relation to payments to or for the benefit of Agents:

34.3.1 all Material Transactions between Clubs and Agents are evidenced in writing; and

34.3.2 all Material Transactions between Clubs and Agents are authorised by a person

appointed by the Directors of the Club for that purpose;

34.4 in relation to Third Party Payments:

34.4.1 all contracts and arrangements in relation thereto have been entered into by the

Club with the authority of its Directors or a person appointed by them for that

purpose; and

34.4.2 the terms of such contracts and arrangements have been strictly observed;

34.5 in all such cases all elements of the Material Transaction have been accurately and

completely entered into the accounting and administration records of the Club on a

timely basis, including the record required by Rule D.27.

Submission of the Report

35. Within 10 months of the end of each of its accounting periods each Club shall cause its

Auditors to submit its Report together with its Auditors’ Report to the Secretary on behalf of

the Board and the Board shall be entitled to rely on the contents of any Report and any

Auditors’ Report in exercising its powers set out in Section R of these Rules.

Disqualification

36. The Board shall have power at any time to disqualify Auditors from preparing Auditors’

Reports.

37. It shall be a condition precedent to the exercise of such power that the Board shall have

communicated with the Club for which the Auditors in question act setting out fully its

reasons and inviting the Club and its Auditors within 21 days to show cause why its Auditors

should not be disqualified.

38. A Club to which such a communication is addressed shall be entitled within the said period of

21 days to require the Board to exercise its power of inquiry under Rule R.1 and to inquire into

the reasons for the proposed disqualification and both the Club and the Auditors in question

shall be entitled to appear before the Board when conducting such inquiry.

39. In the event of a Club’s Auditors being disqualified under the provisions of this Rule, the Club

in question shall as soon as practicable appoint other auditors to replace them.

[Amo]

tl;dr.

[Iceman]

is that also a typing error Topman, like Paffel's error? Is everybody out trying to get me or something?

[philipl]

Thanks Icers.

Ordinarily, Ahsan Ali Syed would walk those tests but these are not ordinary times for him. He will still pass but it will take a little more time.

[BuckyRover]

I got 71%.

Excellent

[OscarRaven]

is that also a typing error Topman, like Paffel's error? Is everybody out trying to get me or something?

All you own work? Perhaps a link would have sufficed and prevented any potentail copyright infringement hassle for the boards owners.

[Iceman]

i got this off some Liverpool forum

Link to Owners and Directors test