[Archived] Parliamentary Investigations into Football

[philipl]

There are currently two Parliamentary Committees looking into football. There is the Select Committee which has wide powers of investigation and to call people which operates under Parliamentary Privilege which is the senior standing body.

But there has also been the specific Parliamentary investigation into Leeds United and the Governance of Football which will be reporting shortly.

This second body has really got its teeth into Leeds and Ken Bates after many small businesses particularly in Yorkshire felt they were very unfairly discriminated against and financially badly damaged by Ken Bates using the conjunction of football rules as they currently stand and English company laws.

The investigation has asked:

- why should football creditors enjoy creditor preference if football clubs are normal commercial or social enterprises?

- who actually controlled Leeds United?

- is the person controlling Leeds United actually the same person as appeared in the documentation at the time of the take over or were their shadow people actually behind the take over reality?

- have the new owners of Leeds United done what they said they would do when they bought it? Have they honoured their commitments?

The conclusions of the Leeds United and Governance of Football Committee are likely to be:

- Football creditor preference to be ended. In other words when a football club goes bust, everyione in football owed money by them will take their turn with all the other creditors including the tax man.

- Annual fit and proper and compliance reviews for owners and directors of football clubs so they cannot say one thing to gain control of a club and then act in a very different way afterwards.

It appears very likely the Select Committee will adopt these proposals and that either football will implement them or legislation (ten minute rule bills are very quick) will be enacted. Football (the FA, League and Premier League) is hardly in a strong moral or political position to fight this.

Football creditor preference looks to be particularly vulnerable. If you watch the BBC recording, you will see the MPs talking as though it is already conceded that it must disappear.

If everybody in football faces losing huge amounts of money every time a club goes bust, the transfer system etc could grind to a halt because clubs are not going to be sure the club buying their player is going to be around to pay the last instalment some years into the future.

As a result, football itself will have an enormous self-interest to beef up its own compliance units' teeth in terms of owners and directors and would no doubt desperately need to have powerful meaningful annual reviews of whether directors and owners are truly fit and proper, continue to be so and are doing what they told the authorities they would do at the previous review. Only this way could football clubs continue to trade with each other with confidence knowing they no longer have the cosy fall back of getting all their money back before anybody else if the other club goes bust.

This has been designed to reform the ways of Ken Bates and his ilk but in the process of getting rid of financial malpractise the dragnet will inevitably bring under investigation owners who have used third parties to exercise managerial control or influence, conflicts of interest (as understood in the UK), and call into question radical reorganisations which were explicitly excluded at the time of purchase.

Parliamentarians are also looking at ways in which football fans could be brought into the review process although I doubt in practise this will go much further than creating a mechanism by which fans can formally submit evidence to the owner/director annual review process.

[PAFELL]

There are currently two Parliamentary Committees looking into football. There is the Select Committee which has wide powers of investigation and to call people which operates under Parliamentary Privilege which is the senior standing body.

But there has also been the specific Parliamentary investigation into Leeds United and the Governance of Football which will be reporting shortly.

This second body has really got its teeth into Leeds and Ken Bates after many small businesses particularly in Yorkshire felt they were very unfairly discriminated against and financially badly damaged by Ken Bates using the conjunction of football rules as they currently stand and English company laws.

The investigation has asked:

- why should football creditors enjoy creditor preference if football clubs are normal commercial or social enterprises?

- who actually controlled Leeds United?

- is the person controlling Leeds United actually the same person as appeared in the documentation at the time of the take over or were their shadow people actually behind the take over reality?

- have the new owners of Leeds United done what they said they would do when they bought it? Have they honoured their commitments?

The conclusions of the Leeds United and Governance of Football Committee are likely to be:

- Football creditor preference to be ended. In other words when a football club goes bust, everyione in football owed money by them will take their turn with all the other creditors including the tax man.

- Annual fit and proper and compliance reviews for owners and directors of football clubs so they cannot say one thing to gain control of a club and then act in a very different way afterwards.

It appears very likely the Select Committee will adopt these proposals and that either football will implement them or legislation (ten minute rule bills are very quick) will be enacted. Football (the FA, League and Premier League) is hardly in a strong moral or political position to fight this.

Football creditor preference looks to be particularly vulnerable. If you watch the BBC recording, you will see the MPs talking as though it is already conceded that it must disappear.

If everybody in football faces losing huge amounts of money every time a club goes bust, the transfer system etc could grind to a halt because clubs are not going to be sure the club buying their player is going to be around to pay the last instalment some years into the future.

As a result, football itself will have an enormous self-interest to beef up its own compliance units' teeth in terms of owners and directors and would no doubt desperately need to have powerful meaningful annual reviews of whether directors and owners are truly fit and proper, continue to be so and are doing what they told the authorities they would do at the previous review. Only this way could football clubs continue to trade with each other with confidence knowing they no longer have the cosy fall back of getting all their money back before anybody else if the other club goes bust.

This has been designed to reform the ways of Ken Bates and his ilk but in the process of getting rid of financial malpractise the dragnet will inevitably bring under investigation owners who have used third parties to exercise managerial control or influence, conflicts of interest (as understood in the UK), and call into question radical reorganisations which were explicitly excluded at the time of purchase.

Parliamentarians are also looking at ways in which football fans could be brought into the review process although I doubt in practise this will go much further than creating a mechanism by which fans can formally submit evidence to the owner/director annual review process.

I knew a carpenter who did a lot of work for pompey. When pompey went bust was shocked to hear the taxman and football clubs / players got paid first. I also think the fit and proper test should always be reviewed on a yearly basis.

[Biddy]

Excellent post Philip a really good read.

Personally I hope they do get rid of the creditor preference. I've never been sure how they have managed to operate outside of the same rules and regulations every other British firm has to abide by when going into Administration.

That was the one (and only) thing that stood out for me in that rubbish Alan Sugar program on football and that highlighted the carpenter tangled up in the Pompey affair (I guess the same one Pafell mentions). Shocking that they should lose any entitlement to monies owed when the greed of the other PL clubs is paid off.

I'm not sure however that all transfers will grind to a halt in the wake of such findings. I think (hope) self regulation would be improved but ultimately I think we would see an end to the "buy now, pay later" transfers. Perhaps it will go back to paying up front. If that sees a reduction in transfers fees as a result then thats an added bonus.

[thenodrog]

What would be the legality of banning foreign ownership? Football club debt has risen dramatically since all these dodgy foreign owners turned up.

[AggyBlue]

I'm not sure however that all transfers will grind to a halt in the wake of such findings.

I think more selling clubs would insist on one full payment rather than installments. Not many clubs can afford to pay the huge transfer fees in one go

[koi]

Is there any chance the finding will recommend the public flogging of that vile creature Bates?

[philipl]

The point about football creditor preference is that other than when Pompey got into such dire straits that there was a danger even for football creditors would get less than 100%, football clubs have had no need to do any credit rating when selling to other football clubs.

When there was a risk Man City and later Pompey might not pay football creditors, the PL and FA piled in to sort out the problem because this certainty of payment is so critical to the entire football cash and trading ecology.

If, as seems very likely, that assurance of payment through creditor preference goes from the English game, football will either stop trading with itself or become more normal in its business practices. This will then make fit and proper ownership and governance mission critical rather than the easily circumvented soft touch process it is now. This will be especially important to give overseas clubs confidence they can sell players to English clubs and get paid for them without recourse to UEFA or FIFA.

So owners and directors will be held accountable for doing what they said they would. For a football club we are all familiar with, this would probably mean:

- an assurance that agents would not be involved in management would have to be adhered to

- an assurance that the existing management personnel, systems and structures would continue would have to be adhered to

- if one person is the responsible person, that person would have to clearly demonstrate how she/he exercises all decision making without let and hindrance

- the responsible person would have to show that all systems and people report directly and are subordinate to her/him irrespective of reporting relationships in other businesses they might be involved with and that all the football club's systems of control are fully operational

- if other members of the family are in reality exercising power jointly or individually as responsible persons, they would have to be formally registered with the English authorities and be rigorously checked as fit and proper including global compliance with sporting regulations in every single jurisdiction they have been involved in and checked to be sure all past business involvements were closed or disposed of in an orderly manner

- that all UK corporate, financial, fiscal and legal requirements are being met

- that an English Premier League Football Club is unambiguously being managed and directed by a board of directors acting within the territory of the Football Association that has granted it its license (there is a serious point that if the locus of control of Leeds United is in fact in Monaco it ought to have been subject to French FA regulation and not been allowed to compete in English domestic competition)

[roverwhelmed]

Philipl do you think this would be good/awful for Rovers?

I don't really know my stuff, so am I wrong to be heartened by the news that an annual fit and proper persons test to be taken every year might come into play? From the depressing reading in other threads about the state of our club, surely Venky's wouldn't pass such a test. Surely. So if they didn't pass it, do you feel the club could be saved by that, or end up falling entirely?

[roversmum]

What would happen, if a club was found to be owned by a 'not fit and proper person?'

[philipl]

If there were any failure, I would expect they would be given a fixed time period to improve before being re-evaluated to see if they had become compliant. Only in the event of a failed re-evaluation would the PL start talking about revoking the license of Venky's altogether.

I would be surprised if the PL did not ask for all four of Mr and Mrs Desai and both the brothers to be evaluated as it would be hard to argue they are not in reality controlling/owning the club as a quartet. I am told Venky's London is the registered owner and Mrs Desai is the PL-registered responsible person and they comfortably qualified as fit and proper or whatever the current terminology is.

However, should one individual amongst those submitted for evaluation have something in their history that caused them to fail the test, that person would be immediately debarred and be very publicly set at a distance from having any influence whatsoever over the club.

If the entire ownership were deemed not fit and proper (unlikely to be all four in the case of the Raos) then the orderly sale of the club would be required or in an extreme case the owner could be suspended immediately and a forced sale instructed but this has never happened. In lower leagues, clubs have been expelled over issues of ownership.

I would expect that the PL would also require that the location of decision-making to be pulled back from India to England. I know that Sheikh Mansoor, the Glazers and Roman Abramovich are more often than not away from the UK but those clubs are clearly and unambiguously managed by their boards of directors and powerful CEOs here in England. That simply isn't the case for Rovers now.

In a nutshell, the activities of Ken Bates using obscure overseas structures to achieve a financial coup (I cannot say anything stronger..) might bring in regulation which will as a by-product prevent the way Rovers are now being run. Parliament will probably throw the Venky's baby out with the Bates bathwater.