Time To Readdress Rules For Clubs Entering Admin TSS March 2, 2012 Leeds United 32 Comments Points deductions for teams entering administration are supposed to deter other clubs from wild overspending. But do they work? Who are they really punishing? Surely the punishment to the previous owners responsible for the club’s plight is losing the business they owned? Once the club enters administration, they have no further involvement, their days of financially mismanaging the club in question are over. They can either accept they’re no good at running a football club, or- worryingly- move on to the next victim. As a Leeds United fan, I’m no stranger to the perils of administration. At Elland Road, the situation was different from most in that Ken Bates somehow managed to take our club into administration, wiping clear all of our debts and still come out the other end as owner through offshore and “anonymous” holding companies. This was wrong on so many levels. Millions of pounds owed in tax and to various other creditors, including many local businesses, was wiped off and forgotten about, and the man responsible for a lot of this debt (Leeds United had amassed tens of millions of pounds of additional debt since Bates’ first takeover) was able to continue running the club. It’s like taking out a mortgage followed by several loans to improve your property, defaulting on repayments, declaring bankruptcy and then ending up owning the whole thing anyway. For tens of millions of pounds of debt wiped clean, Leeds United – already faced with certain relegation – were handed an inconsequential 10 point deduction followed by a 15 point deduction to start the following season with. But why should Leeds United be punished at all? The club were at the lowest point in their history and the fans had played no part in this. The real failing was that of The FA and Football League for allowing this to happen in the first place! When Sky Sports, Coca-Cola and Barclays came knocking offering huge sums of money, the football governing bodies decided that the game should be run as a business first and a sport second. In doing so, it was their duty to ensure adequate protection was provided to the clubs from dodgy owners and chancers that would lead them on the road to oblivion. The FA created this situation, they can’t punish those that still see football as a sport for the failings they created when cashing in on it’s potential as a business. Needless to say, The FA don’t see it this way. If they did, they’d address the real issue. They would take preventative measures to ensure the people buying up our clubs really are “fit and proper”, and when one slips through the cracks, they wouldn’t punish the clubs because the system they created has failed, they’d punish the businessmen responsible by banning them from any involvement in the English game for life. The crux of the matter is this. Handing Portsmouth, Leeds United or any other team that has been financially mismanaged a points deduction is punishing the fans and the team. The FA and Football League aren’t punishing the dodgy owners that continue to make a mockery of their system, by the time the points deductions kick in – theoretically at least – those responsible are long gone. Instead they’re punishing the sport itself. I don’t want to sound like some football purist romanticising about a bygone era, but as a football fan, I never asked that the sport was run primarily as a business. The FA wanted that, and it’s their duty to sort this mess out. The system is broke and points deductions are nothing more than passing the blame. Why should we suffer for the failings of those that are tasked with governing the game? TimPM Hear hear! The Football League declared Pompey’s owner fit and proper. He has proven to be anything but in my opinion. Thus, logically (and perhaps legally?) the FL should be held directly responsible for the place the club is placed in. The nerve to then deduct them points is amazing… WJD An excellent article and spot on in it’s criticism of the football authorities who like to take credit for any achievements but never responsibility for their mistakes. The fans are the lifeblood of football, stop punishing them and help them instead! oldschoolbaby It`s time to change admin laws ? I would think it`s time for quite a few clubs to go into administration. At which point you change the rules and how you avoid retrospective or future penalisation is a very thorny question CasWhite The authorities do have a lot to answer. There seems though to be a change by now try to prevent clubs getting into this position by in Leagues 1 and 2 restricting the amount that can be spent on wages. It’s not difficult to put further rules into place: 1. All transfer fees to be paid up front so if you don’t have it can’t spend it. This would also I think lower transfer fees to more reasonable levels. 2. No owners can put debt on a club, ie Scum 3. Clubs should breakeven ie UEFA’s fairplay rules. These are just starts but more could be done. Captaincrash like point 1) a lot Captaincrash I essentially know you are largely right but I am still ‘burnt’ by the total lack of sympahty clubs and the football community at large showed to us (and in fairness Ltuon….). Not just the overwhelming vote on the additioanl 15 point punishment but the lack of respect and willingness to even listen to the arguments, recognise the change in Inland Revenue stance etc. Deep down my fingers are crossed for Pompey and Port Vale and Darlo (especially Darlo)…. but let us not forget how they treated us when we were looking for sympathy, help and support. TSS @Captaincrash The thing is, it wasn’t their fans that voted for that deduction – it was the businessmen running the clubs. That was another attempt to shift blame by the MP by allowing our rivals to determine our fate, rather than get their own hands dirty. Their rules had been exploited and instead of dealing with the problem head on, they took a cheap way out. They’re pathetic, they really are. TimPM @TSS @Captaincrash I’ve got to admit if I saw a club who’d never really had a cuddly reputation (say for example Millwall) blazing up the table, going on cup runs and having a lark in Europe. Then it turned out they’d done it all on a borrowed credit card, I’d not have much sympathy. The fact that I’m a fan of a club that did that softens my approach a bit, and I’ve always liked Pompey so I feel sorry for them. But back in 00s I think a club like Leeds needed an example made of them, just like with other businesses… mattbb1 i think we ned to be bi about this and show some solidarity with portsmouth fans. Like us they endure owners who dont care about the team. My view is that the individuals who run the business should be barred from directly or indirectly being associated with a football team, likewuise fmaily members, associated businesses should only be allowed to come bnear fotball again after a qualifying period of 10 years. The FA Can do that. The fit and proper persons test is pathetic, and not enugh, the same rules should apply as do with banking whereby your corporate history goes against you. mattbb1 i mean we need to be big not bi i’m not sure what on earth would happen if that came to be! MrLew Agree with the sentiments of your article. My opinion is admin clubs should be auto relegated one division lower than they would have otherwise ended up in. The likes of Portsmouth should have to fight it out in L1 or (if relegated) L2. I know this somewhat punishes the supporters but it also makes it less appealing to take a club into admin in the first place – might make them work harder to stave off admin. Example – Rangers will come back fighting next year with no debt and probably win the SPL – is that fair to all the other well managed teams in the SPL? TSS @MrLew Make who work harder to avoid admin? The businessmen that have created the entire situation, but by this point, have left the club so serve no punishment whatsoever? What do they care? CasWhite @TSS @MrLew TSS, would your rule ban just the owner taking the club into administration or all previous owners. In our case we had three owners leading up to the administration process. Who decides who was responsible. I understand you put this bluntly at Bates shoes, but my view would be different. TSS @CasWhite @MrLew Bates was the one that created the admin situation by failing to pay the tax man and loading tens of millions in additional debt onto the club, so he must take the fall. However, in all cases you’d have to look back at every factor that brought a club to this situation in the first place. Ridsdale should have been reviewed before he was allowed involvement in another club. Did he create Leeds United’s admin? No. Has he proven himself to be financially capable of running a club? No. You can’t make it entirely black and white, you have to judge each case on it’s own merit. For example, if someone takes over a heavily indebted club and unsuccessfully attempts to prevent admin, then the debt wasn’t his fault so he should avoid punishment. You punish whoever is directly responsible for the unpaid debt basically. That’s all it comes down to for me. CasWhite @TSS Bates created the administation situation. It wasn’t the HMR&C asking for the money sooner than was negotiated?? Take you blinkers off TSS and understand the club should have been put into administration when Krasner was involved and certainily before they sold ER and TA. The tax being requested was the historical PAYE and VAT in the main. TimPM @TSS @CasWhite @MrLew I think I’d wholly support MrLew’s auto-demotion, BUT only if we had some loose wage-caps, and some tight financial fair-play rules like not spending more than X amount of turnover. That way it would be nigh-on impossible for a rich owner to come and over-spend. Asset-stripping wouldn’t be stopped by that, though? TSS @CasWhite Of course we should have been put into administration sooner, I’m not disputing that. We wouldn’t have lost Elland Road that way, would have recovered much sooner than we did and would have been much more attractive to potential buyers. But the admin under Bates was entirely his doing. He can’t takeover the club, claim the debts and minor and now under total control then sink the club into admin soon after with tens of millions in additional debt claiming it’s all Ridsdale’s fault. It wasn’t, Leeds United under Ken Bates borrowed that money. What the Ridsdale board did is an entirely different thing that they too should be barred from involvement with football for. And on the subject of Bates again, how did he pass a fit and proper test in the first place? He’s sent multiple businesses under and had Chelsea in a worse situation than we were before Roman came to the rescue. I’d say there’s plenty enough in Bates recent and not so recent history to warrant a ban from the game. CasWhite @TSS I agree with some of your sentiment. But the additional debt you refer to would be what was used to run the club and reduce the debt of Krasner and Risdale. I keep hearing this Chelsea were in a worse situation, but we’ll never know what would have happened without Roman. They qualified for Champions League, unlike us, which would have saved them for another year. I still don’t understand what the fit and proper person test does. Seems you just need to breathe and have a note from your mum saying your a good person deep down!! As for what I think should be done to prevent this situation, I put this down on another link. CasWhite @TSS For ease of reading………………. 1. All transfer fees to be paid up front so if you don’t have it can’t spend it. This would also I think lower transfer fees to more reasonable levels. 2. No owners can put debt on a club, ie Scum 3. Clubs should breakeven ie UEFA’s fairplay rules. These are just starts but more could be done. TSS @CasWhite Chelsea were in a dire state of affairs, that’s why Bates instructed Kenyon (I think it was?) to find a buyer. They were on the brink, and a lot of that was to do with the Chelsea Village project that failed epically. Bates himself said Ridsdale’s debts were all but gone when he came in. He didn’t acquire debt to pay old ones off. He said these were manageable under the clubs current financial situation. If he did acquire debt to pay old ones off, there was extreme financial mismanagement at play since he managed to increase debts by tens of millions. Did he use one of those “take out a bigger loan to reduce all your debts into one manageable sum” at a thousand times the cost companies? The fact is, we had very little outstanding that can be blamed on Ridsdale. You pay your tax bill yearly and Ridsdale was long gone, so that wasn’t his fault – if it was a carried over bill, we’d have been shut down much sooner. ChicagoWhite @CasWhite @TSS Bates defaulted on the negotiated payment plan he missed two payments what was te revenue supposed to do just let him screw them over? mattbb1 @CasWhite @TSS its standard business practice to borrow money to acquire other firms, i cant see how on earth you would be able to outlaw that. mattbb1 point 1 definitely a good rule to have, as it would level theplaying field and encourage good cash management. ChicagoWhite The FL & PL needs a commisioner who runs the league who can review deals including salary ad veto deal if it make fnancial sens. Plus all owners with more tan 10% ownership have to b declared publicly, any large group or consortium designed to hide onership should ether be barred from ownership or they have to disclose all owners including minority owners. Every club should have to post a surety bond with the league that guarantees enough funds to complete the season, this could be in the form of a League run insurance policy that the league can collect on, if a club goes into administration the league should takeover the operation of the cub or appoint administrators, the ownership and executive management should automatically be disbarred by the league for life, an appeal mechanism can be put in place to protect anyone who was defrauded so they could be reinstated if conclusive proof is provided they were totally uncomplicit. The football creditors rule needs to be abolished this would force the FA/FL/PL would be much more thourgh with transparency and the operation clubs, it would also stop transfer deal on credit as the selling club wouldn’t take the risk of not getting paid wheras today they are protected even if they believe the buying club is trading insolvent. Any club under admin or a transfer embargo should be forced to cancel all loan deals, Birmingham signed 4 players this week immediately prior to getting a transfer embargo making a mockery of the embargo, those players need to go back to there clubs! MurkyBob It would do the game good if a club like Portsmouth was allowed to fail. Can’t keep propping up lame ducks. Clubs should have to submit a business plan before the start of each season and if it is a joke then they shouldn’t be allowed to compete. If the support is there then clubs will rise again albeit in the non-professional leagues. There should be caps on wages and level of debt against actual turnover. Fail to stick to the caps and points are deducted. Transfers should be on a cash only basis. I still think that a new club without Bates rather than the pheonix that arose from the Risdale ashes would have been preferable even if we would now be in the Conference North. Agree with every word that Chicago White wrote. jimmyoneeye To be fair to the football league, you can sometimes be inbetween a rock and a hard place when new owners come in. Quite often clubs are in desperate need of new owners as in Portsmouths case, to stop them going under. If they block new owners on the fit and proper rule and the club goes bust the fans suffer, if they dont 12 months down the line things have gone wrong and the fans want to know why the league didnt block it. @Spanish_Leeds When I see the headline I said: This is nonsense. Then I reed the article and change my mind : you have a smart point of view TSS. John Beech For some research on the effectiveness (or not) of points deduction, see http://wwwm.coventry.ac.uk/researchnet/CIBS/Documents/CIBS%20WP08.pdf Pete_Dog As someone who used to work in the profession, running and selling businesses in Administration, I totally agree with you and with a lot of the comments to this article. The rules which the FL put in place to penalise clubs who fall into Administration completely miss the point and in many ways make things worse – the whole point of the Admin process is to help save the business, secure jobs of people who work for it and (hopefully but unfortunately not often enough) realise cash to pay the creditors of the business (or at least pay back more than they would have received if the business had just fallen into Liquidation. Compare this with what the FL’s rules do to clubs which fall into Admin, regardless of the reasons – automatic 10 point penalty and a transfer embargo effectively kicking the club while they’re down, making it a less attractive proposition for a new buyer when they end up dropping a division as a result (also making it more likely that staff will have to be made redundant and creditors won’t get repaid – both running counter to the Enterprise Act, which sets out the Admin process). Even worse, the people responsible, as you rightly say, don’t suffer: they either buy it back at a knock-down price (can’t think of an example here…!!) or move on to the next disaster in waiting (again, if only there was an ex-Leeds Chairman I could use as an example..!). The FL uses as its reasoning for this that clubs shouldn’t benefit from being in Admin, but this really doesn’t wash. Admin is a court-appointed process – requiring oversight of a judge and needs to be done for a specified set of circumstances. If (as the FL seem to fear) someone racks up £millions in debt irresponsibly, knowing they cannot service that debt, then this is a criminal offence – Fraudulent Trading – and the directors can be sent down, subject to an unlimited fine (to cover all the debt they incurred) and/or banned from being a director. My point is, the law of the land has this covered… It works for every other business and sector in this country – manufacturing firms don’t have a one year embargo on buying the best materials just because they go into Admin for example – so why does football have to be different? Answer – they don’t trust their chairmen to behave like responsible managers and custodians of their businesses – in which case, this is an issue for the fit and proper person test, not to punish the fans. The FL’s football creditor rule just makes things worse and is even hypocritical – it actually makes it less likely that the likes of St Johns Ambulance and local businesses will be paid in the event of financial problems. If all creditors were treated equally, as the law states, then these smaller concerns wouldn’t lose out: OK, so football creditors would share the pain but that’s the way these things go. And the big issue witht the football creditor rule is that HMRC are gunning for it, making an example of every club that so much as skips a payment – rather than entering negotiations and a payment plan, as is the case with every other business. Was shocked to hear in the press (if correct) that one of the big issues at Pompey and reason why they may not be able to finish the season is that their parachute payments and FL income is being syphoned off to the previous owner to pay off debt due to him under the terms of the CVA they used to exit Admin last time. How can the FL allow this, knowing that many clubs rely on this to survive once the season ticket income has expired?? (of course, the directors of the club, knowing this, really should have budgeted for this and trimmed their wage bill accordingly, but that’s a different point for a different rant entirely…) Sorry for the essay, but it’s a real thing of mine. MOT number1inyorkshire going into admin should mean that the people who put the club there are unable to take back over the club . the court should appoint the administrator instead of the person putting it there . the fit and proper person rule should mean that anyone putting a club into admin has failed to be fit and proper . everyone who has a share in the club no matter how small should be public ,same with ground owners etc . all clubs should have a fans representative on the board or to meet with it at least a fans envoy if you like . teams entering admin twice should be thrown out of the league .. the football creditors rule should be banned , .no one knows who really owns football clubs in the british isles they could be front for anything from terrorism to football clubs .. the football authorities are clueless idiots who do not know their ass from their elbow its time to merge everything into one the ENGLISH FOOTBALL AUTHORITY who regulate everything from fines .to tournaments . too many cooks spoil the footy Gary Cooper Protesting against bates is pointless and it should stop I really regret advocating that now, I wish I put more time into supporting Leeds and actually going to matches rather than causing this pointless split, I am really sorry for my actions. To all the right minded and loyal Leeds fans I apologise whole heartedly. LUFC is marching on together with Ken Bates, I accept that it is the best policy for LUFC and our campaign for change has ceased MoT. Jonbiriani Pete-Dog “the directors of the club, knowing this, really should have budgeted for this and trimmed their wage bill accordingly” is not a seperate issue at all, and the real reason why significant points deductions are valid. Clubs like Portsmouth were doing very well paying huge wages for top players that they couldnt afford. This practice inflates player wages accross the league as a whole and puts pressure on other clubs. Similarly clubs like Bristol, who play by the rules and are forced to sell thier better players like Nicky Maynard, are put at a particular disadvantage, whilst Portsmouth (and I predict Birmingham if they dont get promotion) spend heavily, give themselves an unfair advantage, then expect to be able to cancel thier debts and start afresh when a new owner turns up. Points penalties are the only thing the league has to combat this at the moment. There has to be some kind of justice for clubs who almost ‘cheat’ in the manner that Portsmouth has done. You’re right to say its not the fault of the fans, but they never ask questions when things are going well, and complain when tough choices had to be made. How many Leeds fans raised concerns when Ridsdale mortgaged the clubs future on ‘guaranteed’ champions league success for many seasons to come? The last ten years at Leeds has been terrible, but if I was looking from a neutral prespective (which Im not) I would find it difficult to argue that the club didnt get what it deserved for overspending massively to give ourselves an advantage over clubs who balanced the books. Perhaps the lesson to be learned is that the supporters need to be prepared to look at things carefully, and not be afraid to speak out even if things seem to be going well. That said, this article is absolutely correct to say that the football league needs to take responsiblity; the system is broke and the level of spending at all levels unsustainable. Sadly however, nothing will change whilst theres so much money at the top of the game, and many more clubs will go bust before decisive action is taken.