New Financial Fair Play Rules Agreed By Championship Clubs

Henry Irving

Championship clubs have voted in favour of introducing a groundbreaking new financial fair play model, the Football League announced today.

All but three of the npower Championship's 24 clubs voted in favour of introducing the model, which is based on UEFA's financial fair play regulations, and plans to curb Football League debt by limiting investment from owners and total spending.

Football League research has revealed that the 72 clubs that form the Championship, League One and League Two are on course to rack up a combined £2billion of debt unless spending and investment from 'sugar daddy' owners is curbed.

The regulations will be introduced next season on a gradual basis, but sanctions for non-compliance will not be put in place until the 2014-15 season.

Under the regulations, from the 2014-15 season, clubs who record total losses of over £6million will be hit with either a transfer embargo or a fine that could run in to the millions.

The club in question will be fined if they are promoted to the Barclays Premier League and will be hit with a transfer embargo if they remain in the Championship.

Owners will be allowed to invest £6million next season, £5million the following and £3million the following season.

PA

Henry Irving

Clubs promoted to the Premier League who have not met fair play guidelines will be subject to a specially implemented tax, under new rules released by the Football League on Wednesday.

From the beginning of next season, clubs in the Championship, League One and League Two will adopt a fresh financial fair play model based on Uefa guidelines.

Under the rules, clubs will be required to provide accounts to the Football League by 1 December each year highlighting whether they have stayed within limits on loss-making and shareholder equity investment.

Championship clubs will see permitted losses drop from an acceptable deviation of £4m in 2011-12 to £2m by 2015-16. The permitted level of shareholder equity investment will reduce from £8m for 2011-12 to £3m by 2015-16.

Sanctions for failure to meet these guidelines depend on whether the club was promoted, remained in the Championship or was relegated.

In the case of promotion, the club would have to pay a "Fair Play Tax" on the excess by which they failed to fulfil the fair play requirement, ranging from 1% on the first £100,000 to 100% on anything over £10m.

Any proceeds will be distributed equally among those clubs who complied with the regulations for the season in question. Clubs failing to meet the criteria but who remain in the Championship will be subject to a transfer embargo. Any side relegated from the Premier League will not be subject to sanctions in their first season in the Championship, as long as they have met their financial obligations under Premier League regulations.

The Football League has stressed, though, that clubs will not be subject to sanctions until the reporting period of season 2013-14 in order to give them a spell of "transition".

Greg Clarke, the chairman of the Football League, said: "On the pitch we have three exciting, competitive divisions with crowds at their highest levels for 50 years. But that success isn't necessarily being reflected on our clubs' balance sheets and we have to remedy that situation or face an uncertain future.

"I'd like to commend the Championship clubs for the courageous decision they have taken today. It means that for the first time, all 72 Football League clubs have agreed to take concerted action towards controlling their financial destiny.

"Whilst we cannot promise that these rules will deliver results overnight, they will begin to lay the foundations for a league of financially self-sustaining football clubs."

randy andy

Well I did state in the Rangers thread that allowing, so-called, owners to fund clubs through loans rather than out of pocket was crazy, and it seems the football world agrees. So many clubs are massively in debt, not because their owners have spent more than they can afford, but because they have loaned the money instead of investing it, essentially loaning the money to themselves to artificially create additional monies to them when the clubs are eventually sold, or to ensure they get some of their money back should the clubs fail and go into administration.

Weegie Addick

Surely this means that relegated clubs from the Prem will have an even huger financial advantage with parachute payments?

Henry Irving

or it means our mega-rich owners can't pump tens of millions in the Club next season : - )


Andy, but it's not just loans that are limited. "The permitted level of shareholder equity investment will reduce from £8m for 2011-12 to £3m by 2015-16."

So even if you don't loan but put the money into the Club as equity ie shares you are limited.

Plaaayer

Would like to know who the 3 clubs were.

Henry Irving

Would like to know who the 3 clubs were.

Leeds, Leeds and Leeds.

Although maybe Coventry and Portsmouth too

randy andy

or it means our mega-rich owners can't pump tens of millions in the Club next season : - )


Andy, but it's not just loans that are limited. "The permitted level of shareholder equity investment will reduce from £8m for 2011-12 to £3m by 2015-16."

So even if you don't loan but put the money into the Club as equity ie shares you are limited.

That shouldn't be an issue. As has been stated many times, we should be able to break even/make a small profit as a mid-table championship team.

And there are always ways around it, there is nothing in these rules to stop owners arranging for suppliers to under-quote, sponsors to over-pay, etc.

randy andy

or it means our mega-rich owners can't pump tens of millions in the Club next season : - )


Andy, but it's not just loans that are limited. "The permitted level of shareholder equity investment will reduce from £8m for 2011-12 to £3m by 2015-16."

So even if you don't loan but put the money into the Club as equity ie shares you are limited.

That shouldn't be an issue. As has been stated many times, we should be able to break even/make a small profit as a mid-table championship team.

And there are always ways around it, there is nothing in these rules to stop owners arranging for suppliers to under-quote, sponsors to over-pay, etc.

And from that wording it looks like owners can spend any amount of money they want, they just do that as a loan or investment, could the league stop an owner giving/gifting £10million to a club. If the shareholder making the gift gains no equity in the club from that gift, then it would fall outside of the rules, correct?

randy andy

or it means our mega-rich owners can't pump tens of millions in the Club next season : - )


Andy, but it's not just loans that are limited. "The permitted level of shareholder equity investment will reduce from £8m for 2011-12 to £3m by 2015-16."

So even if you don't loan but put the money into the Club as equity ie shares you are limited.

That shouldn't be an issue. As has been stated many times, we should be able to break even/make a small profit as a mid-table championship team.

And there are always ways around it, there is nothing in these rules to stop owners arranging for suppliers to under-quote, sponsors to over-pay, etc.

And from that wording it looks like owners can spend any amount of money they want, they just can't do that as a loan or investment, could the league stop an owner giving/gifting £10million to a club. If the shareholder making the gift gains no equity in the club from that gift, then it would fall outside of the rules, correct?

BigRedEvil

We'll be sponsored by one of Jiminez's company and any extra money will come through that way. Same will probably happen for alot of clubs.

Henry Irving

or it means our mega-rich owners can't pump tens of millions in the Club next season : - )


Andy, but it's not just loans that are limited. "The permitted level of shareholder equity investment will reduce from £8m for 2011-12 to £3m by 2015-16."

So even if you don't loan but put the money into the Club as equity ie shares you are limited.

That shouldn't be an issue. As has been stated many times, we should be able to break even/make a small profit as a mid-table championship team.

And there are always ways around it, there is nothing in these rules to stop owners arranging for suppliers to under-quote, sponsors to over-pay, etc.

I thought you were calling for more financial honesty/accountability : - )

I'm sure that there will be ways around it such as Man City getting a huge sponsorship of their stadium by a company owned by, oh, the people who own Man City.

But at least accounts will have to be submitted (never doing this was one of Simon Jordan's tricks) so can be looked at and see if tax etc has been paid.

My gut feeling is that it has come at the wrong time for us. We are potentially/maybe/could be cash rich. So we can break even this but extra investment could be the difference between mid or top table finish.

In the long run it might be good for football and well run clubs (which we are) but if the business model to spend to get in the prem and then sell it makes that harder perhaps.

Hard one to call as not really enough info from the Club on business model and finances to say.

Henry Irving

And from that wording it looks like owners can spend any amount of money they want, they just can't do that as a loan or investment, could the league stop an owner giving/gifting £10million to a club. If the shareholder making the gift gains no equity in the club from that gift, then it would fall outside of the rules, correct?

Not sure how they could "gift" an amount of that size without falling foul of the rules.

Maybe if a fans message board auction off some memorabilia the mysterons could bid £10m for a signed shirt and then the supporters group could all skip the country donate it to the club

: - )

randy andy

I'd say the biggest problem with this is that it's just the Championship, teams getting promoted to the Prem will be at even more of a disadvantage, and teams getting relegated will also have a bigger advantage from their parachute payments. However teams like Newcastle and West Brom are showing you can be successful in the premiership without racking up massive debts and even making a profit in Newcastle's case. I think sooner rather than later there will be a shift throughout the premiership to a profit making model. Throwing money at a club, running massive loses and hoping to sell for a profit is a model that is doomed to failure and looks to be on the way out thankfully.

kentaddick

Would like to know who the 3 clubs were.

Leicester, Ipswich and ?

Just since those 2 have rich owners that want to invest?

_MrDick

I have a gut feeling that we're going to get a sponsorship deal for the Valley similar to the one Man City have for the Etihad to get round these fair play rules.

I have a friend who is a senior figure in the world of wealth management and is supposedly an associate of TJ's (he was at the game on Saturday as a guest of a director) and he's telling me we're cash rich next year and the money's to be used for team rebuilding and ground improvements. When I asked him if the money was from Dubai his response was more like an hour and a half's flying time but that's all he'd say.

Henry Irving

I have a gut feeling that we're going to get a sponsorship deal for the Valley similar to the one Man City have for the Etihad to get round these fair play rules.

I have a friend who is a senior figure in the world of wealth management and is supposedly an associate of TJ's (he was at the game on Saturday as a guest of a director) and he's telling me we're cash rich next year and the money's to be used for team rebuilding and ground improvements. When I asked him if the money was from Dubai his response was more like an hour and a half's flying time but that's all he'd say.

Tally's with a few third hand rumours I've heard to re:cash rich

What's 90 mins flying time from Dubai? India/israel/Iran?

_MrDick

I was think Qatar...

Valiantphil

I wish to remain neutral in this discussion, as I have done on many occasions over the years. I'll be 90 minutes away if you need me.

Henry Irving

Cheers R,

Would this be the same person I met when he was with you and working for a midlands footie club?

Rob62

The regulations will be introduced next season on a gradual basis, but sanctions for non-compliance will not be put in place until the 2014-15 season.

We can also look at this another way - the owners could see the next few years as the time to invest a fair bit of money, before punishments come into place.

Henry Irving

The regulations will be introduced next season on a gradual basis, but sanctions for non-compliance will not be put in place until the 2014-15 season.

We can also look at this another way - the owners could see the next few years as the time to invest a fair bit of money, before punishments come into place.

True. £5m strikers here we come!

kings hill addick

The sale of sponsorship to the owners is perfectly acceptable in my view. It comes as income so can be included. The issue is the debt, and realising maximum revenue for sponsorship is not going to raise debt.

If an owner puts money in that he can't take back then it is ok for it to be spent. The issue is that many owners use their money to leverage massive debt that is 'unfriendly'. Southampton didn't build St Mary's with directors money it was built with a loan. That loan was as good as written off when they ran out of money.

Bolton have, I read somewhere, close to £100m of debt. That can never expect to be repaid, so it will have to be serviced from TV money until the club fall out of the Premier League, then I suspect that they will have to use Administration to reduce it. Just 7% on an interest only basis would require £7m a year to service the debt. Ultimately this can't be afforded out of the Premier League.

killerandflash

If TJ's rich friends want to spend £10m pa on sponsoring the East stand toilets, then that's fine by me.
Clearly something has got to change, the Championship is a dangerous league financially, as it's easy to get carried away, trying to buy promotion, as the financial benefit of promotion to the PL is so great. I'd be interested to see the size of West Ham's wage bill this season!

ColinTat

Monaco? Qatar's another bloody continent, it takes about 6 hours to fly there!

These are excellent rules. If they have any sense they'l be written in a way that's been pushed in the financial world for the last ten years - no that any government isn't successfully lobbied by Goldman Sachs not to do it: Namely a financial law is written not to cover every possible outcome, but it is for every organisation to keep within the spirit of that rule and for them to prove that they did not act against the spirit of the rule.

Wage caps, operational loss control can both be got round. In America clubs choose to go outside them sometimes, sometimes they are found post event to have avoided them and are punished. Howeve it happens, it is an excellent move in modern football. The next move is that the Premier League agree that the football league has first rights on any payments if clubs like Pompey neglect to follow any financial fair play rules.

Just a shame that their is no wage structure for players under 24, to encourage home grown players and put pressure against the ridiculous upward pressure on wages. If clubs want to sign average mature players on wages that are astronomical fine, but some controls on wages is needed for the above rules to consistently work.

Weegie Addick

They had better not try and change the name of The Valley....

sam3110

90 minutes flight? Could be gibraltar, switzerland or monaco to be honest. I hope TJ buys a bed company and then uses them to sponsor the ground, The Valley Of Dreams has a great ring to it

Dippenhall

If there is a cap on total spending as well as a limit on investment doesn't this mean backdoor income from sponsorship couldn't be spent?

_MrDick

@colintat Qatar is only c700km by road according to Google maps so it wouldn't be a 6 hour flight. It's roughly the same as going from London to Glasgow?

ColinTat

Didn't sound right to me as it's next to Saudi Arabia, and it's about 800 miles through to France let alone through to Turkey Checked on google map and it's 4,000 miles.

charente addick

I wouldn't have thought that £6m balance sheet investment is a huge amount in the Championship so it will be interesting to see what instruments are used apart from equity, loan or gift.