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Administration and bankruptcy among football clubs. The story continues.

By Tony Attwood

So clubs that are big or were once bigger than they are now, continue to get themselves into a mess.  We followed the Rangers saga – who would have been brave enough three years back to say that Rangers FC would be playing in the fourth tier of Scottish football?

So we shouldn’t be surprised by anything now… and yet….

The latest club in trouble according to Reuters is AEK Athens where the president was arrested this week over the fact that the club forgot the tiny detail of paying taxes (£145 million’s worth).  (AEK say he went to the police station voluntarily).

There have also been warrants issued for the arrest of various past AEK presidents since 2004. Although AEK’s name will ring many bells across world football it maybe a surprise to know that this season they are not heading for another period in the Champions League but are 11th in the 16-team Greek Super League.  Most of last season’s first team were sold, in order to get the money to stay in the top league in Greece.

Coventry City on the other hand don’t have the recent pedigree of AEK, although they won the FA Cup once, and for a long time they were a respectable 1st division club.  But certainly no more as this weekend all the staff were told to leave the club’s HQ and set up in the training complex.   Apparently all the items for sale have been removed from the club shop.  A meeting about the club going into administration has been adjourned until Tuesday.

Arena Coventry Ltd which owns the ground claims that the club owes them  £1.3m in unpaid rent.  Meanwhile there is some odd stuff happening as the owners of Coventry put another company, which is seemingly a subsidiary of the firm, but which doesn’t trade, into administration.  But it is hard to see what is happening – since it seems no one is now quite sure which company is operating the club that actually plays football, and whether it is in administration, or not.

The club has said, “It is important to stress that the football club itself is not under threat. This is merely a property subsidiary which owns no material assets and has no employees, on or off the pitch.”  So why put it into administration? If you want to get rid of a non-trading company (in order to save of auditor fees and renewal of the name) you simply apply to have them deleted at Companies House.  But if it is Coventry City FC that has entered administration,  they will lose 10 points and that will end their promotion hopes this season.  Fans have said meanwhile that they can no longer buy tickets for games on line.

So it is back to court on Tuesday, but even if Coventry survive it is not clear where they can play if the company owning the ground does not open the gates.  One ground near where I live in Northants is, however, available: the ex Rushden and Diamonds ground, which Kettering Town moved into this season. Kettering were kicked out of the stadium for not paying their bills, and they now play at Corby Town (of the Conference North).

As the Guardian said, “As well as their season ticket, the modern fan requires a degree in company law and a keen awareness of the failings of human nature. Coventry’s emissaries were given practical advice about dealing with owners who purport to be benefactors but operate as opportunists.”

Also back in court next month will also be Portsmouth, who are asking for the Pompey Supporters’ Trust to take over the club.   So it goes.

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20 comments to Administration and bankruptcy among football clubs. The story continues.

  • nicky

    Tony,
    A very sobering article and a warning that no club these days is immune from financial disaster should the governance be tainted from within.
    Barcelona allegedly still owe Arsenal part of the fee for Fabregas. Clubs are in default of Income Tax payments.
    Players’ wages are delayed.
    What is going on in the big business world that is professional football?
    The demise of Rangers may be only the tip of the iceberg as more and more clubs suffocate under attempts to spend money that simply isn’t there.

  • Dec

    The question that comes mind is – are some football clubs simply too big to fail ( or to be allowed fail) ?
    Certainly for many years in the past the answer would have been a resounding yes, in these sobering times however it’s all changed. Just ask the next Cypriot you meet. Entire nations are now being hung out to dry and condemned to years of suffering, mere football clubs, even the giants of the game should be very careful. Thankfully we’ve had a grown up in charge of affairs at Les Emirates and are not in anyone’s firing line. Could be some spectacular wreckage soon though with not just the Coventrys and Portsmouths of the world hitting rocky shores.
    The biggest trophy Le Boss ever wins for Arsenal may well prove to be the club itself.
    Long may he continue to steer us.

  • AL

    Wenger has been saying there will be a financial meltdown in Europe for years, and he was getting laughed at. Well, we shall see who will have the last laugh. But yes, noone is safe, even mighty sides like Barcelona.

    Feel sad about Coventry, my local club, not sure what really went wrong there. I mean, they never had a manager whose bank account was named after their dog, so how did it all come to this? Worrying times ahead indeed.

  • Lanz

    @AL. Your last paragraph was meeeaaann!

  • It's Grim Oop North

    Football is not like any other business model (which is not to say there aren’t unusual business models out there – it’s a big world), and has always been patronised by wealthy business people for their own enjoyment, personal prestige, and often driven by political and social advancement aims.

    Football is littered with bailouts and patronage in all countries over the last century and a half, from the huge monies Real received which would not pass muster with FFFP regs, to your local Sunday league team getting sponsorship from a building firm supplying the kits. This would not happen for your local clothes store for example.

    If you try and close off all these historical avenues of finance in football, in order to run it like a business for profit, then there will be business failures in line with the comparable industries you’re trying to emulate.

    For example, in English football, there are, say, two bankruptcies a year, and so far, no football club has failed to rise from the ashes this century, and what, two in total over the previous century? If I’m wrong, I can’t be far out ‘tho.

    In an industry like the car and motorcycle for example, literally hundreds of marques have bitten the dust never to come back over the last 100 years, because of normal economic fluctuations – perhaps this is a poor example because some car names are resurrected by wealthy benefactors for brand reasons, but still, the point is, if football is regulated into normality, hundreds of football clubs will go bust, most for good possibly.

    If football is regulated in a different fashion to how it has been in the last 150 years re investment, then many, many teams will go bust, but no-one will be there to revive them – they will stay dead like Rumbelows, C and A, and all those normal businesses no longer with us.

    For me, where it has all started to go badly wrong, is when clubs were rewarded vast sums more than less successful ones based on league position, and qualification for the Some Champions but mostly runners up League, using TV revenues.

    The previous status quo consisted of clubs whose incomes were taken in the main from gate receipts – pre 1990 plenty of clubs could command gates of forty thousand plus, especially before all seater stadia, Charlton Athletic were right up there in attendance figures, and therefore could compete with the City and Uniteds, but leave them out of the CL places, they soon disappeared from the top flight, along with the Sheffield clubs etc..

    Every so often, a wealthy person or persons would throw some cash at their chosen club, like the Norris’, Moores, Edwards, who would shoot up the league for a time, but never have that extra £20 million plus just for entering in a European competition, and so were unable to pull away from the chasing pack.

    In the history of English football, only since the CL and Premiership years do we find this crazy situation where Sky get to host their Grand Slam weekends featuring the Sky Four, yes the same four that qualified for the CL TV monies every season for nigh on twenty years.

    City have outspent everyone else to take their place in the cartel, and weakened the competition, so there has been a shake up, but rest assured when the dust settles, it will be four clubs again hogging the wealth, whilst the rest slowly go bust because wealthy business people won’t want to invest in such a pointless exercise unless they’re richer than Sheikh Mansour or Roman Abramovich.

    Financial Fair Play will ensure the big clubs stay big, ironically down to gate receipts, but more so TV revenues and overseas fans who are plainly attracted to shiny silver cups – if they weren’t, how come Chelsea didn’t have these hordes of admirers pre Abramovich? Why don’t any English clubs apart from the old Sky Four have all these overseas fans? City have the record attendance for an English game outside of Wembley, yet pre Mansour takeover and success, proportionately virtually no overseas fans compared, yet now have several millions according to the club. and increasing massively every season.

    Therefore, if you want increased TV revenues, you need to attract Global support, but to do that you need silverware to suck them in – a small to medium size club without half a billion to invest in the squad cannot do this without divine intervention, but of course FFFP says you can’t now, it’s not allowed.

    It seems overseas supporters once hooked, are every bit as loyal as local supporters, if the surveys are to be believed, and the anecdotal evidence on forums like this, so you have some grace period before they lose interest and follow another club – Liverpool are still deemed to be a huge club despite little silverware, and the Arsenal are not shrinking in support these last barren 8 years.

    Football is indeed in a mess, and I put it down to TV monies and it’s distribution – FFP is misguided and self destructive for the majority.

    My answer to this? Equal payments to all professional football teams under Fifa/Eufa jurisdiction, whatever league you’re in – Barca get the same as Grimsby, win, lose or draw – should cover the plane tickets in European nights, they can still be dominant by attracting fans thru the turnstiles, but they’ll not be able to pull away in the insane fashion they have, and the gap will close between little and large clubs throughout Europe, and perhaps players won’t be so tempted to jump ship for double the wages. It won’t help City, but we’re a big enough club to compete, and at least it would be FAIR.

    I despair for the future of the game, but whilst it’s falling apart, as a City fan at least I finally get to see my team win some trophies, albeit tainted by the knowledge that historical rivals are being shafted in a way I despise.

  • greencardusa

    Isn’t corporate capitalist culture great! No wonder the mainstream press simply insist that Wenger spend, spend, spend!

  • gouresh

    Nice article, like I said in my previous comments elsewhere, some clubs R toooo big to be allowed to go under. I will bet my bottom $ that in case unreal or barcas problem (which we all know they are)surfacing, everything will be done to safe guard them. They will talk about their history and all the claptrap to justify their actions.

  • ARSENAL 13

    One big doubt I have. We know that Barca still owe us money. But how long will ARSENAL wait for it? Will they pay us interest for the delay?

    May be some clubs are too big to go bust. BUT if us individuals have to pay tax on whatever little we earn, then why not the biggies.

  • Gerry Lennon

    Yes, I too am sad for Coventry. It is my hometown Club, and watching this story unravel from afar is difficult to understand.
    I think they were badly advised to moved from Highfield Road to a ground they did not own? There have been issues before of money ‘disappearing’ out of the Club, and this seems to be another unanswered question … ‘Who gained from it?’
    The current owners appeared to have been quite deliberately hanging on to the asset stripping prize as they wriggled away from a would be takeover at the start of the season? You could smell a rat then. Yet despite all of this, the players had got the team within s possible play off position, only to have their efforts denied by this possible points deduction.
    In footballing terms, £1.4m is not a vast amount, but unless the Ricoh Stadium is put in any offer to take over these debts, then their problems will continue? But the purchase of the ground, even on a 99 year lease like WHA have managed to get, would be more than this current debt?

    As an Arsenal supporter I am just grateful that we have Silent Stan, who may not have appeared to do much in a positive way, other than support the current BoD and manager, he hasn’t done anything negative either?
    I am not so sure that the ‘alternative’ would not replicate the Coventry demise for his own gain?
    Be thankful for the things we have, eh?

  • Rufusstan

    Its Grin up North– I agree completely with the first half of the article, but I think you need to look again at the underlying evidence behind TV revenue. I do think that TV income does lead to a very scary issue down the line, but it is not the distribution.

    The English League has the most even distribution of cash of any league in Europe. Take a look at the table in the Swiss Ramble here: http://swissramble.blogspot.co.uk/search?q=Premier+League+TV+deal (scroll down for the table). The short version is that the top 4 earned around around £60 mil from TV rights last year. But everyone in the league earned at least £40 mil. I can see the argument about an even split, but I’d argue that, here at least, things are already split as evenly as you can in the PL environment.

    The international rights are all split evenly, so the arguments about a big worldwide audience shoveling TV cash into your pockets is wrong; it goes into everyone’s pockets.

    Compare this with other leagues:

    Spain– http://monchismen.wordpress.com/2011/09/02/la-liga-tv-revenue-distribution-2011-12/. Short version is the big 2 get 100 mil Euros more than anyone else, and 10 times the revenue of the bottom sides.

    Italy — http://www.financialfairplay.co.uk/latest-news/tv-revenue-distribution-–-comparing-italian-and-english-models More even than Spain, but still a 4:1 ratio between top and bottom.

    The only nation that comes close to us is (surprise, Surprise) Germany.

    Getting into the Champion’s League does have an impact as you get more TV revenue, but last year it added between £15-30 Mil. A bonus but not overwhelming. Numbers here http://swissramble.blogspot.co.uk/2012/04/champions-league-revenue-final.html if you are interested.

    In England at least, I don’t think TV money is the main problem. There is a cumulative issue with all strands of revenue offering way more to the bigger clubs, but Commercial income will have a bigger impact than TV. Matchday is a strange case, both because we have capacities between 18,000 and 75,000 in the league right now (8 Championship clubs get bigger crowds than QPR, Wigan or Reading), and that matchday offers a small part of overall income for most clubs.

    Look at Arsenal. We have: the biggest contribution of matchday income of all, the second largest crowds, prices that range between the expensive and obscene and matchday only contributes 40% of income. Over the next few years, that proportion will drop as well..

    Lastly If TV income has a problem is that it has become such a huge proportion of any clubs income, that should it drop or go away, half the league (generously) would go bust overnight.

    That is what scares me.

  • Rufusstan

    Sorry, missed a couple of things.

    1). Just to highlight the scary impact of TV money–
    Wigan: Total revenue last year £52.6 mil—–TV money £42.9 mil

    2). If TV has an impact it does raise the profiles of the CL clubs, which in theory could drive their commercial income up. Long term this could be an issue if we get to Bundesleague levels, but right now only United is even close to that.

  • It's Grim Oop North

    Rufusstan,

    yes, TV monies are apparently easily gifted, and therefore could easily be lost, although it seems when times are hard, we sit at home with our cheap supermarket alchohol and a takeaway rather than go out for a meal and pay bar prices – TV is recession proof to a degree, but in the end it’s still a luxury compared to having to heat your home.

    Totally agree with you on building an industry on such a flimsy base, but you could argue actually attending matches in the flesh is a bigger luxury for the traditional football fan, and so that’s a risk as well – I guess life and business is one big gamble!

    I also must make clear I think the only way distribution of TV revenues could be made properly fair for all, is if there is a blanket agreement throughout Europe, and in a fantasy scenario, the world.

    I would take issue that that £15-30 million isn’t that significant – look what it would do for Wigan to have that boost on their profits for instance, and if you look at the Arsenal, over a 20 year period, if you conservatively said the CL has brought in £20 million per year, you have 20 x £20 million = £400 million pounds – roughly what it took City to spend to catch up on the pitch, no coincidence for me that number.

    I think once we get over the need to win everything every season, and accept that some seasons will be full of football fun, but no shiny cups, others there will be, we can all get on with talking about the football again – as it is, there is no hope of that kind outside of the CL qualifying four really, and it will get worse with FFFP.

    When I was a young lad in the seventies watching City, we thought nothing of Forest coming up one season, then winning the League the next, and the same with the cups – most teams had a good chance of getting to Wembley, you always had a buzz at the start of every season with the hope of a glorious year – this died for me before Thaksin Shinawatra bought City, and he rekindled the flames by investing heavily and making his ambitions public – but this shouldn’t have had to happen, you shouldn’t have to throw nearly half a billion at your club to be competitive with the Sky Four.

    Oh for a return to the good old days, without the crap facilities and scrapping of course, where the hope was there for all supporters.

  • Georgaki-Pyrovolitis

    It’s Grim Oop North

    Really good posts my friend. Enjoying the informative posts.

    Cheers

  • Rufusstan

    OK, trying not to take this further off topic, but…

    Firstly, I agree that the only truly fair system is for all clubs to share revenue. That must include all revenue, so not only TV, but Matchday, so Arsenal and Man U have to throw their 100 mil from the stadia into the pot, but also commercial, so Man City’s sponsorship deals (that £400 million again) and the £50 mil odd a year that Man U get from Chrysler, amongst others. In addition, you would have to enforce strict conditions on debt, and probably a hardcap on salaries as well.

    The only time I have seen this work is in US sports, where you have a small number of teams, which makes it easy for the owners to agree to these sorts of regulations (and shut the league down if the players complain). There is no issue of promotion of relegation to worry about. Finally the owners conspire to control and parcel out the new young talent that enters the game.

    In Europe with so many clubs, so many owners, with so many different agendas. It just is not going to happen. In Spain, the big 2 seem unwilling to go into a collective TV deal even though the rest of the clubs are on the point of collapse. Getting a proper revenue share…..It doesn’t help that different clubs want to control different parts of the revenue stream (See Chelsea or City VS Arsenal).

    In many ways I agree it would be good if football could go back to the old days, where teams were successful by building rather than buying. It seems that few clubs have the patience to do that today, and so many teams risk their future for success now.

    There are hints that a low investment approach is possible even in today’s PL. Everton turnover a fraction of the big clubs but are 6 points (and a game in hand) off 4th, and still have to play the three teams above them. I’m not saying they will do it, but I’d love to see an Arsenal, Everton 3rd/4th. It is interesting that Everton are one of the few clubs to have the stability (and a talented manager) that it seems you need to make it possible.

    Thinking of the old days, it is funny that even then things were the same. We’ve only had 5 different clubs win the PL, one a one-off (assuming City do it again at some point :)). Go back through the 30 years before the PL and there were only 10 different winners of the league with 3 one offs. (I could go back further, but it would require me to accept that a certain team were ever good enough to win the league, and that I cannot do). Arsenal have had the same number of wins in each period (as have City), so the funding system does not seem to have mattered for us.

    Actually, The only real winner in the PL era is United. In their case the CL and TV money could well be secondary to other factors. Of the rest of the winners: Chelsea, City and Blackburn got there due to external financing, and Arsenal….well they win the league now and again whatever happens.

    Not sure how much of this makes sense, should never post late, but I guess I’m trying to say that I’d love the perfect solution, but it wont ever happen, and at the moment, what we have is about as good as is realistically possible

  • Gord

    The Economist is running an article on the popularity of Arsenal in Africa, and good finances in football.

    http://www.economist.com/blogs/baobab/2013/03/football-africa

  • Rufusstan

    The economist article is a bit of a let down. It starts with the idea of lots of Arsenal fans there, then follows it up with all the usual media clichés: 7 years no trophies, selling off the best players, fiscal responsibility over success (it is the Economist after all).

    The best bit is the ‘keep the faith’ comment from the local supporter, that could have been written here :).

  • Ash

    Rufusstan – how can it be fair for Arsenal to hand over the very hard-earned benefits of their stadium which has been built at huge cost, great risk, and substantial pain? I can hardly think of anything more unfair than to take away what someone has earned through hard work and sacrifice.

    Oop North – you make some interesting points, but the ‘Sky Four’ epithet which is is regularly and disparagingly used to imply that Arsenal’s achievements in establishing themselves as a regular CL status club were handed to them by Rupert Murdoch does completely ignore and discredit the accomplishments of the club and manager.

    Arsenal had to pay nearly £400m for their stadium, and it has hurt. City’s was practically given to them by the taxpayer, and was instrumental in attracting a further half a billion of free money – so far.

    So please forgive those that feel like the hard-working bloke whose wife has just left him for a lottery winner. 😉

  • Adam

    Some very interesting comments, yet something people miss is the fact that benefactors have always been in the background of football directing the game, always to their own advantage.

    As far back as the 1880s when the player registration was first introduced due to rich benefactors collecting the best players via their wallets. So rules were introduce to combat this, where a player could only move at the end of the season. This still did not work so new rules were introduced (research the “retain and transfer system” also known as the slavery contract).

    Then in 1961 we had an Arsenal player go to court over his rights to transfer outside of his agreed contract yet retained on a smaller income. Later the Bosman ruling then onto the Webster ruling.

    So we have a history behind the sport of not addressing the real issue which has been the unregulated injection of wealth into individual clubs and the wealthy being able to direct policy.

    FFPR is the first real attempt at this, and its a puppy and will change and be challenged.

    Most fans of football will agree that the sport is in a mess, and is not fair across the pyramid system on into the varying rules from nations.

    Yet within the rules of player status regulations you have an answer. And that is what defines a professional player from an amateur, and that is; a player who earns more from playing than the expenses he incurs from playing.

    Clubs should be held to the same principal or lose their professional status.

    To compare any sport to a business is slightly unfair, historically wise because we are talking about a participation sport, a pastime, not an exercise in making money.

    My own personal view is that we need to relegate FIFA & UEFA to competition organisers only and bring in another world governing body to oversee the background rules of football that have one agenda, and that is to harmonise the rules across the nations, so we have no tax relief or differing models of ownership. Install transfer caps and larger solidarity payments for smaller clubs losing their talent to the bigger clubs.

    No personal promotion for clubs, only competition organisers should be allowed to tender for advertisers with the proceeds split fairly across the teams that could qualify for their tournaments at the start of that season.

    Football needs to be run with a communal spirit. The competition is on the pitch not a financial battle off of it.

  • It's Grim Oop North

    Thanks for all the kind comments 🙂

    I fear TV monies and their distribution has opened up a Pandora’s box, which can never be sealed or their effects reversed 🙁

    Football is now a global business, there is genuine profits to be earned by shrewd owners, like the Glazers – the risks are huge, but the rewards are equally huge – hence we have spectacular financial meltdowns, in tandem with for instance the three billion pounds new TV deal for the Prem – that’s a lot of wonga up for grabs!

    No longer are gate revenues enough to be able to compete, you need an international fanbase numbering tens of millions, maybe billions in the future at the very top.

    Take away the golden prize of Champions League millions, or make it irrelevant, and play for the glory only, you remove the causes of high risk-taking – not by this anti-competitive, cartel inspired and backed mess of FFFP – by the time the lawyers have ripped it apart, it will be worse than useless – it is absolutely not the way to stop risk taking, merely a challenge for rich and powerful men to beat it by fair means or foul, and they will, sure as eggs is eggs!

    Down with prize money, up with playing for the joy of victory 🙂

  • Gord

    @Adam

    It is not yet 6am here, and while I have a coffee here beside me, I haven’t had any yet (a bit too hot for me). But in writing about benefactors, do we need to consider our own? I am not talking today, I am talking the transition from Woolwich to Highbury, and Sir Henry Norris. Maybe this has already been discussed on the Making the Arsenal site? From what little I’ve read about Norris, he was much different than Abramovich is today.

    I had forgotten Norris’ first name, and searched Google. Second hit was a page from a Tottenham supported explaining while they should always hate Arsenal. [sarcasm]Lovely read first thing in the morning[/sarcasm].

    @offtopic – people that have problems with homonyms.

    Ars Technica is running a story about the latest update to the Chrome browser.
    > Google has just released Chrome version 26.0.1410.43 to the stable channel, and chief among its list of changes is something that will please the error-prone: the in-browser spell checker sees several prominent additions, most notably the ability to distinguish between homonyms, check grammar, and perform context-sensitive fixes. Additionally, words added to the browser’s custom dictionary can now be synced between Chrome installations with Google Sync enabled. For now, these improvements apply only to the Windows and Linux versions of Chrome, as well as Chrome OS. Google is “still working on Mac support” for the features—while OS X has its own system-wide spell checker, it obviously lacks the Chrome-specific features of Google’s implementation.