The English Super League (of administrators)
06 July 2022
With the failed European Super League proposals still fresh in the mind of many football fans (and even more so for a handful of elite football club owners!), the English Football League (EFL) is proposing a super league of a different form – this time of insolvency practitioners.
It is a common joke among the football community that if you want to make a small fortune then you take a large fortune and invest in a football club. This should offer all the insight you need into football club investment.
In the wake of the Derby County administration, the EFL are now looking at creating a panel of approved administrators for clubs to choose from, rather than a free market of professionals. This means an administrator of a football club must be approved by the EFL.
Of course, professional panels are not uncommon, but they typically tend to be appointed by the organisations themselves, not imposed by a third party such as the EFL. This is a contentious proposition, and there are cogent arguments both for and against.
Challenging the hand that feeds
The EFL have criticised the Derby County administrators for wasting time and money. However, on a closer look, it would seem a significant portion of this money has been spent challenging the EFL’s decision to penalise Derby 21 points. Sceptics among fanbases are already concerned that this new EFL proposal is reactionary to having the 21-point penalty challenged and could lead to the EFL becoming unchallenged in such decisions in the future.
Fans have highlighted that EFL panel administrators may want/need to then challenge any EFL decisions made during a club’s insolvency. That would mean challenging the hand that feeds them. The administrators would of course be conscious that a challenge may be required in order to act in the best interests of creditors and will be acutely aware of the need for their neutrality as office-holder. It would be a challenging dynamic. Moreover, concerns in the insolvency industry arise over what other hoops administrators may have to jump through to become ‘approved’. All administrators are already subject to their own professional regulations. There may also not be that many firms seeking approval – football club insolvencies carry a particular risk matrix that is not to every administrator’s taste.
The benefit of the EFL proposal can be seen by looking at the less publicised legal case of Swindon Town, which culminated in the summer of 2021. Swindon Town was not in administration at the time, but had an off-field legal issue. Then owner, Lee Power, was facing several legal issues around ownership of the club, a majority of which he faced with questionable prospects of success. In the end, ownership of the club was successfully wrestled from Lee Power by Clem Morfuni. During the legal battle Mr Power tried on multiple occasions to place the club into administration when it was not the appropriate vehicle. This was only stopped by the court preventing Mr Power from doing so.
In theory, under the current system, and were there not existing ownership proceedings where the court stepped in, Mr Power could have placed Swindon Town into administration. It is likely that an administrator prepared to act would have been found, and only thereafter that the challenges with the administration process identified – an administrator is reliant on the information available to him at the time.
In such a situation it is the fans who lose out. The club would suffer a points penalty under EFL rules and Mr Power would potentially be free of liability unless the administrator he appointed pursued him thereafter.
An unusual insolvency beast
Under the EFL’s new proposal, only an approved administrator could have been appointed by Mr Power and this would potentially save a club in the same situation. An approved administrator is likely to have football insolvency experience and know what they are looking for. It would make it less likely that a club owner could orchestrate an inappropriate administration for his own gain.
Additionally, depending on the EFL implementation, the fees that are charged in the administration could also be reduced and efficacies of the procedure increased. Football administrations are an unusual beast, and there are considerable costs savings, and substantive advantages all round of having an administrator who is familiar with the industry.
Overall, it appears that the EFL is looking to make key changes for the benefit of the football leagues it regulates and in turn for the benefit of the fans. However, the practicalities and process clearly still need to be ironed out to avoid criticism and ensure that any additional regulations achieve their objectives.
While these writers look forward to further developments of this proposal, they speculate that such a panel could end up being approved and regulated at least in part by the new Independent Regulator for English Football, which the government plans to introduce (though is currently without a timetable for implementation).
Rebecca Andrews-Walker is a partner at Penningtons Manches Cooper LLP.
Jonathan Allen is an associate at Penningtons Manches Cooper LLP.
