NEWS CCR
NEW INSOLVENCY RULES FOR FOOTBALL CLUBS
The Football League has changed its Insolvency Policy, in a bid to ensure better treatment for creditors By Stephen Kiely
CREDITORS of failing professional football clubs may receive better treatment under new proposals from the Football League. At their Owners’ and Executives’ Conference and AGM,
last month,
Football League clubs approved changes to the League’s Insolvency Policy, which will mean that, in the future, any club that goes into administration will suffer an immediate 12-point Sporting Sanction, an increase on the current 10-point penalty. Once appointed, an administrator will
be required to market the club for at least 21 days, during which time they will be required to meet with the club’s supporters’ trust and provide it with the opportunity to bid for the club. The league has removed the
requirement for the purchaser to achieve a company voluntary arrangement (CVA), meaning that it will transfer the club’s share in the Football League to the
administrator’s preferred bidder subject to their compliance with the league’s other requirements. Analysts believe that this will prevent the administration process being controlled by the club’s previous owner who, in some instances, will be the only party able to achieve a CVA. On exit, the purchaser will be required
to pay creditors a minimum of 35 pence in the pound over three years or face a further 15 point deduction at the start of the season following the insolvency. The Football League’s chief executive
Shaun Harvey said: “The league has now gone two full seasons without a club suffering an insolvency event, which is an encouraging sign. The use of Financial Fair Play regulations in all three divisions, the requirement for new owners to show the source and sufficiency of their funding, and the ongoing monitoring of clubs’ tax affairs have helped us bring more stability to club finances.
“However, we cannot be complacent,
and this is the right time to strengthen our Insolvency Policy and also refine its effects, so that it is as fair as it can be for clubs, creditors, and supporters.” Andrew Tate, vice-president of R3, said:
“We are delighted that the Football League has taken on board our recommendations. The insolvency profession has been calling for a better deal for unsecured creditors in football insolvencies for some time. Non-football creditors should not be left empty-handed, and the fact that they often ended up in this position has been addressed in a manner which recognises the inequality of the Football Creditors Rule when compared with the objectives of the UK’s insolvency regime. “It is also welcome that clubs will no
longer be required to undertake a CVA. This should shorten the time needed by an insolvency practitioner to rescue a club, saving costs for creditors.”
NEW BANKING REMUNERATION RULES
CLAWBACK rights are to be strengthened and the period of time by which bonus payments are deferred will be extended after a proposal from the banking industry’s regulators. The Prudential Regulation Authority
(PRA) and the Financial Conduct Authority (FCA) have published new remuneration rules, which they believe will “further align risk and individual reward in the banking sector to discourage irresponsible risk-taking and short- termism, and to encourage more effective risk management”. Under the new rules, the period during
which variable remuneration is withheld following the end of the accrual period will be extended to seven years for senior managers, five years for PRA-designated
July 2015
risk managers with senior, managerial or supervisory roles, and three to five years for all other staff whose actions could have a material impact on a firm. The FCA is introducing clawback rules
for periods of seven years from award of variable remuneration for all material risk takers, which were already applied by the PRA. Both the PRA and the FCA clawback rules will be strengthened by a requirement for a possible three additional years for senior managers at the end of the seven-year period where a firm or regulatory authorities have begun inquiries into potential material failures. And it has been made “explicit” that no
variable pay – including all discretionary payments – should be paid to the
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management of a firm in receipt of taxpayer support. Andrew Bailey, deputy governor for
prudential regulation at the Bank of England and chief executive of the PRA, said: “Effective financial
regulation
involves creating appropriate incentives to encourage individuals to take greater responsibility for their actions. Our intention is that people in positions of responsibility are rewarded for behaviour which fosters a culture of effective risk management and thus promotes the safety and soundness of individual institutions.” Analysts believe that, when the new
European Banking Authority remuneration guidelines are published, the PRA and FCA will need to consult on any rule changes which may be required.
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