FOOTBALL: Mawhinney Leads League Action on Insolvency ; INSIDE FOOTBALL; New Chairman Promotes Proposals Designed to Combat Clubs' Increasing Tendency to Use Administration to Escape Debts
David Conn Supporters' Football Writer Of The Year, The Independent (London, England)
FOOTBALL LEAGUE clubs which go into administration will have points deducted or even be compulsorily relegated if proposals unanimously agreed by the League's board are accepted by a majority of clubs at a meeting at Leicester City on Thursday. Sir Brian Mawhinney, the former Conservative Party chairman who is the new chairman of the League, said this week that the proposals are intended to provide a "serious deterrent" to the regular flow of clubs into administration, which is "damaging the reputation of football".
League clubs have been crumpling into administration with dreary regularity for the last decade, but the collapse of ITV Digital last April led to clubs queuing at the High Court, unable to pay suppliers, tax, VAT, public services and St John Ambulance. Seven clubs have been in administration this season - a tenth of the League: Notts County, Port Vale, Leicester City, Ipswich, Barnsley, York and Huddersfield.
"Football creditors", mostly players and other clubs, have to be paid in full if a club is to stay in the League, and the League used to insist that preferential creditors - tax and VAT - had also to be met in full. That provided some deterrent to clubs using administration as a way to wipe out debts - although the ordinary creditors were left high and dry. But recent changes to insolvency law have removed the preferential status of the Inland Revenue and Customs and Excise.
Leicester City's recent exit from administration agreeing to pay the Inland Revenue only a tenth of pounds 7m owed - more if the club returns to the Premiership - has left a sour taste at League headquarters and led to fears that more clubs will now choose administration. That, Mawhinney said, would do "irreparable harm to the good name of football."
Besides the appalling spectacle of the national game leaving a trail of people and public debts unpaid, Mawhinney said there was "a lot of unhappiness" among League clubs themselves, many of whom have worked hard to pay what they owe, while watching rivals wiping their slates clean by going into administration. He said: "Many clubs feel that others are gaining a competitive advantage, shedding their tax bill and other debts, and emerging free to spend money on players."
A range of proposed measures to toughen the stance on administration includes time limits to be set on how long clubs can remain under the protection of administration. If it goes on a whole season, a club would be compulsorily relegated. Notts County have been in administration since June 2002 and the League recently issued an ultimatum of the end of the season or Notts County will lose their historic League status. Any club which enters administration for the second time in three years would be automatically expelled from the League.
"We don't want clubs going into administration at all," Mawhinney explained. "If clubs do it on a serial basis, they are bringing the game into disrepute and we don't want them in the League."
Clubs in administration will also lose their vote in League meetings, and any member of the League's board whose club went into administration would automatically be removed as a League director. If that rule had applied this season, John Elsom, a League director who was on Leicester City's board, and David Sheepshanks, the chairman of Ipswich and former League chairman, would have automatically lost their seats on the League board.
Most eye-catching, however, are the proposals to dock points from clubs going into administration, or automatically relegate them at the end of the season regardless of where they finished. Mawhinney said the League needed to halt a dangerous slide towards administration being seen as a solution. One Second Division chairman has told him that the club's own fans were urging him to put the club into administration, because they could leave their debts behind and start again. …