The Scottish Professional Football League new insolvency rules

Published 07 September 2013

During the summer Scottish football experienced administrative changes with the merger of the Scottish Premier League and the Scottish Football League. As a result, the Scottish Professional Football League (the ‘SPFL’) has been formed and a bespoke rule book has been drafted governing the new body.1 In light of recent events in Scottish football, ones’ attention is almost immediately drawn to the insolvency sections contained within the rules and the penalties which are provided for in the rules.

Rule E1 provides that a 15 point deduction should be applied for an Insolvency Event (IE)2, which includes the entering into of administration. If a club enters administration during the course of the season, the penalty will apply immediately in that season. If the IE happens during the summer, the penalty will apply for the following season, as was the case with Hearts this summer. A second IE by a club within a 5 year period will result in a 25 point penalty being incurred. In light of the number of Scottish clubs suffering financial difficulties and entering into administration, are the penalties severe enough?

In the situation of Hearts, the financial events which lead to the inevitable administration took place over many years with debts approaching £30million by the time the club officially entered administration, however the club avoided a points deduction and possible relegation from the SPL in May after the then governing body decided that the rules in place at that time had not been breached and the club were not officially in administration (despite the parent company of the club being in administration in Lithuania). It was on 17 June that Hearts officially entered administration, less than a month after the end of the 2012/2013 season. Is it fair to a club such as Dundee who acted within their financial means last season,3 were relegated whilst Hearts, by relying to a large degree on spending money they could not afford, survived?4

Whilst the new rules appear to be clear and will hopefully avoid confusion in the event of future administration events, it can be argued that 15 points is not a sufficient penalty for what some consider to be ‘financial doping’. Would automatic relegation not be a more appropriate penalty? Whilst it may cause confusion for the governing body of the Scottish game if a club was to be relegated during the course of a season, it would surely encourage clubs to live within their financial means to ensure that such an event did not take place. It would also hopefully help to prevent the need for fans of clubs such as Hearts and Dunfermline to have to bail out their clubs by buying season tickets and replica shirts to keep the respective clubs afloat as a result of mismanagement by others.

Of course one of the main reasons that Rangers, Hearts and Dunfermline have experienced financial difficulties in recent times is due to the actions of particular individuals who have control of the clubs. Is it fair that fans could suffer a relegation of their club due to the actions of one individual? Whilst this may seem like an unfair measure for fans, it must be remembered (and this author is included amongst these fans) that supporters buy into the money, players and prizes that tend to follow investment which is made by rich benefactors. It is hard to recall Rangers fans questioning the money invested by Sir David Murray or Hearts fans that put into the club by Vladimir Romanov when success was flowing.

One issue that requires to be addressed in more detail and for which the Scottish Football Association rather than the SPFL are responsible, is who is a ‘fit and proper’ person to run a Scottish football club. In light of recent events at Rangers and Hearts, it would appear that these rules require to be tightened.5  

The test for who is a ‘fit and proper person’ is contained within Clause 10.2 of the Articles of Association of the Scottish Football Association.6 The list is not exhaustive and is intended to be illustrative. Included within the list is that the individual must not have been declared bankrupt or have been involved as director at another football club, in any country, which has suffered an insolvency event within 5 years of the appointment to the new club. The battle for control of Hearts over the past few weeks has brought these rules into sharp focus with one of unsuccessful parties interested in buying the club being the owner of Livingston in 2009 when they entered administration (and therefore within the 5 year period prescribed for by the SFA).7 It may be time for a clearer

set of rules for the ‘fit and proper person’ test to be drafted in order that it is clear for all to see who is able to control a Scottish football club and hopefully ensure that potential ‘repeat offenders’ are kept away from the directors box.

Scottish football has been in a financial crisis for many years, partly due to reduced revenue and sponsorship income which is exacerbated by the large sums of money flowing into the English game, resulting in Scottish football being the poor neighbours. Whilst the SPFL has at least taken steps to provide for the penalty which should be imposed on future IEs, when the next administration inevitably occurs, one cannot help but think that greater scrutiny than ever before may be put on the new rules, particularly in light of the need for clubs to be in the top league in the land and the additional money that this brings to them. Coupled with clearer guidance on the ‘fit and proper person’ test, Scottish football can hopefully take steps to ensure better governance of its football clubs.

 


 

1 https://spfl.co.uk/docs/067_324__therulesofthespfl_1375800603.pdf
2 See Rule A4 https://spfl.co.uk/docs/067_324__therulesofthespfl_1375800603.pdf
3 Ironically Dundee themselves entered administration in both 2003 and 2010.
4 Dundee finished 14 points behind Hearts at the end of the 2012/2013 season.
5 Particularly in light of the on-going financial difficulties at Rangers and the lack of knowledge as to who has ownership of the club.
6 https://www.scottishfa.co.uk/resources/documents/SFAPublications/ScottishFAPublications2012-13/SFA_HANDBOOK_53-136_Articles_of_Association.pdf7 https://www.edinburghnews.scotsman.com/news/hearts-bid-news-says-angelo-massone-must-quit-1-3027396

 

Leave a comment

Please login to leave a comment.

Official partners 

BASL
Soccerex Core Logo
SLA LOGO 1kpx
YRDA Logo2
SAC logo LawAccord

Copyright © LawInSport Limited 2010 - 2018. These pages contain general information only. Nothing in these pages constitutes legal advice. You should consult a suitably qualified lawyer on any specific legal problem or matter. The information provided here was accurate as of the day it was posted; however, the law may have changed since that date. This information is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. LawInSport is not responsible for any actions taken or not taken on the basis of this information. Please refer to the full terms and conditions on our website.