Football club ownership in Germany – less romantic than you might think

Published 28 July 2015 | Authored by: Christian Keidel, Alexander Engelhard

In this hyper-commodified era of football, with professional clubs organized primarily as commercial companies - some of which are controlled by super-rich foreign investors - many believe that the German Bundesliga has remained the last stronghold of member-run clubs, deeply rooted in their communities with low ticket prices and high attendance numbers.

Indeed, German football has implemented regulation stipulating that if a club is run as a commercial company, the majority of the voting shares of that company always have to be controlled by a member-controlled parent association (the "50+1 rule" – see below). Furthermore, in March 2015, the Bundesliga introduced regulations that also restrict minority ownership in more than one club to avoid investors owning significant stakes in several different clubs. Unsurprisingly, there are exceptions to the rules and reality shows that clubs have become creative in adapting to the regulation in their endeavours to attract investment.

This article gives an overview of the factual and regulatory evolution of club ownership in Germany, explaining in detail the 50+1 rule and its application in practice by looking at the examples of TSG 1899 Hoffenheim, TSV 1860 Munich and RasenBallsport Leipzig. It also touches briefly on the new rule regarding multiple club investments, which has gained relevance with the recent promotion of FC Ingolstadt to the 1st Bundesliga. As a result the next season will feature three clubs in the German top-tier league which are substantially influenced by the German car manufacturer Volkswagen or its subsidiary Audi.

 

Introduction

At the outset, the issue of club ownership is closely connected to the legal (corporate) form of a club, namely the distinction between the member association and the commercial company.1 Whereas, in the motherland of football – England - professional football clubs have been organized as commercial companies for most of the 20th century, in Germany and elsewhere clubs remained local member associations much longer. These local member associations usually offer different sports besides football (e.g. FC Bayern Munich has departments for baseball, basketball, handball, bowling, chess, and table-tennis among others). Yet, the professionalization and commercialization of football required many of these entities to transform their professional football departments into companies since the legal framework for member associations no longer matched the commercial realities of clubs with annual turnovers reaching into the hundreds of million Euros. In particular:

  • Clubs organized as member associations are steered by their boards. However, the major decision-making power is vested in the general assembly, a body generally made up of all (voting) members of the association, which complicates the decision-making process;
  • Member associations generally enjoy the tax benefits of non-profit organisations, yet the realities of modern club football demand commercial activities that are hardly compatible with a non-profit tax regime;
  • Member associations are in principle not open to investments through shareholding. Membership rights in an association cannot be traded unlike the shares of a commercial company.

Not least because of the reasons stated above, in England clubs are generally incorporated as limited companies (public or private2), a legal form that allows them to minimize the personal risk of their owners and potentially increase their attractiveness to investors at the same time. The legal status of its clubs has arguably helped the English Premier League to become the most successful football league in the world –at least from a revenue perspective. However, the organizational structures of its clubs and the lack of regulation to the contrary has also led to a number of major takeovers; allowing multinational corporations and private investors to take control of some of the biggest names in domestic club football, e.g. Chelsea FC, Manchester City FC, or Liverpool FC. More than half of the Premiere League's 20 teams are now in foreign hands.3

In 1998, the German Football Association ("DFB") also allowed the clubs of the Bundesliga, which were traditionally organized as member associations, to transform their professional football departments into commercial companies. However, at the same time, provisions were put in place that demanded the majority of voting rights within such companies (i.e. >50%) still be controlled by its parent member associations. This rule-change marked the birth of the famous 50+1 rule.

...to continue reading register here for free

 

LawInSport is an independent publisher used by sports lawyers, sports business executives and administrators, athletes and support personnel, academics and students to stay informed of the latest legal issues and developments from the world of sport. It is our mission to improve the accountability, transparency and standard of the administration and governance of sport and the understanding of the law.

Thank you for considering becoming a member of LawInSport, supporting independent media and the promotion well researched, reference and accessible legal information that contributes to greater transparency and accountability in the sport and legal sectors.

 


 

Related Articles

About the Author

Christian Keidel

Christian Keidel

Christian Keidel is a salary partner at Martens Lawyers in Munich, Germany. He joined Martens Lawyers as part of the initial spin-off team from Beiten Burkhardt, an international commercial law practice. Christian holds a legal degree from the University of Munich and has also studied at the University of Seville.

  • This email address is being protected from spambots. You need JavaScript enabled to view it.
Alexander Engelhard

Alexander Engelhard

Alexander Engelhard is a senior associate at ARNECKE SIBETH in Frankfurt, Germany. He advises German and international clients in the sports, media and entertainment industry. His particular focus is on dispute resolution, especially in sports-related cases. He also advises clients on the drafting of rules and contracts, including agreements dealing with copyright and media law. As a former Vice-President of the FIFA Master Alumni Association (FMA) Alexander has access to a global network in sport.

  • This email address is being protected from spambots. You need JavaScript enabled to view it.

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.