WHEN A FOOTBALL CLUB GOES INTO ADMINISTRATION?

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For many football fans, nightmares can become a reality, and when economic uncertainty caused by factors beyond the supporters’ control take hold, these nightmares can become all too real in the form ..

For many football fans, nightmares can become a reality, and when economic uncertainty caused by factors beyond the supporters’ control take hold, these nightmares can become all too real in the form of administration. Administration is a part of UK business law where accountants are brought in to take control of a club (or business) in an attempt to make them economically viable again.

Clubs struggling to pay players’ and coaching staff’s wages, outstanding transfer fees, or other such debts, will be given a winding up order bringing them to court where they will have to give proof that these debts can be repaid. If there is insufficient evidence of this, the club may face liquidation and be dissolved. Facing such a crisis, a team may decide to enter administration in order to salvage some assets and make them more financially secure.

Between 2010 and 2020, nine different teams have gone into administration, with Portsmouth having to call administrators in twice, and Wigan still going through the process (at the time of writing in February 2021):

Club Administration Start Administration End Duration
Wigan Athletic July 2020 Present
Bury July 2019 March 2020 9 months
Bolton Wanderers May 2019 August 2019 4 months
Aldershot Town May 2013 July 2014 15 months
Coventry City March 2013 June 2013 4 months
Port Vale March 2012 November 2012 9 months
Portsmouth February 2012 April 2013 15 months
Plymouth Argyle March 2011 October 2011 8 months
Portsmouth February 2010 October 2010 9 months
Crystal Palace January 2010 August 2010 8 months

Sometimes clubs will choose to enter administration and do so of their own accord, usually after a prolonged period of economic instability. Normally they owe debts to several different creditors and their inability to pay is what drags them into administration. This puts the whole team and community through a tough time as it often results in staff and players not being paid, and in prolonged situations like the case of Bury in 2020, can cause the team to be banned from playing in domestic competitions.

Football clubs have a responsibility, enshrined in law, to pay back players and other clubs as soon as possible before HMRC can claim any unpaid taxes owed to them. This helps to make sure other clubs can remain stable, and that one team going into administration doesn’t result in a collapse of whole leagues. In addition, it also acts to protect players’ working rights at the same time.

There are varied consequences that a team may face when they go through administration depending on many different factors. Attractive clubs with large money-making potential often just face a points deduction and are able to recover by selling some of their larger assets to settle the team’s debts, whilst clubs in perilous situations may simply be dissolved and broken up in order to pay off what they owe. In such a situation often their only hope is being rescued by a grassroots organisation resurrecting the team, a generous benefactor coming forward or a takeover being arranged.

There are many famous situations where clubs have gone through this process and managed to make it out the other end. Typically some form of internal investigation helps them review what went wrong but what really happens when a football team enters administration?

 

ARE POINTS DEDUCTIONS THE WORST CASE?

The simplest outcome a club can hope for when facing administration is to receive a points deduction and carry on as usual. Coventry City entered administration between March and June 2013 and were forced to leave their home ground at the Ricoh Arena due to a rent dispute with the building’s owners.

They had a 10-point deduction in the 2013-14 season but managed to avoid suffering the longer-term effects of relegation and have not been forced back into administration at the time of writing.

Points deductions can have more significant effects on teams, for example contributing to Bolton’s relegation to League Two in the 2019-20 season. The Trotters, owing over £1 million in unpaid taxes, were placed into administration in 2019, with reports from the training ground stating that players had not been paid for nearly half a year. The team lost almost their entire playing squad, fielding just three professional players at the start of the 2019-20 season, and looked certain to go into liquidation and be dissolved, a terrible fate for a side founded in 1874 and a founder member of the Football League.

Eventually a new owner was found for the club, but they were still deducted 12 points and ended up finishing last in the 2019-20 season, being relegated to League Two.

Although a points deduction can be a bad situation for a team to go through, often resulting in relegations that have further reaching economic consequences than existed in the first place, it’s certainly not the worst thing for a club in administration to have to go through. That is especially the case if that is the only problem that the economic instability causes. Other clubs have experienced far greater, and wide reaching, consequences when the administrators have come knocking.

F.C. TO A.F.C. THE CHANGING FACE OF WIMBLEDON

Blue and Yellow Stadium Seats

One of the most famous cases of a British club going into administration is that of Wimbledon F.C. The team were famous for some of the First Division’s most iconic moments, from the antics of the ‘Crazy Gang’, to the shock upset winning the 1988 FA Cup final. The club’s hierarchy had decided to relocate from south west London to Milton Keynes. This created a split in the fan base, with local supporters establishing A.F.C. Wimbledon, and the conflict created led to a significant loss of income to the team – eventually resulting in them entering administration in 2003.

The accountants called in stripped the team of any notable assets, including selling players, and left the club without a stadium to call their own. They were rescued by a new owner, Pete Winkelman, backed by a consortium, funding the club’s move to Milton Keynes that would supposedly allow them to expand as a team and grow their fan base away from the congested (in terms of the number of clubs) confines of London.

The now renamed Milton Keynes Dons have steadily kept their place in the English Football League, but never managed to return to the heights of the (old) First Division, now Premier League. The newly formed (in 2002) phoenix club A.F.C Wimbledon (called as such as it formed from the ashes of the team once loved by many Londoners) managed to scrap their way up from non-league football back to the EFL, where they are able to compete against their bitter rivals who were once part of the same club.

The events that happened to Wimbledon F.C. are well documented and give a devastating example of the way clubs are stripped in order to recover money, and how, when business is allowed to take priority over football, everyone seems to lose.

THE BREAKDOWN OF BURY

Tax Return 2019 Form

Bury had faced mounting financial troubles from 2018, receiving winding up orders from creditors, as well as owing money in player wages and unpaid taxes to HMRC. The club’s owner, Steve Dale, created a Company Voluntary Agreement (CVA) with the different parties that the team owed money to. This established payment plans regarding how much money people were going to be paid back, and when. As per the English Football League’s regulations, Bury received a 12-point penalty in July 2019, before a ball was even kicked in the 2019-20 season.

After the EFL requested greater evidence of Bury’s financial viability and their ability to pay back the money owed to creditors, the club was suspended from the EFL, as sufficient evidence could not be provided. Several deals to sell the club fell through, and even political intervention could not help the historic outfit from being expelled from League Two. At the time of writing this article, Bury still technically exist, although no football is played, and no players belong to the club. They have been stripped bare due to mismanagement at the upper levels, and still owe considerable debts to different organisations that would have to be paid before they can participate in professional football again.

Another phoenix club, Bury A.F.C., was set up by local fans in the non-league divisions hoping to continue the legacy of the team once loved by residents. Their dream is to climb the league structures and be able to return to the EFL and compete in the spot of the club they once loved.

REBUILDING RANGERS: FROM DISSOLUTION TO DOMESTIC BLISS AT IBROX

Ibrox Gates, Rangers Football Club
Image: Tonygers, Bigstock Photo

Rangers were top of the Scottish Premiership in the 2011-12 season when they entered administration and were docked 10 points. Failing to reach an agreement with the creditors resulted in the club being forced into liquidation, meaning one of Scotland’s most prestigious teams were doomed. The club transferred their essential assets into a new company but were voted against by all other Scottish teams meaning they could not maintain their position in the SPL, instead having to drop all the way down into the Third Division in Scotland.

Rangers lost the majority of their players, who understandably did not want to drop down in leagues, and instead had to quickly rebuild a team suitable for the lower quality of Scotland’s third division. After a long and arduous struggle they were able to return to the Scottish Premiership in the 2016-17 season, just four years after they were forced into insolvency, and by maintaining the same assets as before they were legally considered the same team – being able to keep their rich and plentiful history.

The impacts of Rangers’ dissolution, and being made to start again in Scottish football, were more seen by the fans and other leagues than the club itself. Being such a large team with a considerable fan base, they were able to fund several transfers, establishing a team of sufficient quality to scale back to their previous position towards the top of the perch in Scottish football.

However, their absence from the top league allowed Celtic under Neil Lennon and subsequently Brendan Rodgers to win nine league titles in a row, including the domestic quadruple treble – four years of winning all three domestic trophies in Scotland, finally claimed in December 2020. Watching the Hoops enjoy such sustained success whilst they languished in the lower leagues was obviously a huge disappointment to Rangers fans and a very bitter pill to swallow.

However, it could be considered that the events that happened in the 2011-12 season allowed the club to rebuild and become potentially a more formidable side than previously were. Under the stewardship of Steven Gerrard, Rangers have become a really dangerous outfit. It appears a matter of time before they wrap up the SPL title, whilst they have been doing superbly in the Europa League too. Their revival shows that administration and even multiple relegations are not the end of the road for a club and how administration can potentially even end up as a positive for the team.

HOW IMPACTFUL CAN ADMINISTRATION BE?

Upset Football Fan in Empty Stadium

Football clubs go into administration on the back of financial instability and overwhelming debt, and as sad as it is to say, money is what keeps the lights on at all the grounds across the country. Without it, players cannot be paid, the grass cannot be cut, and the club will not function as a whole.

Some teams can be re-formed by fans, and others propped-up by new investment but either way, in the face of a points deduction and even suspension by the governing body, going into administration will always be incredibly impactful on a team. That is not to say that doing nothing is worse, as that will result in the club definitely being dissolved, but by bringing administrators in, the club can try to correct any past mismanagement, and it is better for supporters to perhaps lose a few players, than lose the club that they have supported their whole lives.

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