Out-Law Analysis 7 min. read

Looking forward – shaping football’s future

Football in England is on the cusp of a new era of governance, with a pivotal role envisaged for a new independent regulator to help ensure the financial sustainability of clubs.

Independent regulation of football has long been debated and its endorsement now comes against the background of the proposed European Super League and the significant impact of the Covid pandemic on club finances.

The powers proposed to be given to an independent regulator should, if exercised properly, reduce the risk of clubs running into financial difficulties, or at least enable developing problems to be identified and resolved before they become so serious as to threaten a club’s very survival.

Regulatory intervention in football does, however, require a careful touch so as not to negate the very features of the game that make it so loved by millions – the ability to compete – and to do so both domestically and internationally – and to ensure the aspirations of supporters and owners can be met.

Changing the landscape – football finance and fan ownership

As stakeholders explore how best to implement change, it is worth reflecting on how much football has changed in the past 25 years and how pioneering solutions to financial problems back then may not offer a panacea to struggling clubs now.

It was back in January 1997 that I first got involved in professional sport. A lifelong AFC Bournemouth fan, when the club went bust in the middle of the season in January 1997, I led what started out as a group of supporters just trying to keep the club alive and ended five months later with our buying the club from the club’s receiver.

Watkins Trevor

Trevor Watkins

Partner, Head of Sports

We put bespoke and pioneering legal structures in place to enable us to raise money from supporters. It recognised different rights of shareholders who had invested different sums of money

Today, football increasingly offers a club owner the opportunity to realise on-the-field success and achieve a return on their investment. Recent transactions in the English Premier League have seen values increase significantly and that has been coupled with significant interest in lower league investment. The desire for success has in and of itself created situations where the future of clubs has been put at risk but, notwithstanding multiple checks and balances, a small number of malevolent actors have also been attracted to the English game.

Several clubs that have pursued on-the-pitch success have been mismanaged and encountered financial difficulty. Some clubs have gone out of business completely, including Bury which had been operating since 1885. This is despite the existence of financial regulations and other controls – such as ‘fit and proper owner’ tests – designed to ensure the responsible running of clubs.

Back in 1997, after AFC Bournemouth was put into receivership on Friday 24 January, I created a committee of supporters hastily convened to coordinate efforts to save the club from going out of business. With the bank and directors withdrawing their financial support for the club, we spearheaded a campaign to raise publicity about the club’s plight and galvanise the fans.

We held a public meetings at the Winter Gardens, a now long-gone venue in Bournemouth, where at least as many people turned up as there had been home fans at the previous home game. It threw me into a world of professional sport where I was suddenly liaising with players, league officials, club directors, management and prospective investors. Having created a trust fund to hold supporter donations on the day of the public meeting we then did everything we could to keep the club alive week-to-week.

The response we received was remarkable. The town made it very clear that it wanted to save its football club. The community came together. Attendances at home games increased. A substantial six-figure donation from one wealthy supporter gave us hope that we could not just keep the club afloat but might be able to buy it. Fundraising efforts went into overdrive. We made an offer to buy the club.

While the bank turned the offer down, it lent us the money to enable us to purchase all of the assets of club. Even so, the Football League regulations obliged us to also deliver a company voluntary arrangement, something we could not control. It also obliged us to repay a significant proportion of the debts owed to the club’s other creditors.

While there had been cooperative movements in other industries, at that time no supporters group had ever taken ownership of a professional club before. We put bespoke and pioneering legal structures in place to enable us to raise money from supporters. It recognised different rights of shareholders who had invested different sums of money – from a few wealthy individuals who invested tens or hundreds of thousands of pounds on their own, to thousands of everyday supporters who collectively held a stake in the company we established. The arrangements had to satisfy both the Football League and comply with the laws of receivership. The golden share structure we created meant that the fans would have a right of veto over major issues – such as any sale of the club or the stadium.

Following the model we developed at AFC Bournemouth, I was asked by government to help found Supporters Direct. A whole new movement arose where sporting clubs were recognised as being special. Subsequently, new legislation has been introduced that provides routes forward for supporters and communities to protect and preserve their clubs.

Over the last 25 years, many clubs have been acquired by supporters groups. Today, clubs operating throughout the English lower leagues, including AFC Wimbledon, Exeter City and Newport County, are still under fan ownership, and this is also the case with clubs in Scotland too, where examples include Heart of Midlothian and Motherwell.

In the case of AFC Bournemouth, the period in which the club was under fan ownership was temporary. There have been multiple changes of ownership since I left the board in 2002, but the efforts of the supporters to save the club provided the platform for the club to go on to achieve on-the-field success, which included promotion as champions to the Premier League and a subsequent five-year stay in the top-flight.

Watkins Trevor

Trevor Watkins

Partner, Head of Sports

Football still has a lot to do if it is to become a stable, solid business where clubs do not go bust with the substantial impact on communities that entails

At AFC Bournemouth, the club’s debts in 1997 were a shade under £5 million and the monies raised by supporters and investors around £600,000. The financial sums involved in football now arguably put similar rescues out of reach for supporter groups in the top two tiers of English football. Even so, anything is possible when the passion of fans is harnessed.

A review chaired by former sports minister Tracey Crouch last year described fan ownership as “a legitimate model for many clubs”, but it will not work for every club. The problems faced by Derby County currently demonstrate that, with the survival of the club remaining out of the fans’ direct control.

I was proud to be part of a Pinsent Masons team that advised on the recent resurrection of Bury FC, where fans and investors have come together as we did in Bournemouth 25 years on. The common themes, however, suggest football still has a lot to do if it is to become a stable, solid business where clubs do not go bust with the substantial impact on communities that entails.

The case for independent regulation

The future of football is a debate that has been going for as long as I have been involved in football. Now it is likely that the government will intervene in football regulation.

The Crouch report described the men’s professional game in England as being “at the financial precipice, because the incentives are driving poor and reckless decision making”.

At the centre of the package of proposals for reform recommended in the report is a new system of financial regulation for English football and the establishment of a new independent regulator to develop and oversee that system.

The shift to independent regulation, which has the support of the UK government, aims to take some of the complex issues regarding the sport’s governance out of clubs’ hands and therefore avoid the potential for conflicts of interest to cloud important decisions, such as on how to support, or sanction, individual clubs that breach the rules.

As football authorities and the government debate how to implement the reforms in practice, careful thought must be given to the potential unintended consequences that could arise from a new system of independent regulation and, if negative, how they can best be avoided.

A successful new regulatory framework will be one that respects that football’s appeal is its history, traditions and rivalries, the passion of supporters and the uncertainty of the outcome of any match. Though some clubs have enjoyed sustained periods of success, results in individual matches pale against how over time periods of dominance ebb and flow, with clubs rising and falling as they either realise or fall short of their potential.

Watkins Trevor

Trevor Watkins

Partner, Head of Sports

Any business needs space to innovate, to pursue excellence, attract investment and strive for success, and there needs to be recognition of the factors that rest at the heart of a sector. It is no different for sport

A competitive playing field with uncertainty of outcome is ensured by policy, regulation and practices that give effect to the principle that competition between clubs is fair, but which also recognises the differences between clubs, their access to resource and income. It is arguable that whilst some clubs have bigger fanbases, better infrastructure and access to greater resources than others, this does not in itself guarantee success – and there has always been the opportunity for others to compete for success with shrewd investment.

There is a risk in any sector from intervention by government or regulators: that the intervention will fail to achieve its aims and have inadvertent knock-on effects. Any business needs space to innovate, to pursue excellence, attract investment and strive for success, and there needs to be recognition of the factors that rest at the heart of a sector. It is no different for sport. The ability to dream or aspire to succeed must prevail, along with fair competition.

This is the challenge when regulating football and it arises at a time when football is grappling with significant other changes too, from a new world of the metaverse, NFTs and disruption to the traditional commercial rights model that has driven growth.

A new independent regulator will arrive. It can be a positive development and help significantly reduce the challenges we faced at AFC Bournemouth 25 years ago and at Bury FC so recently.

To succeed though, any solution when implementing and enforcing new financial regulations and other controls must ensure that the features of the game that are so loved, and which are so central to the sport’s commercial success too, are preserved.

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