Out-Law News 3 min. read

Football Governance Bill passes its first hurdle

The Football Governance Bill has passed its first hurdle in the UK parliament, after a second reading debate on 23 April that demonstrated cross-party support.

The bill will have a major impact on football regulation in England, short and long term, establishing a powerful new independent regulator, the Independent Football Regulator (IFR).

Following the Fan Led Review of Football Governance, the UK government confirmed in 2022 that it would legislate to establish a new independent regulator in English football. The primary purpose of the bill is to “ensure that English football is sustainable and resilient for the benefit of fans and the local communities football clubs serve”.

The government previously cited shortcomings in the current model of industry self-regulation as a factor in the case for reform.

To tackle this, the bill will introduce the IFR and set out its high-level guiding principles and broad discretionary powers. These principles and powers aim to flesh out how football clubs in the top five tiers of the English men’s elite football league pyramid should be regulated in practice. The IFR is to be funded by a levy imposed on all clubs within the pyramid.

The IFR will have three high-level objectives: protecting and promoting the financial soundness of clubs; protecting and promoting the financial soundness of English football more generally; and safeguarding the heritage of English football.

The bill will establish a detailed regulatory regime requiring clubs to satisfy certain financial and governance requirements, in order to be licensed by the IFR to operate. The IFR will also oversee the suitability of the owners and officers of clubs. The introduction of time limits on the process for the IFR to complete owner determination, is “welcomed to avoid deals falling away”, said Gabrielle Armstrong of Pinsent Masons.

The bill also proposes a broader definition of “officer” to cover individuals who purport to act as an officer of a club. This may include ‘shadow directors who seek to run clubs from the sidelines.

The IFR will have strong powers of enforcement as well as the power to impose a solution in situations where leagues fail to reach an agreement on distribution of revenue to lower leagues from televised matches.

Duties to be imposed on clubs by the bill include not joining any prohibited competitions, such as the failed attempt in 2021 to create a European Super League. Other duties include not to sell or relocate home grounds without IFR approval, and not going into administration without IFR approval. Material changes to a club crest or main home shirt colour will only be permitted under the legislation after a club has taken “reasonable steps” to secure support for the changes from a majority of fans.

New duties are not only imposed on clubs - the five top tier leagues also face new obligations under the bill. A league would have a duty to notify the IFR if it becomes aware of a risk to the financial soundness of a club or of English football more generally. The IFR must also be made aware if a league suspects a club to have breached a competition rule relevant to any IFR functions, as well as a duty to notify the independent regulator before imposing any sanction on a club for such a breach. The IFR must also publish a state of the game report, but it is not yet clear how far this may go in scrutinising the finances of individual clubs.

The IFR will be given broad and robust powers to investigate and enforce compliance with requirements of the bill. This will include the ability to issue financial penalties of up to 10% of a club’s revenue or the suspension or revocation of a club’s operating licence.

“Additionally, the Bill recognises the need for the IFR to recognise the specificity of football - a key tenet for sports lawyers,” Armstrong said.

Public law and legislation expert at Pinsent Masons, David Thorneloe, said: “The bill runs to 100 pages and establishes a strong framework for a new independent regulator to write the new rulebook on the financial sustainability of English football, and take robust enforcement action to ensure compliance. Although the Bill is likely to pass with cross-party support before a General Election at the end of 2024, the new regime may not be fully in force till some time after that, given the breadth and complexity of the rules that will need to be developed by the regulator under the framework.”

The bill will now proceed to the committee stage where each part and any proposed changes to the bill will be debated in more detail.

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