Following the Fan-Led Review of Football Governance, the government has issued a White Paper setting out the government’s plans to deliver an Independent Regulator to ensure the long-term sustainability of the English football pyramid, writes David Little, a Partner in our Commercial department who increasingly handles Sports Law cases too.
This includes the legislative framework for regulation, with the primary strategic purpose to ensure that English football is sustainable and resilient, for the benefit of fans and local communities.
The White Paper also sets out government’s broader non-legislative reform measures, to drive industry action in areas outside of the regulator’s remit and ensure the ongoing development of both the men’s and women’s games, at elite and grassroots levels.
The government proposes establishing, in law, a new licensing system for football clubs operating in the top 5 tiers of the English football pyramid, overseen by an Independent Regulator. Football clubs will be required to comply with licence conditions which seek to ensure club sustainability and the overall stability of the English football pyramid, and to protect the cultural heritage of football clubs for their fans.
The introduction of a Regulator will not mean a club can never fail, but through close monitoring and requirements for better reporting and stronger corporate governance, it is felt this would be less likely under a Regulator.
Clubs will be expected to demonstrate they have financial buffers and plans to withstand certain financial shocks – anything from relegation, loss of a major sponsor to a wealthy owner pulling out.
The Regulator will also be able to intervene and work with leagues where it feels the action of a particular club may create systemic sustainability issues – such as an owner paying extortionate wages which has the potential to create league-wide wage inflation.
Distribution of revenue
The White Paper promises a strengthened owners’ and directors’ test for individuals seeking to have a controlling interest in a club. The fitness and propriety of new owners and directors will be considered but the Regulator will decide whether an individual is a ‘politically exposed person’ (or ‘PEP’) – those potentially exposed to bribery, corruption or external influence.
Being deemed a PEP would not mean an application being approved or denied, but may lead to certain licensing conditions being imposed.
The White Paper says the current distribution of revenue covering the 116 clubs in the top five tiers of the English professional game is “not sufficient” and urged the game’s authorities to reach a football-led solution.
However, the regulator will be given targeted powers of last resort to impose a solution. The Regulator would also have to pre-approve any stadium sale or move.
The Government said it was also considering toughening restrictions on leveraged buyouts – where a club is purchased through loans secured against it. In the meantime the White Paper is only a basis by the government for targeted engagement to consult with key stakeholders as it develops legislation. Given the next election is probably less than 18 months’ away. I envisage that legislation being in the King’s Speech any time soon.
Contact our Sports Lawyer
David Little, is a Partner in the Corporate & Commercial team and also Head of Sports Law for the firm. If you would like to contact him please quote Ref CB385 on either 020 7631 4141 or email email@example.com.
The above is accurate as at 03 March 2023. The information above may be subject to change during these ever-changing times. The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.