Tuesday, November 9th, 2010 « Untold Arsenal: Arsenal News. Supporting the Lord Wenger in all he does

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By Tony Attwood

Manchester IOU plod along their merry way, spending all their profit on interest and fees for the owners.

Liverpoodle (named after the annoying little dog favoured by rich Americans) have paid off RBS, but are perhaps just a little red-faced by the emergence of the fact that the new owners didn’t actually promise not to load the club with debt again.   There’s also the annoying business about the new stadium, with the debt for the initial study and planning costs not yet sorted.

The oily dealers in Fulham have finally tumbled that without a stadium of the size and scope of the Ems they can’t really meet the financial fair play rules and so have put a compulsory purchase order on Earls Court (except the law isn’t quite like Russia in London guys, so it might not all just go through on the nod).

As for Sheikh Yerbooty and his gang, the latest signs are that winning the league at any price is the order of the day.  Financial fair play can come later.  (I seriously believe that the thinking now is that if Man C do win the EPL and are refused a licence they believe Uefa will be the ones looking silly, and so will have to back down and grant a special licence – rather like people used to get from the Archbishop of Canterbury if they wanted to get married in a rush.)

As for us, the stories are that Mr Usmanov is still buying shares.  Mr Kronke as we know sits on 29.9999999999999999999999% ownership and is ready to… well, I am not quite sure what, but whatever it is, it will be good.

Oh, and the Tiny Totts are going to have two stadia – one just a couple of miles from the pornographers in the east end, and the other on top of the existing pile.   West pornography don’t mind too much because you don’t need a very big ground in the conference.

So that’s it, except, well, not.  Because our old pals HM Revenue & Customs are in the process of going back to court to challenge the “football creditors” rule.  The case will be heard in February 2011.

Those who have lived by and benefited from the rule are already mounting a PR campaign concerning the end of football as we know it, chaos, undermining the system that has stood for a thousand years, “an epidemic of insolvencies” (I rather like that phrase – “an epidemic of insolvencies” – one of the EPL guys actually said that) a “domino effect of collapsing clubs” (get your head around that one), a cascade of creditors (actually that doesn’t mean anything and I made it up – but you get the idea). Etc.

Generally, it seems to me that when people start talking about a change in the rules being the end of the world as we know it, they are playing the special interest card.  The fact that they are playing it now shows just how much of a panic the special interests are in.

To be clear about this, if a club goes into administration, the current rules say that everyone involved in football (eg the players) gets paid their salaries and other debts.   Those not involved in football (the printing company that employs five people all of whom lose their jobs when the club doesn’t pay up which forces the printer to go bust and everyone to lose their jobs, and possibly their homes because they can’t pay the mortgage), they get nothing.

The argument from the EPL is this: when Portsmouth went bust if there had been no “football creditor” rule then Watford would have gone bust, because Portsmouth owed Watford.  Then the club that Watford owed would go bust, and so on.

This is utterly ludicrous.   If the f0otball creditor rule goes then clubs stop buying on credit all day long.  If a transfer is wanted, the club must pay there and then.   This reduces the value of players and the wages of all but the very top players.  Sanity returns and clubs stop being gambling ventures playing with the very livelihoods of the small firms that trade with them.  There will be no more Leeds.

Consider the Dundee administration.  They got docked 25 points for going into admin twice in seven years.  The fans are protesting that it is “unfair”.   And where is the unfairness to all the small traders and other local companies who have traded with Dundee FC and now get nothing and are laying people off, while Dundee’s “football creditors” are protected?

According to the Guardian, the Revenue and Customs argument is based on the findings of Lords Cross, Diplock and Davies in the 1975 case  which established in English law that, “A party cannot obtain the status of a secured creditor without having a properly registered charge.”

The finding in the case relied on what is generally called the “anti-deprivation principle” of law. In the event of insolvency this principle attempts to prevent cash or assets being transferred to a third party while other unsecured creditors miss out.

The EPL claims however it holds a golden share in each club, which is the entitlement of the club to compete in the competitions.  So if the clubs don’t behave properly that share is removed and they are kicked out of the league.  Therefore the 1975 case should not apply.  But the Revenue and Customs say, “The PL/FL may not lawfully strip an insolvent club of its golden share because that offends against the ‘anti-deprivation principle’.   I am not a lawyer but I believe this means you can’t deprive people of the right to trade just because they owe money.   If a man who cleans windows can’t pay his newspaper bill, the newspaper shop can’t take away his window cleaning apparatus, because that deprives him of his living.

As was admitted in the Portsmouth case by some of those actually working for Portsmouth, the football creditor rule “goes against all normal principles of insolvency law”.  The only reason Portsmouth got away with it was that the judge felt that such a change in the application of the law couldn’t be granted in one case but needed a full hearing.

To me there is no doubt that clubs go into administration normally because they constantly spend beyond their means.  This is not the case with all business administration where companies can get caught out by changes in the market or sudden moves in government policy.  Most football clubs that go bust gamble insanely on a debt-now future-success approach, (Leeds was the perfect example, but there have been many others,) and then make the ordinary people in the town who are just trying to make an honest buck, pay for their pathetic stupidity.

Here’s a list of some of them in the last 25 years.  The data comes from this site – which I fully recommend if you want to know more.  I think it is time for this insanity to stop.   (And yes, if you want all the facts – Arsenal went into administration, but from what I found out when I researched the issue, they paid off everyone.   Which is not bad considering the person who arranged that was the eternally maligned Henry Norris.)

Charlton 1984 Middlesbrough 1986 Tranmere 1987 Newport County 1989 Walsall 1990 Northampton 1992 Kettering 1992 Aldershot 1992 Maidstone 1992 Hartlepool 1994 Barnet 1994 Exeter 1994, 2003 Gillingham 1995 Doncaster 1997 Millwall 1997 Bournemouth 1997, 2008 Darlington 1997, 2009 Chester 1998, 2009 Hereford 1998 Portsmouth 1999, 2010 Crystal Palace 1999, 2010 Oxford Utd 1999 Barrow 1999 Swindon 2000, 2002 Scarborough 2000 Hull 2001 QPR 2001 Chesterfield 2001 Leicester 2002 Barnsley 2002 Carlisle 2002 Notts County 2002 Bury 2002 Bradford 2002 Port Vale 2002 Lincoln City 2002 Swansea City 2002 York 2002 Halifax Town 2002, 2008 Derby 2003 Ipswich 2003 Huddersfield 2003 Oldham 2003 MK Dons 2003 Wimbledon 2003 Wrexham 2004 Cambridge 2005 Crawley Town 2006 Rotherham 2006, 2008 Leeds United 2007 Boston United 2007 Southampton 2008 Luton 2008 Stockport 2009

Salisbury 2009

Arsenal’s administration is described in Making the Arsenal