HMRC to challenge Creditor Rules in football on 15 February 2011
Did you see the article in the Independent on Sunday yesterday on this subject? It’s certainly worth a read if not.
In short, as matters stand at the moment when a football club is declared insolvent the players, manager and (even more amazingly) other football clubs who are owed money by the insolvent club, stand way ahead of other unsecured creditors. In any other walk of life that would not be the case and the outstanding wages of staff, senior management and trade creditors would (in the absence of security, say, over property) all fall into the same pot and usually results in creditors getting a few pence in the pound if they are lucky.
So why is it different in football? How can people associated with football suddenly become preferential creditors? The answer is the commercial clout which is applied by the relevant leagues.
Administrators and Liquidators are required to look for the best price when selling assets of a club. However, if the league in question makes it pretty clear that the non payment of players etc will result in the club being kicked out of the league, the Administrators/Liquidators suddenly have to face the fact that a club without a league status is worthless.
With that gun to the head, we have seen various clubs head into insolvency and players and certain other “essential” staff getting paid 100% of their claims whilst other unsecured creditors have even less to share around. Whether or not that is good, bad, lucky or perverse depends on your perspective. Players at failing clubs will applaud it as a means of securing their families short term financial future and who can blame them. Unsecured creditors will shake their heads at the unfairness of it all and think twice before dealing with clubs in the future.
The rule that has developed is now under scrutiny and matters go to Court this week. HMRC are challenging it, the Premier league are opposing the challenge. Quite a match! Watch this space for the final score.
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Chris Allen
