Fans have been one of the key factors behind the financial success of Premier League clubs, evident by the fact that both Arsenal and Liverpool get around £3 million each match day from gate receipts. Obviously during lockdown, fans were not able to attend matches in person. However, the large football clubs were richly compensated for such losses through eye-popping tv deals, but what happens to clubs away from the topflight and all it’s monetary benefits?
Even before the pandemic, smaller sized clubs entering administration was fairly common, and now that fans have been away for what seems like an eternity, this could rise significantly over the coming months. The most heart-breaking example would be Bury FC, who were kicked out from the professional game during the 2019-20 season as a result of insurmountable debts.
Football clubs enter administration when they no longer have the means to pay wages, bills or anything else for that matter. Control is then passed over the administrator, and whilst under their control, creditors cannot take legal action against the club, therefore giving the appointed administrator time to try to find a solution.
Although the sale of players may be necessary within the process of administration, this can of course have a huge impact on the team’s competitive edge on the pitch.
Take Leeds United for example! They were placed into administration in 2004, having amassed over £103 million in debt. The club’s best players were sold and the club was relegated to the second tier, where they stayed for another 16 years!
One of the problems with being relegated from the Premier League is that current clubs get a share of £9.3 billion worth of revenue payments and far more brand exposure across the globe.
If football clubs don’t have assets to pay off their debts, then they will be required to close down. This has happened on quite a few occasions, and when this does take place, football clubs often create a phoenix alteration with a small modification of their original name. This does mean the community gets their beloved team back, but you have to start right from the bottom league and work your way up the football pyramid all over again.
The football league doesn’t like teams going insolvent and wants to deter this from becoming too frequently an occurrence, accordingly 12 point deductions are often brought into play, something which takes effect when insolvency procedures first took place and where the club is positioned in the table.
If you know of a sports team which is struggling, please feel free to give us a call!
To learn more about administration procedures and discover whether this could be the best way forward, simply contact RG Insolvency today for further advice.