For that rare breed of person who is a fan of football as well as finance law and practice, the current goings-on with the League Two crisis clubs make for interesting reading. For the rest of us, it looks to lead towards the strange spectacle of three clubs – Luton, Bournemouth and Rotherham – all starting the season on minus points before a ball’s even been kicked in anger.
Points deductions for breaking the league’s financial rules have become increasingly commonplace in recent years, but this season looks to reach a new nadir for promotion and relegation to potentially be settled in the courtroom rather than on the pitch.
While the rules are necessary to act as deterrents for clubs overstretching themselves, clubs are finding it nearly impossible to stick by those rules if they do hit financial difficulties. Indeed, there’s a strong argument for the FA to look at their rules and the issues of points deductions again.
Luton: The Crisis Club of Crisis Clubs
The team that has suffered most, as has been well documented over the past few months, is Luton Town. Last season they were hit with a ten point deduction for going into administration after they collapsed with debts of around £4.5m. This season they’ll start their League Two campaign on minus thirty points. Ten of those points were deducted for financial irregularities, the other twenty for failing to agree to a CVA to exit administration.
All well and good, it may seem. After all, the League has rules to prevent clubs ‘doing a Leciester’ when, back in 2002, the Foxes entered administration, wiped out huge debts and, in doing so, walked back into the Premier League. That shouldn’t happen again, and in this case it’s Luton’s third insolvency in eight years. Then you’ve also got the slightly iffy transfer dealings, which former boss Mike Newell blew the whistle on in 2006.
But while the penalties against Luton are harsh, they’re also anything but fair. The points penalty for dealing with unlicensed agents had nothing to do with bungs and, while it did break the rules and the FA have since amended these, the breaches were nowhere near as serious as it first appeared.
For both points deductions, what has really upset Luton fans is the fact that the club has been punished so heavily for offenses committed under the previous regime, who’ve largely got off scot-free. Former chairman Bill Tomlins has been banned from football for five years and fined £15,000, but it’s the new owners – the 2020 consortium lead by newsreader Nick Owen – who’ve been hit hardest, with a £50,000 fine and points deductions for the crimes of the past owners.
What’s more galling for the supporters is 2020 have co-operated fully with the FA and have been open and transparent in their dealings since buying Luton. Here is a regime that has done its best to make a fresh start and sweep away the problems of the previous owners only to be hit with some of the harshest penalties seen in the league. It’s unlikely many others will want to follow 2020’s example next time there’s a football club that needs to be dug out of a hole.
The CVA Problem
Luton can also feel hard done-by due to the 20 point penalty relating to insolvency rules. Under these, any club looking to exit administration must pay football creditors in full and agree to a CVA with 75% of the rest of the creditors.
The problem here is that these non-footballing creditors almost inevitably include HM Revenue and Customs, who’ve now decided to vote against the CVA as a matter of purpose. This means, currently, no club can exit administration without breaching the FA’s rules, so they’ll incur a further deduction of 15 points in addition to the ten they’ll receive for going into administration.
It’s why both Bournemouth and Rotherham are likely to join Luton in starting the season on negative points. All three clubs took a ten-point hit last season and all three will have to take another deduction because there’s no way they can comply with the rules as they currently stand.
Elsewhere, Boston United have recently had another enforced demotion from the Blue Square North on a similar matter, while Leeds United took their CVA-related points deduction all the way to court and lost (despite waiving their right of appeal).
But the Leeds case was slightly different to events at Luton. United could clearly take the punishment and find the money from somewhere, as last season’s league table shows. Luton, however, have to pay 16 pence in the pound for the CVA – double what Leeds were paying.
The alternative was expulsion from the league (which may have been a better choice). As it is, Luton’s points deduction is more than that of Leeds and the Hatters will have to rake up around 75 points just to avoid relegation. The Blue Square Premier beckons.
Leeds have shown a club can fight back on the pitch from this type of punishment, but Luton do not have the same calibre of players, nor are they likely to, instead relying on the odd free transfer and youth team players.
With relegation all but assured before the season’s started, nobody would blame the supporters for staying away – after all, what’s the point in watching if the result is unlikely to have any affect on your league position?
Sympathy for the Devil
On one level it’s understandable why some find it hard to muster any sympathy for a lot of the sides caught up in this. Luton were briefly that plucky, popular club in the top flight in the early 80s when Raddy Antic’s late goal at Maine Road sent Manchester City down, and the Hatters’ then-manager David Pleat charged onto the pitch in delight.
Since then any form of solidarity swiftly evaporated after their chairman, Tory MP David Evans, installed a hated plastic pitch at Kenilworth Road, replaced an entire stand with nothing but executive boxes (a legacy that still lasts today), and effectively banned away fans from visiting Luton with a ridiculous membership scheme.
Then there’s Boston, a team who were found guilty of fraud the season they won the Conference, but were allowed to stay in the football league despite gaining an advantage over their rivals. Bournemouth and Rotherham have both had multiple insolvencies while the reasons why Leeds are one of the least loved clubs in England could take up an article in itself.
But many of these clubs have got new regimes in charge, and these regimes – like Luton2020 – are being kicked when at their lowest ebb as they fight to keep the club afloat following years of excess from previous owners.
Another supposed cornerstone of the FA’s effort to tidy up the game – the “fit and proper person test” – has seen just one man fail this. Denis Coleman of Rotherham had the misfortune of first taking the helm of the club as it was sliding into a CVA (something that was no fault of Coleman’s). When Coleman was forced to put the Millers into administration for a second time in 2006 he automatically was banned from becoming a director at any football club due to overseeing two insolvencies.
Meanwhile, the likes of Peter Ridsdale, at the helm of Leeds United’s worst excesses, is now in charge at Cardiff where he paid himself £1m (although he has ploughed this back into the club) despite the Bluebirds making an operating loss of £5m last season and having total debts of more than £35m. Before him was Sam Hammam, who did rather nicely out of Wimbledon’s woes.
At the moment pretty much anybody can take over a football club and do what the hell they like, safe in the knowledge that as long as they’re out of the picture before the club’s first (or second) insolvency they’ll probably get away with a fine and a quick warning not to do it again, at most.
Nobody is disputing the point that clubs who overpay players or rack up massive debts with little or no thought should have some form of punishment; sadly, these punishments are necessary to clean up some of the more unsavory and worst excesses within football.
But when part of those rules, the exiting via CVA, are impossible to adhere to and tend to have little or no effect on the people who run up the debts in the first place, then there’s a strong argument for changing the rules or the punishment.
Until that happens, the sight of league tables having one or more teams on minus points, in effect shaping the relegation battle before the season starts, along with final placements being decided in the courtroom is likely to become more common. Increasingly, what happens on the pitch is becoming secondary to these battles, and that cannot be good for football.