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What really happens when a football club goes into administration

Points deductions, transfer embargos and restrictions on playing in Europe all come into play when a club goes into administration.

Motherwell entered administration in 2002 and have since recovered, with Bryan Jackson (left) overseeing their revival.
©SNS Group

Since the turn of the century, seven Scottish clubs have entered administration. With Rangers new owner Craig Whyte having admitted that he is working to avoid taking the Ibrox club down the same road, the spectre of insolvency still hangs over the national game.

The business implications of calling in the administrators are countless and can threaten the existence of a company, or provide it with a road to recovery. The sporting implications also have to be considered, and with clubs answerable to as many as four different governing bodies for different competitions, can be wide reaching.

We've put together a layman's guide to the rules and regulations regarding administration from the authorities concerned and answered some of the key questions often posed.

How many points will an SPL club be deducted?

The simple answer is 10 points. The only way a club can be deducted more than 10 points is if it goes into administration twice in the same season.

When will they lose the points?

If the "insolvency event" occurs during the season, the points are docked straight away. If it happens in the close season, the club starts the next season on minus 10 points.

Can a club appeal a points deduction?

Only if it can prove it did not go into administration.

What happens if administration lasts over more than one season?

If a club begins a season in administration, they will begin on minus 10 points.

What happens if a club goes into administration twice in one season?

Ten points are docked each time a club goes into administration, unless the events are linked. It is up to the SPL board to decide, this can be appealed.

Will a club still be able to sign players?

No. The only exception is if a team requires an emergency goalkeeper or if a club is looking to replace a player who has left the club. This means no permanent transfer and no loan signings. Clubs can still sell players. The SPL board has the final say.

How many points will a First, Second or Third Division**** (SFL) club lose?

The SFL do not have a set figure. The amount docked from clubs is decided by the board on a case-to-case basis. The SFL are also likely to impose a registration embargo. There are no fixed punishments and the SFL can set any conditions it chooses.

Can an SFL team be thrown out of the league mid-season?

No. Gretna and Livingston were relegated to the Third Division for being in administration but this can only happen in the close season.

What can the Scottish FA do to clubs?

The Scottish FA's Judicial Panel has the power to suspend or terminate the membership of any club which goes into administration. This has never happened.

Alternatively, the SFA can instead choose to “censure, fine, sanction and/or penalise the member in such manner as it considers appropriate”. This has nothing to do with points deductions. The SFA has never exercised this power.

Another option available to the SFA is to exclude a club from the Scottish Cup. This is a new provision which first appeared in the organisation’s articles of association in the 2011/12 season.

Can UEFA do anything to Scottish clubs in administration?

If a club is playing in Europe, it needs a UEFA club licence. If a club goes into administration but has already been given permission to play, it will not lose its licence for the season.

Would a club get a new licence when in administration?

It is unlikely. The club would have to prove it owes no money to other clubs, to its employees, and to HM Revenue and Customs.

Additionally, the club would also have to prove to the SFA it is likely to survive until the end of the season in which the licence applies to. Club licenses are valid for one season and are granted at the start of each season.

What happens when a club wants to exit administration?

A Company Voluntary Arrangement (CVA) is drafted for a club to try and reach an agreement with its creditors. Clubs must agree with those it owes money to over how much to pay back, and over what period of time.

Everyone who is owed money is then invited to vote on the proposal. A 'yes' vote is required from creditors up to 75% of the value of the overall debt. For example, if total debt is £10 million, the company must receive the backing from creditors to the tune of £7.5 million.

How long does it take before the club is out of administration?

If a CVA is approved, creditors have a period of 28 days to register their opposition to the decision.

If there is no opposition, the club exits administration and continues in its current form, paying back its creditors over the agreed period of time.

What if a club fails to reach an agreement?

A club may try again to reach a satisfactory agreement with its creditors. But, if is unable to agree a deal, the company will be dissolved and the club will cease to exist.

There is an alternative for football clubs. As was the case in England with Leeds United, the insolvent company can create a "phoenix" club and attempt to transfer every part of the club to a new business, leaving behind the debt.

Part two looks at what happens when a "phoenix" club is born

REFERENCES

Scottish Premier League

Scottish Football Association

Scottish Football League

UEFA

Article by Andy Coyle and Grant Russell

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