Harriet Parfitt and Hana Ali, in our Charities & Education team, examine the issue.
For many years, the industry and the general public have shared concerns regarding the distribution of funding by the Premier League within English men’s elite football.
The Government now looks to be stepping in, in a bid to protect the sport, which contributes £8 billion to the UK economy each year.[1]
Under the recent Football Governance Bill, the Government has proposed that an independent regulator be established, namely the Independent Football Regulator (IFR).
What would the role of IFR be?
According to the Department for Culture, Media & Sport (DCMS), the IFR will have 3 objectives:
- “Club financial soundness - to protect and promote financial sustainability of individual clubs, ensuring that clubs take sensible financial decisions and consider the long-term when taking risks.
- Systemic financial resilience - to protect and promote the financial resilience of English football as a whole, ensuring that systemic risks and structural issues like the distribution of revenue through the pyramid are managed appropriately.
- Heritage - to safeguard the traditional features of English football that matter most to the fans and local communities of clubs”.
What powers could the IFR have?
Critically, the IFR may have the power to intervene in financial plans made by the Premier League for its clubs where necessary, and put in place bespoke conditions to mitigate any risk that is identified.
Additionally, in order to address the concerns regarding owner mismanagement and misconduct, the IFR may impose a three-part test to determine the suitability of prospective owners and directors of clubs.
According to the DCMS, the test will comprise of the following steps:
- “A fitness test (owners and directors) to assess an individual’s integrity, honesty, financial soundness and, in the case of directors, competence, to ensure they are a suitable custodian to run or own a football club. This draws on similar ‘fit and proper persons’ tests applied by other regulators including the Financial Conduct Authority (FCA), HMRC, and the Solicitors Regulation Authority."
- "A source of wealth test (owners) to mitigate against the risk of illicit finance in football and ensure the financial sustainability of clubs and the pyramid."
- "To ensure the financial sustainability of clubs, prospective owners must have sufficient financial resources. They must also provide the IFR with their proposed plan to operate the club, an estimate for those costs, how those costs will be funded and the source of such funding.”
Other powers of the IFR may include:
- Operating a “license to operate” system for all clubs;
- Requiring all clubs to seek its permission if relocating or selling their home stadium;
- Preventing all clubs from joining other prohibited leagues;
- Imposing fan engagement requirements on all clubs; and
- Establishing a new corporate governance code, on which clubs may be required to report on.
Note that all of these powers are currently set to be limited to the top 5 tiers of men’s English football.
The IFR will have to have regard to seven regulatory principles whilst in operation. These standards are based on best practice from existing regulators, but are specifically tailored to the football industry:
- Use its resources in the most efficient, expedient time and economic way.
- Co-operate, and proactively and constructively engage, with clubs; owners, senior managers and other officers of clubs; and competition organisers.
- Any requirement or restriction imposed on a person should be proportionate to the benefits which are expected to result from that requirement or restriction.
- Act in a way that recognises the specific context of football and the fact that clubs are already subject to rules, restrictions and burdens by virtue of their membership of or participating in competitions.
- Act consistently (subject to it recognising the differences between clubs and competitions and the differences between the circumstances affecting clubs and competitions).
- Act in a way that recognises the responsibilities of owners, senior managers and other officers of clubs in relation to the requirements placed on clubs by the legislation.
- Act as transparently as reasonably practicable.”
When can we expect to see any change(s) in regulation?
Several other UK bodies already govern the game - the current, principal regulator being the Football Association (FA).[2] Similar to the proposed scope of the IFR, the FA has disciplinary powers to penalise any breach of its Rules & Regulations. Moreover, where organisations seek government or National Lottery funding from UK Sport or Sports England, they must follow a separate Code for Sports Governance, which sets out expectations of transparency, accountability and integrity (amongst other core values).
It is important to understand what regulations apply to your organisation and how best to comply. Our Charities & Education team can advise on the best regulatory framework for your organisation.
Whether the IFR comes into force, and the impact of any of these proposed changes on wider sporting regulation, remains to be seen - at the time of publishing, the Bill is currently at the Committee Stage in the House of Commons.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
[1] Figure taken from the 2021/22 season on https://www.premierleague.com/news/3884417.
[2] Such regulation is devolved, meaning that the Scottish FA and FA Wales administer their own set of regulations.
