Generic clubs in financial crisis Thread

[Silver Fox]

I'd be interested to know the answer to this myself handbags. I've always thoguht that as soon as clubs say "can we not pay you this month" the players would be entitled to walk away

[Mr Angry]

I'd be interested to know the answer to this myself handbags. I've always thoguht that as soon as clubs say "can we not pay you this month" the players would be entitled to walk away

I thought that as well.

[Hoop Blah]

I'd be interested to know the answer to this myself handbags. I've always thoguht that as soon as clubs say "can we not pay you this month" the players would be entitled to walk away

I thought that as well.

Pretty sure it's 3 months of non-payment before a player can walk away on a free. Could be wrong though.

[Tony Le Mesmer]

So, Plymouth Argyle enter into a legally binding contractual agreement with Kari Arnason to pay him X amount per week for X number of years. Plymouth Argyle then enter financial difficulties and ask their players to sign a voluntary wage deferral in order to help the club meet it's other commitments. Arnason, after six months of wage deferrals, decides that he can no longer accept to go without full pay and refuses to sign another deferral. He is then sacked, essentially for informing Plymouth Argyle that he wants them to abide by their contractual obligations and give him 100% pay. No expert here, but that's not legal, surely?

And anyway, surely the money owed to Arnason for his contract is football credit and therefore is subject to 100% repayment temrs anyway? What am I missing here?

I dont think you are missing anything. And yes, footballing creditors must be paid in full. Can they exit administration without doing so?

[Friday's Legacy]

that's no way at all to treat a footballer, let alone an employee. especially when you see how he and his team mates have bent over backwards to help the club when they couldn't afford to pay their wages in full. arnason owes them nothing and i hope he takes them to task over this.

[Svlad Cjelli]

You can be sure the PFA will assist him.

[Terminal Boardom]

Haven't seen this anywhere, but Bristol Evening Post is reporting that Championship clubs have voted for the 60% wage cap from sumer 2013. 22 of 23 clubs voted in favour.

League 1 is 60%, League 2 55%.

http://www.thisisbristol.co.uk/act-wake ... story.html

Interesting that this comes from Bristol City, who's wages equate to 108% of turnover I think I read somewhere...

And how will this be managed? And what will the penalties be for overspending?

[Rev Algenon Stickleback H]

I can't say I agree with the % of turnover idea.

I mean, the sentiment is correct, but it's really debt that should be the measure.

One club could spend 65% but make a profit, and get penalised, while another could pay high transfer fees and make a loss, but due to spending 59%, be considered fine.

[Royal Rother]

Debt is harder to specify and open to creative accounting and subsequent interminable debate, neither of which would they want to encourage.

Wages & Turnover are very much more clear cut.

[Mr Angry]

Also, there is no way they would get an agreement from the clubs to base it on debt; that would be like turkeys voting for Christmas!

% of revenue is easier to get agreed as it is deemed as fairer.

Salary caps would fall foul of EU employment laws.

Sadly, there is no truly "fair", "just" or "right" system, unless you want to go down the route of US sport and have all the clubs franchised with the governing body have supreme control, and where having a competition based on everyone starting from an equal place financially is the over-riding aim.

[Svlad Cjelli]

Also, there is no way they would get an agreement from the clubs to base it on debt; that would be like turkeys voting for Christmas!

% of revenue is easier to get agreed as it is deemed as fairer.

Salary caps would fall foul of EU employment laws.

Sadly, there is no truly "fair", "just" or "right" system, unless you want to go down the route of US sport and have all the clubs franchised with the governing body have supreme control, and where having a competition based on everyone starting from an equal place financially is the over-riding aim.

INDIVIDUAL salary caps would fall foul of EU employment laws - well, they might, no-one has ever tested it AFAIK, and it's anotehr reason why EU law needs to recognise the specifivity of sport. But TOTAL salary caps are fine.

% of turnover is what is used in the Bundesliga and it works fine there, and it's the only fair way - it is only fair to let Manchester Utd spend more than Reading as they have higher income streams which they've investd to develop over the years.

The most significant thing under these schemes is that money lent to the club (by chairman or whoever) is not allowed as income - it has to be given (i.e. not show on the books as a liability) to be alloweable as income.

[Mr Angry]

Also, there is no way they would get an agreement from the clubs to base it on debt; that would be like turkeys voting for Christmas!

% of revenue is easier to get agreed as it is deemed as fairer.

Salary caps would fall foul of EU employment laws.

Sadly, there is no truly "fair", "just" or "right" system, unless you want to go down the route of US sport and have all the clubs franchised with the governing body have supreme control, and where having a competition based on everyone starting from an equal place financially is the over-riding aim.

INDIVIDUAL salary caps would fall foul of EU employment laws - well, they might, no-one has ever tested it AFAIK, and it's anotehr reason why EU law needs to recognise the specifivity of sport. But TOTAL salary caps are fine.

% of turnover is what is used in the Bundesliga and it works fine there, and it's the only fair way - it is only fair to let Manchester Utd spend more than Reading as they have higher income streams which they've investd to develop over the years.

The most significant thing under these schemes is that money lent to the club (by chairman or whoever) is not allowed as income - it has to be given (i.e. not show on the books as a liability) to be alloweable as income.

Yeah - I forgot to make that distinction SC.

[rhroyal]

I can't say I agree with the % of turnover idea.

I mean, the sentiment is correct, but it's really debt that should be the measure.

One club could spend 65% but make a profit, and get penalised, while another could pay high transfer fees and make a loss, but due to spending 59%, be considered fine.

Measuring it by debt would be more silly seeing as debt is not a problem if manageable. I have just finished uni and have a good job to go to September. I'm in loads of debt, but I shouldn't be in any financial difficulties. Equally, anybody with a mortgage has a shed load of debt but so long as they can keep up with repayments, they're financially stable.

The mortgage example maybe isn't entirely relevant because (in most circumstances anyhow) the individual's house will be worth close to the value of the mortgage and can be used as collateral. Many football clubs have debts taken out worth far more than their assets and are screwed when they fall behind payments. However, if they can keep up with these payments, it's still not an issue.

I think measuring revenue vs expenditure is more effective, like UEFA's new fair play regulations. If clubs want to add to revenue by taking out more loans, let them. They need to consider the long term though, as if the year comes when they can no longer keep up with repayments and will have to spend beyond their means, they will be banned from competitions (as would hopefully be specified by laid out, tough laws). I'm not sure the wage cap is necessary. Just simply measure revenue vs expenditure.

If clubs want to gamble for a couple of years with loans, let them. If they fail, they will have to cut cloth accordingly like we did after 08/09 or face failing to meet financial regulations and bans from competitions.

That's how I'd work it anyhow; it would work if only the authorities stuck to the letter of the law. It would only take one club to be expelled from the FL within a couple of years implementation for the whole world to sit up and realise that these laws are serious for once.

[Svlad Cjelli]

Measure it by debt and you can't take any actuon agaiunst clubs until after they have debt problems, so it's a pointless system.

An debt-prevention system to stop clubs getting into trouble is all there really can be, and this is ideal.

[TheMaraudingDog]

Wouldn't it be very easy for a club to side step any salary cap by operating a second 'non football' business at a loss where conveniently the players are also employees?

[Svlad Cjelli]

It all depends how vigorously teh relevant league polices it and investigates. I doubt the FL will have the money to police it properly, but the Bundesliga has a whole team of forensic accountants who look into the accounts throughout the year and see where all the money is going.

Clubs will have to balance the likelihood of getting caught against the penalties to be imposed - and in places where this is taken seriously the clubs know that the penalties are severe - for instance automatic relegation.

The PL would have the resources to investigate and police it properly - whether they would is another issue.

[Rev Algenon Stickleback H]

I can't say I agree with the % of turnover idea.

I mean, the sentiment is correct, but it's really debt that should be the measure.

One club could spend 65% but make a profit, and get penalised, while another could pay high transfer fees and make a loss, but due to spending 59%, be considered fine.

Measuring it by debt would be more silly seeing as debt is not a problem if manageable. I have just finished uni and have a good job to go to September. I'm in loads of debt, but I shouldn't be in any financial difficulties. Equally, anybody with a mortgage has a shed load of debt but so long as they can keep up with repayments, they're financially stable.

The mortgage example maybe isn't entirely relevant because (in most circumstances anyhow) the individual's house will be worth close to the value of the mortgage and can be used as collateral. Many football clubs have debts taken out worth far more than their assets and are screwed when they fall behind payments. However, if they can keep up with these payments, it's still not an issue.

I agree. My thinking was more about running at a loss, building up a year on year debt rather than just being in debt.

You can be in debt, but still be making a profit. Clubs that are in debt, however, should not be allowed to keep running up bigger debts, just because they are within some specified budget percentage.

I think measuring revenue vs expenditure is more effective, like UEFA's new fair play regulations. If clubs want to add to revenue by taking out more loans, let them.

I'd disagree totally. Clubs should only be able to borrow for infrastructure costs, not to pay salaries.

They need to consider the long term though, as if the year comes when they can no longer keep up with repayments and will have to spend beyond their means, they will be banned from competitions (as would hopefully be specified by laid out, tough laws). I'm not sure the wage cap is necessary. Just simply measure revenue vs expenditure.

What competitions could you ban a championship club from that would have much of an impact? It would have to be from the championship itself.

If clubs want to gamble for a couple of years with loans, let them. If they fail, they will have to cut cloth accordingly like we did after 08/09 or face failing to meet financial regulations and bans from competitions.

I think the game needs to do everything it can to prevent clubs gambling.

Bearing in mind those that get into debt through gambling are usually so far gone that "cloth-cutting" is no longer an option, measures are needed to stop them getting into catastrophic debt, rather than trying to deal with them when they play their "get out of jail free" card by going into administration.

The gambling also creates an "arms race" mentality, with clubs knowing that if they don't also overspend then they'll be at a disadvantage. That disadvantage could stop them going up or see them relegated.

That's how I'd work it anyhow; it would work if only the authorities stuck to the letter of the law. It would only take one club to be expelled from the FL within a couple of years implementation for the whole world to sit up and realise that these laws are serious for once.

Administration is now doing more harm than good. It's encouraging clubs to gamble, knowing if it goes wrong they can just wipe out their debts and start again.

After all, if offered £50 million up front for the price of just a 10 point deduction, what club wouldn't take the money?

[Rev Algenon Stickleback H]

Debt is harder to specify and open to creative accounting and subsequent interminable debate, neither of which would they want to encourage.

Wages & Turnover are very much more clear cut.

They are, but how would you count transfer fees in all that?

A club could be well under the % cap in salaries, but be spending well over 100% once transfer fees and maybe signing on fees are added in.

[Svlad Cjelli]

Under these (and other) Financial Fair Play reglations debt isn't outlawed completely - but it depends what the debt's for.

Arsenal's investment in a new stadium would be allowed, borrowing money to pay wages isn't.

[Royal Rother]

Debt is harder to specify and open to creative accounting and subsequent interminable debate, neither of which would they want to encourage.

Wages & Turnover are very much more clear cut.

They are, but how would you count transfer fees in all that?

A club could be well under the % cap in salaries, but be spending well over 100% once transfer fees and maybe signing on fees are added in.

Signing on fees paid to the players must surely be taken as part of wages. Anything else would be a nonsense.