Changes to the ownership model
161. Closely linked to football's financial management,
the ownership of football clubs is another difficult area for
football. All owners, good or bad, are liable to face criticism
from supporters when results are poor. Ownership usually only
becomes a governance issue when the actions of the owner are seen
to threaten the sustainability of the club. The governance challenge,
therefore, is to create an environment where clubs are protected
from over-ambitious or otherwise incompetent or duplicitous owners
exploiting their football club, and good owners are encouraged
to stay in the game. Much of the evidence we have received, however,
has suggested first that the current English model has made ownership
issues more problematic and second that the measures taken to
address the increased challenge have been inadequate.
162. The manner in which some of the changes
were enacted raises a further governance issue. In his book, The
Beautiful Game, David Conn explains how the FA's Rule 34,
preventing owners from reaping financial reward from their involvement
in football, was first circumvented and then quietly removed.
When the owner of Tottenham Hotspur, Irving Scholar, decided to
float his club on the stock market in 1983, he was able to manoeuvre
round the restrictions on payment to part-time directors, unrestricted
dividends and profiting when a club is wound-up, by creating a
holding company free of the restrictions, and making the club
a subsidiary of the holding company. Other clubs such as Aston
Villa, Manchester United and Newcastle subsequently adopted the
same device in order to become public companies able to make profit
for their investors, though few clubs today still retain this
model. David Conn observes that, at the time, the FA appears
to have been silent on the compatibility of the floatations with
FA rules whereas, as the governing body, the FA should either
have approved the modernisation of its rule book or defended its
rules. In 1998, the FA removed the restrictions on dividends and
on directors working part-time from its rule book. The FA retained
the final component of Rule 34, however, prohibiting owners from
winding up clubs and keeping the proceeds.
163. The measures taken by the football authorities
in the 1980s and 1990s to encourage the commercialisation of the
game certainly had positive effects. For example, removing restrictions
on paying full-time directors enabled clubs to recruit professionals
who helped to increase turnover, and so create funds for much
needed investment in stadia. However, there was also a downside
in that they also increased the opportunities for bad owners to
164. Derby County supporter James Wheeler observed
the impact of the circumvention and subsequent lifting of Rule
34's restrictions on dividends and director-pay: "This has
brought extra 'investment' into the game, but also began to attract
elements who were purely involved to make a profit for themselvesusually
at the expense of the club and ultimately the supporters".
For Andy Green, one consequence has been a shift in the ownership
model away from the traditional best practice of philanthropic
local businessman supporter:
In the last 20 years English football has had a shift
in ownership. Traditionally owned by local business people, many
clubs have been bought and sold by a new breed of entrepreneurs
from both the UK and overseas. In many cases owners have been
proved to be short-termist, seeking swift improvements in team
performance through debt funded investment, often the mortgaging
ground and/or future ticket revenue in pursuit of success.
165. It is worth observing that such entrepreneurial
behaviour is far less prevalent elsewhere in Europe. Indeed, a
number of alternative ownership models exist, often based on a
community-based sports club model rather than that of a limited
company, that serve to prevent or at least discourage it. Although
Germany, like England, has moved to a more commercial model of
ownership over time, the key difference is that, with a couple
of exceptions for historical reasons, a members' association must
have majority ownership of the clubthe "50+1"Rule.
For Christian Müller, this rule ensures that clubs remain
grounded in their community and prevents "outsiders"
from having undue influence. In England the limited company model
makes it relatively easy, in principle, for "outsiders"
to gain control of clubs if they can raise the finance. The English
football authorities have, however, responded to concerns about
the intentions of individual owners by introducing an additional
hurdle; fit and proper persons tests.
166. Around half of Premier League clubs are
now run by foreign owners keen to participate in the most prestigious
and highest revenue-producing league in the world. While it is
important to acknowledge distinctions in the model operated by
different foreign owners at their respective clubs (the model
operated by Aston Villa's American owner is, for example, far
more conservative than the regimes at Chelsea and Manchester City),
this trend is liable to continue because, as football supporter
Paul Norris observed, with regard to foreign ownership:
Whilst many fans would prefer their club to be run
by the traditional 'local boy done good' type of owner (an example
might be Steve Gibson at Middlesbrough) or through fan ownership
models, the reality is that the finances demanded in order to
compete at the top of the Premier League mean that this is now
rarely possible. 
167. Does this matter? Our evidence offered a
number of reasons why it might. Firstly, there were concerns that
foreign owners would be less inclined to support measures in the
long-term interests of the English game. John Bowler, Chairman
of Crewe Alexandra questioned whether foreign owners "have
as much interest in the future of the national game [
the wellbeing and development of it". He stressed that the
Premier League had been supportive thus far, but that "we're
in a changed process, with new ownership and foreign ownership
coming in to the Premier League. [
]a number of us have got
concerns about how will this relationship nurture itself and develop
in the future".
168. Secondly, there were concerns that foreign
owners, unfamiliar with the complexities of the English game,
might be more inclined to bite off more than they could chew.
Peter Coates explained how Stoke's previous Icelandic owners had
found the going much tougher than they had imagined, and ended
up selling the club back to him:
They thought they could take Stoke into the Premier
] They found it much more difficult than they thought.
] They had a bit of money to spend; they thought they would
have a bit of fun, enjoy it and make some money, because they
thought they were going to get into the Premier League. Of course,
they discovered how difficult it was. It is an immensely difficult
industry to work in. You have immense pressure from the media,
immense pressure from your supporters and it is a tough business.
169. Thirdly, concerns were expressed that foreign
owners, not appreciating the traditions of their club, would be
more likely to take decisions that clashed with the identity of
their club. Niall Quinn, Chairman of Sunderland for US owner Ellis
Short, recalled asking him to understand the emotion of the football
club. He also argued, however, that his foreign owner had fully
brought into Sunderland's history and potential, and wanted to
go with the fans on an adventure. He proposed that this was a
Though he avowed that UEFA was neutral on the subject of foreign
ownership, William Galliard also commented that "when you
have a foreign owner, a foreign coach and mostly foreign players,
what is left that is local? The history, the spirit of the club
is based on its supporters and the identify of its supporters".
170. The fourth concern expressed was a reputational
issue. The suggestion was that foreign owners might be more likely
to seek to own a club for non-football related reasons which would
reflect poorly on the reputation of the English game. Sean Hamil
provided arguably the most egregious example:
I don't think Thaksin Shinawatra [a former owner
of Manchester City] was a fit and proper person. He obviously
bought that club for purely political reasons. He spent all the
money off a three-year TV deal in the first year. Potentially,
he could have destabilised the whole competition.
171. Finally, and pertinently in the light of
the previously articulated concerns, it was suggested that it
was harder for the English football authorities to gauge whether
prospective foreign owners were likely to be fit and proper owners
of an English club. Greg Clarke, explained:
Our biggest problem isn't necessarily people in the
UK, because you can phone around in the UK and you can get a reasonable
off the record view of most people. What if someone pops from-let
me pick a country at random where we haven't had anyone from,
so they can't say. 'Hey you're talking about him'the Philippines.
How do you find out about someone who has made some money in the
Philippines? You can phone up the embassy and they'll say 'oh
well, don't know much about him'. 
would not wish by any means to rule out or discourage foreign
ownership of English clubs. It is a reality that English clubs
can be bought and sold more freely than in other major football-playing
countries. A strong case can, therefore, be made that because
more owners from different backgroundsboth domestic and
foreignare looking to purchase English football clubs,
particularly robust criteria for ownership need to be applied
before they are allowed to own a club in English competitions.
Leveraged buy outs
173. Limited companies can change ownership
through a leveraged buyout (LBO). There are two relatively recent,
and high profile, examples of this occurring in English football;
at Liverpool by former Liverpool owners, US businessmen Gillett
and Hicks, and at Manchester United by current owners, the US
Glazer family. Highly leveraged buyouts in football can appear
particularly problematic because the prospective owners borrow
the money required to buy the club on the premise that they will
then make the club responsible for servicing the debt.
174. For Andy Green:
Leveraged buyouts (LBOs) are in some ways even more
problematic than borrowing in the hope of success on the pitch.
] With LBOs, clubs are saddled with debt solely to allow
a particular party to take over the club. The club gains little
or no benefit, no players are purchased, no facilities are built
He also observed that the LBO model has not been
limited to the high profile examples of Manchester United and
debt financing has been a material part of other
purchases and subsequent problems of other football clubs including
Portsmouth and Hull City as well as smaller clubs like Chesterfield.
There is also suspicion that other 'equity financed' takeovers
have actually been funded with debt (Notts County and Derby being
Andy Green accepted that, in "normal" industries,
LBOs could possibly be defended on the grounds that they brought
efficiencies and financial discipline to large companies. However,
he argued that in a football context, they resulted in ticket
price rises (to service interest costs) and reduced investment
(for example, in Liverpool's case, deferral of plans to build
a new stadium). It is also the case that, given the uncertainty
of competition, some revenue streams cannot be guaranteed. Hence,
Liverpool's failure to qualify for the riches of the Champions
League contributed to a near default on its LBO debt, and the
enforced sale of the club. According to Manchester United Supporters
Trust, Manchester United had no debts before the LBO, but now
"the amount of money required to finance the debt exceeds
the club's operating profits".
Manchester United Chief Executive David Gill, however, denied
that debt was an operational concern.
It is noteworthy that Manchester United has greater revenue-earning
potential than Liverpool and, unlike Liverpool, its sporting performance
has not dropped since the LBO.
175. Richard Scudamore observed, with regard
to whether he disapproved of the LBO model: "If it was too
highly leveraged, yes; if it was leveraged, not as good; if there
was no leverage at all, obviously better".
William Gaillard, on behalf of UEFA, explained that:
What we are saying is that the leveraged buyouts
ended up for many clubs in a disaster. Just take Liverpool. You
have owners who came, contracted debt [
] and saddled the
club with the debt. The club has been rescued, thank God, because
of the tremendous heritage that Liverpool actually represents,
but it was a close call.
UEFA was also clear that "the use of large levels
of debt connected to leveraged buy outs [
] in general appears
to act as a burden, soaking up club's operating profits, whilst
offering little merit to the club and their supporters".
176. In all the evidence we
have received, a whole-hearted defence of the use of leveraged
buyouts to buy football clubs is entirely absent. Within a football
context, the leveraged buyout appears to be a particularly risky
vehicle with little obvious benefit, and certainly not to supporters
and local communities.
177. Although undeniably high profile, foreign
ownership and LBOs remain very much in the minority when the English
League pyramid is viewed as a whole. There remain more cases where
the traditional English model of local owner funding the club
he, or occasionally she, also supports for essentially philanthropic
ends remains robust. Peter Coates explained why he owned and financially-backed
Stoke City in the following words:
I am a Stoke boy, I have supported the club since
I was a boy and I have had two comings at Stokean early
one in 1985, after which I sold the club to an Icelandic consortium
and then bought it back again in about five years ago this summer.
I bought it back against my better judgement, in some ways, and
my family's, who all thought I was daft to do it. The club was
in a mess at the time and I thought I could help it and do things
for it, and I was a bit disappointed with my previous time, there
was [a] little bit of unfinished business about it [
I thought it would be important for the area if the football club
were doing well. I thought that if Stoke could get in the Premier
League it would give the place a lift and would be good for it.
I don't expect to make any money out of it. I do
not think you can make money out of football at Stoke's level.
] obviously I enjoy it as well.
178. Barry Kilby, one division below Stoke at
Burnley, explained his motivation in similar words:
My dad brought me here as a lifelong supporter I
suppose is the correct answer, and also in a town like Burnley
I think the football club really is one of the central pillars
of the culture that I come from, so when I got the chance to take
over and strengthen that and move it on that's what I chose to
do. It's as a super supporter that I took over as Chairman.
He explained that the other directors, who have a
smaller amount of shares in the club, had similar backgrounds:
"Essentially we are local people who support the club".
179. Written evidence offered further examples
of clubs thriving under local ownership. Adam Franks, a director
of Brighton and Hove Albion Football Club, wrote that the Brighton
Chairman, Tony Bloom, was the third generation of his family to
serve on the Brighton board:
His motivation for investing is not to obtain a fair
return, although it's quite legitimate for investors to expect
a financial return for the risk they run, but rather because the
club is a vehicle through which he can proactively 'give-back'
to his local community.
Reading Football Club supporter Jonathan Keen was
effusive about Reading owner Sir John Majeski and his sound investment
180. The problem is that this is by no means
the whole story. There are also too many examples of domestic
owners acting against the long-term interests of their club either
out of naivety or duplicity. While this has always been a part
of the game, the financial stakes are much higher now: the temptations
and opportunities greater; and the falls more precipitous. There
is, for instance, much evidence critical of owners overreaching
in order to "live the dream". The complaint is that
such over-reaching serves further to inflate wages and push up
spending levels, issues that lie at the heart of English football's
financial problems. Leeds United under Peter Ridsdale and Bradford
City under Geoffrey Richmond are perhaps the most infamous examples.
Sean Hamil warned that such behaviour threatened to push good
owners out of the game, as they could not compete themselves without
taking excessive risk:
If you have a scenario where someone of the quality
of Delia Smith, a successful entrepreneur, or Sir John Madejski,
successful entrepreneur and local boy who tried to build a sort
of major sporting institution in his hometown, decide it is not
worth it and that they would like to get out, I think that is
181. Lord Triesman was equally critical of clubs
who had sought to achieve success:
by spending money, as I think was described in the
last session, related to their ambition rather than to their business
model. They want to beat other clubs; they spend what they believe
is necessary to do that. The model falls apartLeeds is
a very strong example of thatand they are left with a huge
financial crisis on their hands. People in other clubs reflect
not only on the amounts that were spent but on the unfairness
to the competitive regime that it creates.
I know people think that "financial doping"
is a rather dramatic term but it is a pretty accurate term for
what is described.
Greg Clarke alluded to the level of frustration among
more prudent owners:
We had a lively debate at our last chairman's conference.
] there was a motion from the floor from a very respected
chairman of a Football League club. He has been a long time, high
quality owner who said, 'I'm sick of bad owners going out of business
and besmirching the game
182. We also received evidence critical of owners
who had not merely been naïve, but rather allegedly duplicitous
with regard to their actions. According to Wrexham Supporters
Trust, their club had suffered under such ownership: "In
April 2002 Alex Hamilton and Mark Guterman had entered into an
agreementwhich they called the Wrexham Projectto
profit personally from the property assets of Wrexham AFC".
For them, and journalist David Conn, this development was a landmark
moment: "the first evidence that property developers were
seeking to profit personally from the development of football
They also drew attention to a 2003 research paper by Matthew Holt
for the Birkbeck Football Governance Research Centre, which raised
A well publicised tendency at some Football League
clubs has been to form a second (holding) company and then separate
the ground from the club. This had been a source of criticism
from fans' organisations who highlight the danger that this can
be a first step towards selling the ground (or the land on which
it is built) for the personal benefit of the club owner.
Wrexham subsequently went into administration, and
has since lurched from financial crisis to financial crisis.
183. James Wheeler explained that Derby County
had similarly suffered when a consortium of owners, without a
history of involvement in the club, bought the club out of administration
for a nominal fee. Having mortgaged the ground to pay off existing
debts, they proceeded to create new debt until ousted by the bank.
He concluded that:
It was clear from the outset that the individuals
involved had come to Derby Country solely to make money for themselves.
There was no previous connection with the club or any indication
that they were here for the good of the community. It would have
been relatively simple for any regulator to identify whether these
individuals had the best interests of the football club at heart.
184. According to The Yorkshire Division of the
Football Supporters' Federation, York City is also "a good
example of what can happen when a club owner decides to become
an asset-stripper, and the failure of the existing regulatory
framework to prevent that and the weakness of the fit and proper
Its submission relates to how then owner Douglas Craig first separated
the club from ownership of the ground with the justification that
this was in the best interests of the future of the club, but
then decided both to sell the club and give it notice to quit
the ground "to enable him to personally benefit from its
sale". Douglas Craig sold the club to the late John Batchelor
who "circulated money between his different companies, walked
off with £400,000 which by his own subsequent admission was
properly the money of the football club".
185. These examples appear to be the tip of the
iceberg. Other allegations about duplicitious ownership were made
about Chester City, Fisher Athletic, Hendon and Scarborough amongst
others. In his book, The Beautiful Game, David Conn makes
the point that the actions of owners such as Douglas Craig seeking
profit from the sale of club assets, would appear to contravene
the one element of FA Rule 34 that remains: prohibiting owners
from profiting when a club is wound up.
A point made by a number of submissions was that the 'fit and
proper persons' test needs to be tightened. Evidence from Daniel
York and Ben Westmancott on behalf of the board of Fisher FC argued
that "football clubs need to be protected from unscrupulous
types who use them for their own ends".
Cardiff City Supporters Trust commented that "new measures
should include the person's previous record not simply in business
but also in football, their personal history and past and their
present financial standing". They also wanted to see "an
intentions test" covering plans for community involvement
to be made a condition of any takeover.
Paul Norris wanted to see existing criteria tightened so that
any person who had been involved as a director in two periods
of insolvency with companies of any kind would be disqualified.
David Hodges, researcher, co-author and editor for the 2009 All
Party Parliamentary Football Group report into "English Football
and its Governance" urged a unified test adjudicated by an
independent body with particular scrutiny given to directors loaning
clubs money instead of investing in shares. The concern here is
the tendency for "soft" loans apparently given with
no expectation of recovery to be called in, with interest, when
the owner's circumstances or intentions change.
186. In light of the above, we asked both the
Premier League and the Football League about the governance rules
for owning a football club in their competitions. In the case
of the Premier League, we were particularly concerned that, as
recently as 2010, the (foreign) ownership of Portsmouth could
change hands four times on its way into administration. Indeed,
a number of submissions had highlighted the example of Portsmouth
as proof that the Premier League set too low a threshold for ownership.
For Patrick Collins:
If you had fit and proper people running football
clubs, there would be fewer bankruptcies and administrations.
The one that is always picked out is Portsmouth, of course. They
had four different owners last year [
] One was a fantasist
who made lots of promises that were quite baseless. Another, much
more intriguingly, it was reported, did not actually exist.
Football supporter and retired lecturer in business
ethics John Bentley also asked: "How could the FA and Premier
League bodies approve a person to be a fit and proper person to
be the owner of Portsmouth FC when they never even met him or
interviewed him to inspect his financial assets"?
Pompey Supporters Trust lamented that once an owner has passed
relatively weak criteria "there are very few rules preventing
him from doing what they like".
As an example of how weak the criteria were, they pointed to their
own case where the owner who put Portsmouth into administration
was then allowed to buy it out of administration.
187. Richard Scudamore offered a partial defence
of the Premier League's handling of Portsmouth's owners, observing
that "the reality is that we went through all the tests that
one would need to go through to get a passport in this country,
and we had his passport. We had documentation; we had written
Sir Dave Richards, Chairman of the Premier League, perhaps surprisingly,
appeared not to have been involved, wanting to "make it quite
plain I never approved anyone".
We suggested that the Portsmouth case proved that Premier League
rules on ownership were either inadequate or not applied with
sufficient rigour. Richard Scudamore responded that the rules
had been tightened post-Portsmouth to require face-to-face meetings
and a very detailed checklist.
Niall Quinn further observed that:
post Portsmouth's demise, post other things that
have happenedthat [the fit and proper persons test] has
really tightened up now. I think we are confident and we know
that the Premier League have tightened up and shifted that to
a point. Without going too deeply into it, there is now an international
company that covertly will find out everything they need to know
about somebody coming into the game.
188. We were also concerned as to why, until
very recently, the Football League appeared content to allow a
clubLeeds Unitedto play in its competition without
the Football League or the FA or Leeds United fans knowing who
owned the club. We invited Ken Bates, Chairman of Leeds United,
to give evidence but he said he was unable to attend through illness.
His Chief Executive, Shaun Harvey, told us that Leeds United was
owned by discretionary trusts, but that neither he nor, to his
knowledge, Ken Bates, knew who they were. Leeds United subsequently
announced that Ken Bates had bought the club from the discretionary
trusts for an undisclosed fee. This announcement, however, raised
further governance concerns, as it was not at all clear why the
trusts should sell a financially-sound, upwardly-mobile club without
at least seeking alternative bids to find the best price. The
manner of the sale raises concerns, which cannot be substantiated
or disproven given the lack of transparency, that Ken Bates, who
took the club into administration, was a participant in the discretionary
trusts who took the club out of administration.
189. Despite the lack of transparency with regard
to Leeds United, the Football League affirmed that they had some
quite good rules in place.
Andy Williams explained that they operated a "two strikes
and you're out policy in relation to previous football insolvency
He said that it would not be sensible to exclude owners who had
been involved in various insolvency events outside sport, because
that would exclude owners of businesses who rescue companies for
a living. He also asserted that a number of prospective owners
had failed their tests, and that others had been deterred by it
Greg Clarke also intimated, though, that the application of "fit
and proper person" rules was not easy or black and white.
He agreed, for example, that the financial restructuring of a
club that involved the loss of the ground sets alarm bells ringing,
but also pointed to the financial reality of a lot of clubs where:
good, decent local people are putting a significant
amount of their net worth to keep their club alive, and they are
in situations where they just can't do any more. [
they have to do then is give someonethey take a loan from
somebody who takes a security over their ground. Sometimes I cannot
think of a better idea for them to keep them out of administration.
He concluded that "for every time we come across
a slightly dodgy owner there are another 20 doing their best to
keep their club alive in the community and sometimes they have
to mortgage their ground".
More generally, he pointed out that there were situations where
supporters were desperate for any owner. Under these circumstances,
the League would be put under pressure to accept the offer available,
because supporters would argue that if it were a choice between
losing a bad owner or no football club, "we'll take the bad
190. Finally, we pressed the governing body of
the game on ownership rules. The FA formally vets and approves
the "fit and proper persons" tests of both the Premier
League and the Football League. It also applies the rules itself
further down the pyramid. One criticism we encounted, as with
the wider financial regulations which the FA also endorses, was
that the FA has been insufficiently pro-active in this governance
area. Lord Mawhinney went so far as to assert that the FA had
tried to prevent the Football League from introducing a "fit
and proper persons test".
During oral evidence, the FA affirmed that it did know the names
behind the discretionary trusts of Leeds United. However, it subsequently
clarified in writing that this was not the case. For the future,
the FA agreed that "is is absolutely key that supporters
know who runs their clubs".
191. The FA, Premier League
and Football League have spent too long behind the curve on ownership
matters. Between them they have allowed some startlingly poor
business practices to occur, and have tolerated an unacceptably
low level of transparency. In turn, this has resulted in insolvencies;
too many clubs losing their grounds to property developers; and
has contributed to high levels of indebtedness throughout the
League pyramid. We accept that there has to be some flexibility
to reflect the reality of individual cases. However, we are not
convinced that the football authorities have focused sufficiently
on the link between the fit and proper owner test and the sustainability
of English football's uniquely deep pyramid structure. This
matters, not least because the community benefits of football
depend in part on its reach into local communities across the
nation, and this in turn depends upon the continued existence
of individual football clubs. Although we recognise that the football
authorities have moved to tighten ownership regulations recently,
their track record does not inspire confidence. One key issue
which appears to have been insufficiently considered is the need
for regular monitoring given that intentions can change over time.
192. We recommend that robust
ownership rules, including a strong fit and proper persons test,
consistently applied throughout the professional game with the
FA having a strong scrutiny and oversight role, should be a key
component of the licensing model we propose. The presumption should
be against proposals to sell the ground unless it is in the interests
of the club. There should be complete transparency around ownership
and the terms of loans provided by directors to the club. In this
respect, there is no more blatant an example of lack of transparency
than the recent ownership history of Leeds United, and we urge
the FA to demonstrate its new resolve by conducting a thorough
investigation and, if necessary, to seek the assistance of Her
Majesty's Revenue and Customs.
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