Exploring legal issues around Football and other sports : Coventry City (1 Viewer)

A long read but worth it explaining how and where laws may of been broken regarding FL, SISU,Directors, ETC, ETC



http://footylaw.wordpress.com/category/coventry-city/

I went to the League itself and asked for a copy – twice, before I was told by the Football League’s head communications John Nagle that “the insolvency policy is not a public document.”So that’s that. It is impossible to analyse rules, regulations or laws that you can’t read. But more than that, it’s impossible for people to comply with them either. Ignorance of the law is no excuse for acting in breach of the law; but what if the law is secret?
Okay, we’re not talking about a law, we are talking about a policy containing rules and regulations, but the same principle applies – how can companies bid to buy a football club that’s in administration, if they can’t know the conditions that will be applied to them by the Football League?
Without access to the insolvency policy I can’t do the analysis that I was going to do. What I can do is point you to an article in the Coventry Evening Telegraph which quotes Mr Guilfoyle in some detail. Mr Guilfoyle is familiar with the League’s insolvency policy because of his previous work.
He told the Telegraph: “I don’t think you can say to the Football League, ‘we’re going to groundshare and then build a stadium in three years,’ when you haven’t even got planning permission or submitted a plan. So I think they have got major difficulties, major difficulties, in complying with the Football League’s insolvency policy.“

• But there’s something else I can do: Having read the Football League’s Articles of Association, I spotted something directly relevant to Coventry City’s situation.Clause 3.4 states that “The League will only recognise a member club in relation to a share and the rights which may be exercised by a shareholder. The League will not recognise any kind of trust or joint ownership…”Clause 4.1 states that “A Member Club must be a company that is limited by shares or guarantee” under the companies acts.This means that the set-up that appears to be the situation at Coventry – with the club being part-Coventry City Football Club Ltd and part-Coventry City Football Club (Holdings) Ltd – is a breach of the League’s rules.
  Of course a company may operate through any number of subsidiaries. In the football world, a subsidiary may be the business that operates a club shop and merchandise operation; another subsidiary might operate its catering business; another might be responsible for the conferencing and banqueting.
  But two companies operating a single business operation is not only fraught with a number of legal difficulties (not least with a person not knowing which company they are doing business with) but it is also in breach of the League’s rules.
  A club must be a company – not a collection of companies; and as far as the League is concerned the club is the company that has the Football League Share – and that share can’t be jointly owned.

What is in breach of the Football League Rules is the failure to comply with statutory financial and regulatory reporting obligations.
The breaches by CCFC Ltd and CCFCH Ltd were acknowledged by the Football League as serious; hence the transfer embargo. So it makes no sense to think that life will be better with the proposed new owner as they too are in breach of the law – so much so that on 23rd April, Companies House announced, with a statutory notice in the London Gazette, that they were beginning the statutory process to strike Otium Entertainment Group Ltd off the register of companies.
But “common sense” isn’t relevant when the decision as to whether a proposed director or owner is fit and proper is down to written rules.
What do the Rules say?

I said at the start that the Football League Rules define a “club” as “any Association Football club which is, from time to time, a member of The League”.
It expands this definition for the purpose of the Owners and Directors Test, to say that “club” includes “any associated undertaking, fellow subsidiary undertaking, group undertaking, parent undertaking or subsidiary undertaking of such club.”

This is important, because the Rules go on to define who is covered by the term “directors” – and it is much wider than you think. Under Football League Rules, a director is not only the statutory directors and any shadow directors as defined in the Companies Act 2006, and any directors registered with Companies House and people elected to become directors by the board of members, but also: “a person in accordance with whose directions or instructions the persons constituting the management of the Club are accustomed to act” and “a person who exercises or is able, legally or beneficially, to exercise Control over the affairs of the Club.”


This means that it is not just the directors of the immediate owning company – which would be Otium Entertainment Group should the sale go through – but also the directors of all the companies detailed above, whether in the UK, the Cayman Islands or British Virgin Islands.
The test that the directors must meet is laid out in Appendix Four of the Rules.

The most interesting of the rules is is “disqualifying condition (e)”. I use the word “interesting” rather than “relevant” deliberately. Disqualifying condition (e) relates to criminal convictions and I make no accusation, inference or suggestion that any of the companies or directors have any criminal convictions.