Creditors need to be protected from clubs
Saturday 06 February 2010
At the World Economic Forum last week the idea of an insurance levy on financial institutions, to fund any future bailout of bankrupt banks, gained further support. The idea is similar to the Atol financial protection scheme practised in the UK travel industry, which covers tourists if their operator goes bust.
In the week that Portsmouth again changed owners, with the new ones taking over to prevent the club going into administration, the thought occurs that football should do something similar. In this case a levy should be imposed to protect unsecured creditors when a club enters administration.
"Football creditors" are alright. Under League rules, rival clubs, players and the governing bodies, but not managers, must be paid in full, unless they agree a deal. Then come the administrators' fees. Anything left is divided between the remaining creditors at rates as low as 5p in the pound, as happened at Ipswich in 2003.
This leaves programme printers, stewards, pie suppliers, even the St John Ambulance, severely out of pocket, pushing some towards administration themselves, and wary of trusting a football club again. It is bad for them, and bad for the reputation of the game. A levy, taken from TV income before it is distributed, and capped at, say, £250,000 per creditor to prevent reckless owners reclaiming "loans", could resolve this problem.
It is not a new idea. When the late David Burns, former head of Airtours, and thus familiar with Atol, became the chief executive of the Football League in 2002 he suggested such a policy but the chairmen were not in favour. It is time to revive it, initially in the Premier League, where the collective income is such it is obscene that the future of small businesses could be threatened by a club's financial mis-management.
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