UK: Premier League Cost Control And Sustainability Provisions Published

Last Updated: 4 September 2013
Article by Daniel Geey

The Premier League (PL) published its latest handbook yesterday which contained two important cost control and profitability and sustainability provisions. The PL does not use the term Financial Fair Play (FFP) to characterise their new rules but they bear some of the hallmarks of break-even which are prominent in the UEFA and Football League FFP provisions.

Short Term Cost Control

Rule E.18 states that

"If in any of Contract Years 2013/14, 2014/15 and 2015/16 a Club's aggregated Player Services Costs and Image Contract Payments:

E.18.1. exceed £52m, £56m, or £60m respectively; and

E.18.2. have increased by more than £4m when compared with the previous Contract Year or by more than £4m, £8m or £12m respectively when compared with Season 2012/13;

then the Club must satisfy the Board that such excess increase as is referred to in E.18.2 arises as a result of contractual commitments entered into on or before 31 January 2013, and/or that it has been funded only by Club Own Revenue Uplift and/or profit from player trading as disclosed in the Club's Annual Accounts for that Contract Year."

The definition of "Club Own Revenue Uplift" is set out at A.1.32 of the PL rules and means "any increase in a Club's revenue... when compared with its revenue in ... 2012/13 (excluding Central Funds fee payments."

The practical effect of the above is that only a £4m increase in the wage bill for PL clubs per season will be permitted. If a PL club spends more than an additional £4m on wages from the previous season, the additional wage cost can only be funded by increased commercial revenues that the club has made during that same season. The below table sets out the defined amounts:

Season The extra amount of PL Central Fund revenue that can be used to fund player wage costs (cumulative) If the wage bill is below the following figure, then the club are exempt from the restrictions
2013/14 £4m £52m
2014/15 £8m £56m
2015/16 £12m £60m

By way of practical example, if Liverpool's 2012/13 wage bill is around £125m and for the 2013/14 season it increases to £130m, the club has spent £1m more than is permitted under Rule E.18. Liverpool must demonstrate to the PL that, in the same year of the wage cost increase, the £1m additional wage cost arises either from:

  • contracts entered into before 31 January 2013;
  • its own revenues excluding centrally distributed PL monies; or
  • profit from player transfers.

Rule E.19 states that the 1 March 2014 (for the contract year 2012/13) will be the first time that each PL club will have to submit Form 3 to the PL but that the first substantive assessment will occur in February 2015. Presumably assessment will occur around this time as the PL will in March 2015 have the 13/14 contract year figures to compare against the 12/13 figures for compliance purposes. It appears from the guidance in the handbook that a Financial Regulatory Panel will be established to determine whether a club has complied with the cost control provisions and to sanction the club accordingly if they have been in breach.

Profitability and Sustainability

PL clubs can make a £15m loss over a three year rolling accounting period. This means that a £5m per season loss can be covered by owner loans. Clubs can make a cumulative £35m loss over a three year rolling accounting period (i.e. the first being 2013/14, 2014/15 and 2015/16) I.e. a total loss of £105m with certain conditions attached (set out below).

Importantly, Rules E.52-E.581 will only come into effect from the 2015/16 season.

By 1 March 2016, PL clubs will have to submit three years worth of accounts. For losses up to £15m over the three year period, no owner guarantee will be required. If a club's losses exceed £15m for the three year period, the club in the relevant season has to provide:

  • future financial information to the PL; and
  • evidence of sufficient Secure Funding (as defined in Rule A.1.143) of up to £90m injected into the club by way of shares (Rule E57 and E.58).

If a club breaches the £105m limit, the PL board has the power to compel a club to adhere to a defined budget (Rule E.15.1) and/or refuse to register any new or existing player contract (Rule E.15.3). Rule E.58.2 appears to give a Regulatory Commission the power to further sanction a club for breaching these provisions. The outcomes of such reporting requirements may thus result in breaches which could lead to sanctions like points deductions though a sanctioning tariff has not yet been published.

Related Party Transactions (RPT)

In the Football League and UEFA regulations there are provisions to combat accusations of companies which have connections to the club from providing the club with an artificially high sponsorship deal. The UEFA regulations make reference to the test being "fair value" for assessing the value of the contract. Interestingly, the PL are using a "Fair Market Value" test (Rule A.1.32). However, the test for whether a deal is a RPT appears to be somewhat limited (Rule A.1.132). It sets out that a RPT is only if "the transaction [is] disclosed in a Club's Annual Accounts as a related party transaction". If it is not disclosed then it cannot be classed as a RPT. This is a different approach to the UEFA test.

Promotion and Relegation

Lastly, it is not expressly clear how the PL will deal with relegated and promoted clubs. From first reading of the regulations it appears:

  • accounts for years that clubs were in the FL will be used to assess PL compliance; and
  • a promoted club's accounts for the previous year then they were in the Football League will be used as the wage benchmark for how much a club can spend on wages whilst in the PL.

Conclusion

Any sanctioning decisions for breach of the above rules are still some time away but by March 2014, clubs will have to submit financial information to comply with the latest PL regulatory requirements. By the Spring of 2015, the first wage control decisions will occur but it will only be in 2017 that the first break-even decisions will be taken.

Footnotes

1. Rule E.52 states: "Each Club shall by 1 March in each Season submit to the Secretary:

E.52.1. copies of its Annual Accounts for T-1 (and T-2 if these have not previously been submitted to the Secretary) together with copies of the directors' report(s) and auditors' report(s) on those accounts;

E.52.2. its estimated profit and loss account and balance sheet for T which shall:

E.52.2.1. be prepared in all material respects in a format similar to the Club's Annual Accounts; and

E.52.2.2. be based on the latest information available to the Club and be, to the best of the Club's knowledge and belief, an accurate estimate as at the time of preparation of future financial performance; and

E.52.3. if Rule E.55 applies to the Club, the calculation of its aggregated Adjusted Earnings Before Tax for T, T-1 and T-2 in a form approved by the Board."

Rule E.55 states: "If the aggregation of a Club's Earnings Before Tax for T-1 and T-2 results in a loss, any consideration from Related Party Transactions having been adjusted (if appropriate) pursuant to Rule E.53, then the Club must submit to the Secretary the calculation of its Adjusted Earnings Before Tax for each of T, T-1 and T-2."

Rule E.56 states: "If the aggregation of a Club's Adjusted Earnings Before Tax for T, T-1 and T-2 results in a loss of up to £15m, then the Board shall determine whether the Club will, until the end of T+1, be able to pay its liabilities described in Rule E.14.7.1 and fulfil the obligations set out in Rules E.14.7.2and E.14.7.3."

Rule E.57 and E.58 states: "If the aggregation of a Club's Adjusted Earnings Before Tax for T, T-1 and T-2 results in a loss of in excess of £15m then the following shall apply:

E.57.1. the Club shall provide, by 31 March in the relevant Season, Future Financial Information to cover the period commencing from its last accounting reference date (as defined in section 391 of the Act) until the end of T+2 and a calculation of estimated aggregated Adjusted Earnings Before Tax until the end of T+2 based on that Future Financial Information;

E.57.2. the Club shall provide such evidence of Secure Funding as the Board considers sufficient; and

E.57.3. if the Club is unable to provide evidence of Secure Funding as set out in Rule E.57.2, the Board may exercise its powers set out in Rule E.15.

E.58. If the aggregation of a Club's Adjusted Earnings Before Tax for T, T-1 and T-2 results in losses of in excess of £105m:

E.58.1. the Board may exercise its powers set out in Rule E.15; and

E.58.2. the Club shall be treated as being in breach of these Rules and accordingly the Board shall refer the breach to a Commission constituted pursuant to Section W of these Rules."

www.danielgeey.com
www.twitter.com/FootballLaw

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Daniel Geey
Similar Articles
Relevancy Powered by MondaqAI
Shepherd and Wedderburn LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Shepherd and Wedderburn LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions