We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
Originally published in the Indian Express dated April
15, 2010.
The transparency of ownership in the Indian Premier League, or
IPL, has garnered much attention of late, with much of the focus
being on the equity ownership of the new Kochi franchise. While it
would be premature to speculate on whether or not the ownership of
the ten franchises is of questionable antecedents, what seems to
have gone relatively unnoticed in all the fuss is that this is an
extremely positive development, albeit if carried out under
duress.
There shouldn't be an iron curtain when it comes to
information on team and league ownership in professional sports
leagues. Indeed, the IPL is one of the only global sports leagues
about which so little is known when it comes to the stakeholders.
Until now this was not really an issue; but transparency in
ownership is a must, as is accountability of the league and
confidence in its conforming with legal and ethical
considerations.
It is, after all, about to enter the next phase of its
existence. Investments in the teams are imminent. So are,
reportedly, changes of ownership and of control of the franchises.
Prior to these contracts taking place, there should be a clear cut
methodology in place that governs how the league does its due
diligence when it is to induct new ownership.
Globally, there isn't a hard and fast rule that describes
the structure of professional sports leagues; nor is there any such
rule when it comes to the ownership pattern of the teams within
them. Yes, it is true that the fact remains that ownership in
professional sports leagues — especially where there are
large consortiums owning a particular team — are hard to
regulate and verify. However, the first step is transparency, and a
clear-cut guideline of ownership which would stipulate the
ownership eligibility criterion. Once the eligibility criterion is
met, then one can verify the funding and ownership.
The National Football League and the English Premier League are
two of the most profitable and popular sports leagues in the world.
Their respective league rules however mandate contrasting ownership
structures.
The NFL, arguably the most lucrative and successful professional
sports league in the world, has a somewhat unique ownership
structure, one which allows it to maintain strict control over
management and ownership of teams. Unlike other leagues, there is
absolutely no corporate ownership allowed, and the ownership groups
must contain twenty-four or fewer individuals. The general partner
and his/her family must together own thirty percent or more of the
team, and any change in ownership is strictly regulated. The
reasoning behind this is also linked to ensuring focused management
with a singular vision as well as consistent and long term
ownership. The ownership for the most part is transparent, and for
all intents and purposes, above-board.
The EPL is the exact opposite, where size and influence have
mattered. The sale or purchase of Manchester United, Chelsea,
Liverpool and Arsenal are frequently debated, and due diligence and
background checks that have been conducted are sometimes questioned
with respect to their thoroughness. The ownership guidelines have
been questioned, too, along with their implementation.
The EPL faces, as well, questions about the nature of foreign
investment in its clubs. While foreign investment has propped up
the league and made it a global powerhouse, many of the clubs are
debt-ridden, and the cleanliness of the funds and ownership has
been a subject of mass speculation.
Other professional sports leagues follow different patterns.
Some leagues own their teams outright; investors then pay for the
rights to manage and host a particular team's games. There is
no clear-cut formula for how leagues are owned globally.
While foreign ownership in the US leagues hasn't been much
of a factor, the EPL on the other hand has seen a mass influx of
foreign investment, and there are concerns as to whether or not the
ownership guidelines would need to be tweaked. The Thaksin fiasco
with Manchester City — in which the controversial former
Prime Minister of Thailand briefly became the storied club's
majority shareholder before selling out to an Abu-Dhabi based
consortium — led to calls for curbing foreign investment
But what the debt-ridden EPL clubs desperately need is equity
financing.
What is more likely is a more rigorous 'know your
investor' credential and background check, so as to ensure the
sanctity of management and ownership of these teams. This is also
something the IPL can adopt so as to avoid future spats, and ensure
there is a systematic procedure in place. If it learns from the
EPL, then it has found a good model to emulate.
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.
The Supreme Court has recently directed Bharati Airtel, India’s largest mobile service provider, not to extend its third generation high speed data services for new customers in seven circles where it failed to obtain requisite licenses from Department of Telecommunication.
Since the beginning of civilization, man has always been
motivated by the need to make progress and better the existing
technologies. This has led to tremendous development and progress
which has been a launching pad for further developments. Of all the
significant advances made by mankind from the beginning till date,
probably the most important of them is the development of
Internet.
