Ignorance is no defence – except where the Football League’s rules are concerned

The most interesting response to my first post, which explored the Football League’s Owners and Directors Test, came from the senior and experienced football administrator Brendan Guilfoyle, who said in a comment: “Excellent Blog can I suggest you research the FL rule requiring a newCo seeking a transfer of the FL share having security of tenure at a stadium in Coventry conurbation.”

If there is such a rule it would prevent Otium Entertainment Group Ltd, the administrator’s preferred bidder for Coventry City Football Club Ltd (in administration) from being given the Football League’s golden share, as it stands.

By “as it stands” I mean the proposal to move Coventry City Football Club out of the city for three years in a ground-sharing deal while a new stadium is built at an un-announced location. This is the plan that has been put forward by Tim Fisher, chief executive of Coventry City Football Club (Holdings) Ltd (not in administration), the current owners of Coventry City Football Club Ltd (in administration).

We do not know whether the proposed new owners, Otium, will adopt this plan, but Otium own the Holdings company; Tim Fisher is a director of Otium and Holdings; and both companies are owned (down the line) by Sisu – so it’s a fair bet that this is the plan of the proposed new owner.

So, we are dealing with an “if there is such a rule” and “as it stands” so we are in the grounds of hypothetical.

I have no reason to doubt Brendan Guilfoyle and this post should not be read as questioning whether he knows what he’s talking about: he has been the administrator of Luton Town, Crystal Palace and Plymouth Argyle; and he led the investigation into the conduct of directors at Leeds United. It’s fair to say that he knows what he’s talking about.

But this blog is an analysis of rules, regulation and law – and so I looked for the rules and regulations that Mr Guilfoyle mentioned. And I failed.

This rule cannot be found anywhere on the Football League website; despite the website having a section listing its regulations. I’ve worked through those regulations and none of them come close to such a rule.

The Football League’s press statement in response to the administrator’s selection of Otium Entertainment Group Ltd as preferred bidder said: “The League will now work with the administrator and the proposed purchaser with regards to the fulfilment of the requirements of The League’s insolvency policy.”

Ah, so there’s a specific insolvency policy, separate from the Football League regulations. I searched the Football League site for the policy but couldn’t find it. It doesn’t appear anywhere on the Football League’s site. There are references to it, though, such as in their statement about Coventry City and their rules for clubs promoted into the League from the Conference; but not the actual policy.

The insolvency policy deals with who can and who can’t be members of the League – and therefore who can and who can’t be shareholders of The Football League Ltd. So perhaps the League’s Articles of Association, the legal document that lays out how the League conducts its business, will shed light on the matter.

No! The latest edition of the Articles, as amended at the League’s AGM in Portugal on 7th June, contains no such policy.

It does contain some of its rules for dealing with clubs in administration, such as the controversial Football Creditors rule, but not all of its rules. There is certainly nothing headed “insolvency policy” and nothing that details how it would transfer a share from a company in administration to a new company that takes over a club.

The Articles do include a clause that states “the Board may, in their absolute discretion and without giving any reason for its actions, refuse to register any transfer of shares.” That clause is “subject to the provisions of Article 0” – but there is no Article 0, at least not one that I could find.

So where is this hidden insolvency policy? How can I investigate the suggestion made by Mr Guilfoyle that a new company needs to show the Football League that it has security of tenure over a stadium in the conurbation before the League agrees to transfer its share?

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.