Death of a Club: Analyzing the EFL’s regulations in the context of Bury F. C.’s expulsion

[Author: Ritwik Deswal, a Second Year Student of Law, pursuing B.A LL.B (Hons.) at University Institute of Legal Studies, Panjab University, Chandigarh]

Joy Hart, former director of the club and daughter of Les Hart, a Bury F.C. legend chained herself to a drainpipe in August 2019 as the club faced extinction. Les Hart had famously been part of the club for 44 years until 1980, staying loyal throughout his footballing life. Her photo in protest became a harrowing reminder of the state of English football’s lower leagues. Other supporters too were protesting in their own ways, scared for their club and angry at their owner. However, neither Joy nor the loyal fans could prevent the inevitable- Bury F.C. were expelled from the football league on 27^th August 2019, the first “expulsion” per se and the first club to be removed since Maidstone United in 1992.

By all means, this was a rare occurrence and not something English Football League (EFL) was accustomed to. Certainly not this high up in the English league pyramid. Steve Dale, the owner was widely criticized by fans and the public alike, and rightly so he had a big part in the club’s demise. However, an owner letting fans down is hardly surprising. More striking was the EFL’s apparent complicity. The EFL, an institution with specific rules to prevent such a mishap let it happen anyway. If there was a failsafe, why had it failed? The primary aim of this article is to examine the EFL’s regulations in context of Bury F.C.’s expulsion. Concurrently, we must also first understand the events leading up to August 2019 to gain clarity about the club’s affairs and the background which led to the development of EFL’s rules today.

BACKGROUND

Troubles at Bury had been continuous for past 15 years with one owner after another facing financial difficulties. Stewart Day, the previous owner faced bankruptcy himself and sold the club to Dale for 1 pound. Initially, Dale made substantial gains and Bury F.C. were promoted at the end of 2018-19 campaign. However, this was a false dawn as credit defaults soon emerged and delay in payments became regular. Dale stated that the financial situation he inherited was worse than he found out during his due diligence. In July of 2019, as debts began to pile up Dale entered into a Company Voluntary Arrangement (CVA) with the creditors to solve some of the problems. A CVA is an insolvency event under both British law and Section 3, Rule 12 of the EFL Regulations. The EFL, requested Dale to provide a strategy for paying off the loans which was not given even after numerous deadline extensions. It seemed likely that Dale would sell the club, however the takeover attempt by C&N Sporting Risk failed and Bury were expelled as no plan to pay off debts was forthcoming.

The EFL developed some of the administration and insolvency protocols in place today after the failure of ITV deal in early 2000s.  Many clubs, Bury F.C. included, faced acute financial difficulties and threat of dissolution at the time. The preventative measures included the fit and proper person’s test for owners and point deductions for administration and insolvency to avoid overspending. The main idea behind this was to make League clubs more financially viable and avoid bankruptcy. EFL itself is a deterrent of sorts. So, how did these rules and EFL fail when it came to Bury F.C.?

The Owner’s and Director’s test

The test, given under Appendix 3 of the regulations, is meant to “protect the integrity and image of the League” and provide a comprehensive review of the people in charge of a club. However, the same was not done in the case of Bury F.C. as admitted by the EFL itself in their statements. The prospective owners have to provide certain financial information, to make sure that they will be able to keep the club afloat as well as be deemed ‘fit and proper’ by the EFL. Under rule 16.21.1, Section 4 of the regulations after a takeover by a new owner, the club must give the future financial information to the League within 10 days. Although, Dale complied with rules of the test he did not give the source of his funding or how he would be able to sustain the club. The EFL reasoned that they did not conduct further due diligence because the club’s future was under threat at the time. However, the EFL ignored the cost of a historic club virtually not existing within a year at the time. The short-term benefit of allowing Bury to be sold to Dale is non-existent in the long run. Moreover, Dale suffered no sanction or punishment for failing to provide the sufficient information.  Damian Collins, chairperson of the select committee of the Parliament also lambasted EFL for this, when inquiring about Bury’s demise.

Another lacuna in the test is specificity. Under ‘Insolvency Matters’ of the disqualifying conditions, a person may not become the owner if he was a relevant person in insolvency events of at least 2 football clubs or 2 similar events in 1 club. This significantly narrows down the condition. 43 of the 51 companies that Dale owned were either liquidated or faced insolvency events. However, since none of them were a football club this relevant detail was effectively out of the test’s scope. This also leads us to the next contention.

Categorization and treatment of clubs

The ever-prevalent question is whether a club is a company or a community organization/institution. EFL’s interaction with a club depends on the answer. Although, the Football Association (FA) does provide a large scope and leaves it entirely to the club as to what structure they shall follow including being an unincorporated association or an incorporated company. The EFL does not clarify how they will treat the club, and this increases the vagueness of their limitations. In the present case, if Bury are treated as a company, then ideally the EFL should inquire into the corporate track record of a new chairperson like a regulatory body would. However, the EFL has time and again denied them being a regulatory body and instead referred to themselves as a ‘facilitator’. If Bury are treated as a community organization, then significant control should be in the hands of its supporters in deciding its future and ownership. However, retrospect proves this was not true nor are there any rules to facilitate such a thing in the future.

Precedent for expulsion

There is hardly any precedent for ‘expelling’ a club from the league. Debbie Jevans, the executive chairperson of the EFL, herself stated that this is hopefully a one-off occurrence. Expulsion runs contrary to the object of changes in regulations to prevent such an event. It is a last resort. There was no previous experience for either Bury or the EFL to fall back on leaving them unprepared. In essence, it was an uncharted territory. Considering the club’s financial situation, they could not have been expected to contest it legally as well. In my opinion, EFL should not have made Bury the first example considering the extenuating circumstances and their own shortcomings effectively vitiating the doctrine of clean hands. The fact that there was no appeal process at all except for a voluntary letter of request shows the novelty of this provision and proves that such a step should not have been taken without a structure and precedent in place.

Lapses in EFL’s actions

A Governance Review was commissioned by EFL, led by Jonathan Taylor, QC, to investigate the circumstances of Bury F.C.’s demise. Unsurprisingly, the report absolved EFL stating that nothing more could be done by the League to prevent expulsion and it spent considerable time and effort to deal with the situation. However, in hindsight I find it not to be true. The first contention is that EFL did not intervene in a meaningful way to save the club. The EFL has the power to expel a club, but at no point of time did it try to actively save the situation at Bury. They were only managing the process of decline rather than trying to stop it. Secondly, as the takeover was happening, the League set one arbitrary deadline after another, when they knew that C&N were carrying out due diligence. The process usually takes two to three weeks yet they hardly had a few days. C&N would later state that this rush prevented the takeover. Two weeks more would not have made a difference to the League, but it might have saved a 135-year-old club. Thirdly, EFL did not consider late bids from other companies, even though they were within the deadline, a bizarre step considering what was at stake. All this points to a significant shortcoming of administration and functionality in exigency, an eventuality which will become prevalent for more clubs in the future.

Conclusion

Sweeping reforms are the need of the day. With more clubs facing similar situations, the EFL would become a focal point yet again. Uncertainties like COVID and inflationary transfer markets will only exacerbate the situation. The EFL has to become a stronger body of regulation rather than a mere spectator and change its core functions. Strengthening owner’s tests, salary caps and decreasing confusion and vagueness about rules are also needed. The EFL must become an entity to protect the clubs and its fans in the future.

*For any query, feedback or discussion, the Author can be contacted at [ritwik_deswal@yahoo.com]

PREFERRED CITATION: Ritwik Deswal, Death of a Club: Analyzing the EFL’s regulations in the context of Bury F. C.’s expulsion, SLPRR, <https://sportslawandpolicyreviewreporter.com/?p=1257> May 3, 2021.

*NOTE- The opinions and views expressed in this article are that of the Author(s) and not of SLPRR- the expressed opinions do not, in any way whatsoever, reflect the views of any third party, including any institution/organization that the Author(s) is/are currently associated to or was/were associated to in the past. Furthermore, the expressions are solely for informational and educational purposes, and must not be deemed to constitute any kind of advice.