The Football Governance Bill was introduced to the UK Parliament on 18 March 2024. If passed, the Bill will establish an independent football regulator for England, install a new licensing regime for English football clubs, and further regulate the distribution of competition revenues, among another measures.

The Bill followed a fan-led review announced in April 2021 and the resulting UK government white paper published in February 2023 and consultation paper issued in September 2023.

The extensive measures set out in the Bill seek to address a number of potential concerns including improving the financial soundness of clubs, maintaining the heritage of English competitions, recognising and accommodating the views of fans and local communities, and recognising the importance of football to local communities and economies.

SCOPE OF THE BILL

The Bill seeks to regulate English clubs in specified competitions, which competitions will be determined by the Secretary of State.

It can be assumed that clubs with teams involved in any of the five professional English leagues (the Premier League, Championship, League One, League Two, and National League) will fall under the scope of “regulated clubs,” but how much further down the league pyramid the scope will go will likely only be confirmed once the Bill is passed through UK Parliament and becomes law.

Notably, it appears the Bill’s scope will not extend to regulating women’s football, with the UK government seemingly still committed to delivering separate legislative change following the publication of the fan-led Carney review in July 2023.

INDEPENDENT FOOTBALL REGULATOR

The independent football regulator (IFR) is to be established as a standalone body separate from the Football Association and the UK government, consisting of a board and expert panel.

Its objectives are to

• protect and promote the financial soundness of regulated clubs;
• protect and promote the financial resilience of English football; and
• safeguard the heritage of English football.

The IFR will have certain powers and duties, for instance a requirement to exercise its functions in a way that avoids any adverse effect on the sporting competitiveness of any club or financial investment in English football. A state of the game report must also be published by the IFR, providing an overview of the issues and relevant matters affecting English football, within three years of its establishment.

In light of the criticism levelled at existing English football regulation’s lack of transparency and consistency, the IFR will also be subject to specified regulatory principles. These include requirements that it should proactively and constructively engage with clubs (and club owners and officers) and competition organisers, act consistently and transparently, and recognise the responsibilities of clubs’ owners and officers.

The IFR will be funded by a levy on clubs. Further provisions are laid out in respect of the IFR’s initial costs and methods of cost estimation and calculation in order to ensure any levy charged is necessary and proportionate.

The Secretary of State may prepare a statement and guidance in respect of the UK government’s policies relating to the governance of football which the IFR must consider in the preparation of its own guidance regarding the exercise of its functions under the Bill, but the IFR will otherwise be independent from the government.

CLUB OPERATING LICENCES

The Bill will require an English club to obtain a full or provisional operating licence before it can operate a team in a specified competition. An application made to the IFR for a provisional operating licence must include a strategic business plan (among other documents) detailing the proposed operation of the team, estimated costs of operation, and sources of funding for such costs.

A full operating licence, which can be granted after a provisional licence period of up to three years, may be granted by the IFR provided that the following licence threshold conditions are met:

• The financial resources threshold will be met if a club’s financial resources are appropriate in relation to activities the club carries on. In considering whether a club meets this threshold, the IFR may consider the corporate structure of a club, its latest financial plan, its strategic business plan, and competitions that a club’s relevant team participates in, among other considerations.
• The non-financial resources threshold will be met if a club’s non-financial resources are appropriate in relation to activities the club carries on. In considering whether a club meets this threshold, the IFR may consider the qualifications, experience, training and performance of a club’s individual owners and officers, among other considerations.
• The fan engagement threshold will be met if a club has adequate means by which it consults its fans about relevant matters and takes the fans’ views into account when making decisions about such matters relating to a club’s strategic direction and objectives, business priorities, and operational and match-day issues and the features of a club’s heritage such as its name, home kit/crest, and ground.

If a club consistently fails to take reasonable steps to meet these thresholds, the IFR will have the power to revoke a club’s full operating licence or decide not to grant a full operating licence at the end of the club’s provisional operating licence period, but it must provide an explanatory notice with any such decision. Additionally, if a club holding an operating licence ceases to operate a relevant team, that operating licence will cease to have effect.

The IFR will attach the following mandatory conditions to each operating licence:

• Financial plans condition: Requires clubs to submit a financial plan specifying (1) information about how the club is or is to be funded and the sources of funding, (2) information about expected revenues and expenses, and (3) financial risk assessments and plans for managing financial risk
• Corporate governance statement condition: Requires clubs to submit a corporate governance statement explaining how a club is applying the code of practice that the IFR is set to prepare and publish on the corporate governance of regulated clubs, and for clubs to publish their latest corporate governance statement online as soon as reasonably practicable after submission to the IFR
• Fan consultation condition: Requires clubs to carry out regular consultation with fan representatives (recognised as such by the IFR), and which may require the consultation to take place by specified or means or intervals
• Annual declaration condition: Requires clubs to submit an annual declaration containing any information relating to (1) a prospective new owner or officer, (2) a person that has become an owner or officer without the IFR first making a determination, or (3) a material change in a club’s circumstances which is relevant to the IFR’s exercise of its functions

These conditions aim to ensure that each licensed club continues to meet the core aims of the Bill and is protected against historic shortcomings by requiring that specified practical steps be taken.

With regard to corporate governance, the IFR must keep its code of practice under review, and may alter or replace the code. The IFR must consult the Football Association prior to publishing the code or any alterations to it. The IFR must also publish an annual corporate governance statement.

The IFR may additionally attach discretionary licence conditions to a club’s operating licence to ensure that the club meets, and continues to meet, the threshold requirements. These discretionary conditions may be varied or removed as and when they cease to be effective, and a club may apply to the IFR for such variation or removal.

The IFR is restricted in what a discretionary licence condition can cover. For instance, a discretionary licence condition relating to the financial resources condition may only relate to debt management, liquidity requirements, or overall cost reduction or restrict a club’s ability to accept or receive funding which the IFR suspects is connected to serious criminal conduct. Similarly, a discretionary licence condition relating to the non-financial resources condition may only relate to internal financial controls, risk management, or financial reporting.

SUITABILITY OF INDIVIDUAL CLUB OWNERS AND OFFICERS

An owner of a club must have honesty and integrity and be financially sound. A prospective owner must first apply to the IFR by providing information regarding the proposed operation of the club, the estimated costs of that operation, how those costs are to be funded, and the sources of such funding.

An owner for these purposes is an individual or registered society which meets one or more of the following ownership conditions:

• The individual or society has the right to exercise significant influence or control over the club’s activities;
• The individual or society holds, directly or indirectly, more than 25% of shares in the club;
• The individual or society holds, directly or indirectly, more than 25% of voting rights in the club; or
• The individual or society holds the right, directly or indirectly, to appoint or remove an officer of the club.

Given that an individual or society will satisfy the above conditions even if they indirectly hold more than 25% of shares or voting rights, in some cases it will be necessary to trace up the corporate structure to determine the actual owner of a club for the purposes of the Bill.

Those who will be an officer rather than an owner must also meet the honesty and integrity requirements but must also be competent. Similar to the owner’s test, officers are also required to make an application to the IFR, which application will feature different information requirements.

The IFR will determine an individual owner or officer’s suitability through an “affirmative determination” process whereby the individual makes an application to the IFR.

An individual owner or officer, or the regulated club of the owner or officer, will have a duty to notify the IFR where there has been or may have been a material change in circumstances that is relevant to the individual’s suitability as an owner or officer.

The IFR will then carry out a detailed review process (which in respect of an owner will involve the IFR’s determination of whether an individual has a source of wealth connected to serious criminal conduct) through which it may make a negative finding in relation to the individual, which may then lead to a removal direction and disqualification order (as detailed further below).

DUTIES ON CLUBS AND COMPETITION ORGANISERS

A regulated club, or a club that has been a regulated club at any point in the last 10 years, must not enter or operate teams in any competition that the IFR deems to (1) not be operating on a basis of fair and open competition, (2) be jeopardising the sustainability of any competition where the teams are exclusively or predominantly English teams, or (3) be harming the heritage of English football, among various other factors. This is widely seen as a response to concerns around recent developments such as the European Super League.

The IFR must take reasonable steps to determine and consider the views of fans of participating clubs regarding the competition and must consult the Football Association before deciding to prohibit any competition under the Bill. The location of a competition’s matches will not affect the IFR’s prohibition powers even if the matches are taking place outside of the United Kingdom.

A regulated club, or a club that has been a regulated club at any point in the last 10 years, may not relocate or dispose of its home ground without first notifying the IFR, who will only approve a relocation if it would not harm the club’s heritage and will only approve a disposal if it would not undermine the club’s financial sustainability. Such a club may also not grant security over its home ground in respect of a loan or other liability, or appoint an administrator in the event of potential insolvency, without prior approval from the IFR. The support of a majority of fans must be obtained before a club materially changes its crest or home shirt colours, and a team name may not be changed unless first approved by the Football Association.

These duties, along with the relevant mandatory licence conditions, should provide legislative protection against further failure from clubs and existing regulators to properly prioritise the interests of fans and local communities. By prohibiting regulated clubs from changing their core characteristics such as home ground or shirt colour without the necessary fan consultation, the Bill reflects the UK government’s recognition of the importance of the local community element in English football.

DISTRIBUTION OF REVENUE

The Bill sets out a dispute resolution process that can be triggered by an organiser of a specified competition in the event the organiser has questions to be answered by the IFR in respect of the distribution of revenue from the specified competition between it and another specified competition organiser. Revenue for the purposes of this dispute resolution process may either be (1) the sale or acquisition of broadcasting rights or (2) any other source specified by the Secretary of State.

The resolution process will be a mediation run by the IFR and will involve the organisers appointing a mediator and a distribution order being made by an IFR expert panel committee in light of the mediation, which must not place undue burden on the commercial interests of any organiser.

This mediation process will not be available to specified competition organisers if there is already a distribution agreement in place between them in respect of the specified competition’s revenue.

IFR’S INVESTIGATORY POWERS, ENFORCEMENT, AND SANCTIONS

The IFR will have the power to conduct investigations on reasonable grounds, require certain specified information from a club, and appoint an expert reporter to provide the IFR with information in respect of any club on any necessary matter.

Where an owner or officer has been determined unsuitable by the IFR, it may make an order disqualifying that person from being an owner or officer or make a direction to effectively suspend such an officer or owner from carrying out their activities, as well as prohibit certain specified actions such as voting on any matter relating to a club’s activities or making changes to a club’s corporate structure.

If the IFR considers that the ability of a club to operate effectively or comply with its licence conditions is adversely affected by the suspension of an officer, the IFR can make an order to appoint additional individuals for a specified period or require a club to redistribute the relevant functions among its existing officers.

When the IFR makes an ownership removal order, this order may also appoint trustees and confer functions on these trustees, who will then be authorised to take any steps they consider appropriate to achieve the purpose for which the order was made.

If an owner or officer is removed by the IFR, the remaining senior management or owners have an obligation to cooperate with and provide reasonable assistance to an IFR-appointed officer or trustee(s).

Should a club, owner, or officer be found to have committed any specified infringement or offence under the Bill or failed to comply with an information request, a financial penalty of up to 10% of a club’s revenue (or officer’s remuneration if an officer offence or infringement) may be imposed by the IFR. The IFR will also have the power to issue warning notices and urgent directions. Any warning notice, decision notice, or urgent direction given by the IFR in connection to a financial penalty or potential financial penalty must be published by the IFR as soon as reasonably practicable.

A club, owner, or officer will have the right to request a review of an IFR decision and appeal before a Competition Appeal Tribunal against certain key decisions such as the revocation of a full operating licence or a deemed determination that an owner is unsuitable.

LOOKING AHEAD

Once this legislation is passed into law, clubs will likely face a period of transition as they navigate, adopt, and apply the new regulations and safeguards. Similarly, the IFR will need time to establish itself and deliver on its wide-ranging powers and duties, which will also need to harmonise with the existing regulatory regimes and bodies in English football (e.g., the Football Association Premier League).

Further guidance and statements will be issued in due course by the IFR and Secretary of State in relation to the IFR’s functions and the Bill more broadly, which will aid clubs in their implementation of measures in response to the legislation. It is difficult to predict how long this teething phase might last, but it is likely that proposed investments will be handled with caution by both clubs and investors given the extent of new regulation concerning any ownership changes or significant transactions, as well as the increased financial penalties and sanctions that will come with it.

An understanding of how any club has complied historically or may be at risk of potential non-compliance of the Bill will be essential for any investor as part of the due diligence process once the Bill comes into force, particularly given the IFR’s proposed powers of intervention and greater transparency with regard to clubs’ operations.

Those operating in the industry, particularly clubs and investors, should familiarise themselves with the proposals and ensure that steps are taken in good time to prepare for the wide-ranging requirements that will soon come into force following passage of the Bill.

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