Although we have positive feedback from Nigel on the sale progression – we are also aware that money just might run out at the club before this sale transaction is c0mpleted. If this was the case and Mr Dai was no longer willing or able to continue the funding then there is a risk that our football club could go into administration. STAR have a duty to fans to look into this and what it would mean for us all. We have met with an insolvency expert this week and will continue to speak to them and explore all possibilities on this at this time. On further point deductions we know that if we do not pay our Football creditors then we have a further 2 point deduction. If we as fans cause a game to be abandoned another 3 points deduction. Anymore incidences of non payment of wages or HMRC would be dealt with by EFL and could lead to further point deductions (in line with the EFL rules).
Here is a basic q &a on Football administration that we received from Farley’s Solicitors.
What Does Administration Mean?
When a company or football club can no longer pay its bills, the company enters administration. In administration, all control of the company is passed to an administrator. Essentially creditors can’t take action against the club as there is then a statutory moratorium in place – like an embargo on anyone taking legal action against the club.
What Does an Administrator Do?
Administrators will handle every part of the day to day running of a club other than what happens on the pitch. An administrator’s role is to try and stop a company (football club) being wound up (liquidated) either by finding someone who will take the club on (buy the club from the current owner) or by repaying creditors where possible through the sale of assets. In the case of football clubs, this can mean players, grounds, training pitches, or merchandise.
Creditors
Similar to company administration, there is a hierarchy of creditors who will be paid in a certain order. However; companies must pay Preferential Creditors first but, in football, there is a higher tier of creditors known as Football Super Creditors who will receive monies owed first. These are;
Players
Managers
Other football clubs
The Professional Footballers Association (PFA)
The Football League
The Premier League
Reading FC Specifics
As you are no doubt aware the stadium and the land around the stadium are owned by separate companys and so if Reading FC went into administration this would not affect the stadium or the car park. We currently pay rent for the stadium and this would be factored into the cash flow/running costs for the administrator.
Club Closed Down
If it is found that the club/company does not own any/enough assets to pay creditors or a buyer cannot be found, the club can be closed down through liquidation. Clubs that have suffered this fate over the years include Chester City, Scarborough, and Darlington. Sometimes a club will be reformed under a slightly different name; Chester City reformed as Chester FC and Scarborough as Scarborough Athletic FC.
What Can the Punishments be for a Football Club Entering Administration?
Entering administration is not an easy option for a football club, not only because they may be forced to sell some of their best players but also because the team could face points deductions in the league too. Currently a club can be deducted up to 12 points for entering administration. This points deduction is used to preserve the integrity of the league and act as a deterrent to clubs entering administration to clear their debts without any real repercussions.
Is There Life After Administration?
Administration doesn’t necessarily mean the end for a football club. In recent years, clubs such as Derby, Wigan, Southampton and Huddersfield have entered administration following serious financial difficulties. Southampton went into administration in 2009 after suffering relegation to the third tier of English football and Huddersfield went into administration in 2003. Both clubs have come out of the other side of those financial difficulties and have enjoyed time back in the top flight recently.
If anyone has any other questions about all this we are happy to ask our expert and let you know. We’re not experts but trying to pass on the right information! Please email chair@star-reading,org and we can then reply.