What’s Bad For Accrington May Be Good For Oxford

By on Sep 3, 2009 in English League Football, Finance, Latest, Non-League | 10 comments

The tangled paths that various football clubs weave across each other don’t come much stranger than the ongoing saga of Accrington Stanley and Oxford United. When Accrington resigned their place in the Football League in controversial circumstances in 1962, Oxford were elected in their place. When Oxford surprisingly fell through the trap door and into the Blue Square Premier in 2006, Accrington were promoted in their place. Now, three years later, Oxford United are top of the Blue Square Premier after an outstanding start to the season and Accrington are staring the financial abyss square in the eye again.

The club’s most recent difficulties started with the resignation of former chairman Eric Whalley, who took up a position at Chester City just a few weeks after quitting the club at the end of last season. The club was then landed with a winding up order from the Inland Revenue over an unpaid tax bill of £308,000. The club believed that it had reached an arrangement with their creditor to pay the debt back over twelve months, but this week they found themselves back up in court, with the petition having been represented. This time, the In land Revenue have given the club just eight weeks to find the money or be wound up.

The question of how and why the club believed itself to have a twelve month arrangement is open to question. Their press statements have been unsurprisingly oblique so far. “Over the last few weeks the Revenue have become pushy and want their money back, which is fair enough”, said Chief Executive Rob Heys, adding that, “It’s forced our hand, which is perhaps a benefit as it means if we can raise the money earlier so we won’t have it hanging over us for 12 months. In an ideal world, in that eight week period we can pay the full amount off, but we certainly hope to have paid off a significant amount. I don’t mean tens of thousands, we’re looking at ways of giving them around £200,000, pay off two-thirds of the debt and then they’ll hopefully give us extra time to pay off any more we might have to find”.

The white knight on the horizon at Stanley continues to be the Accrington Stanley Supporters Fund, which was recently formed by a group of fans and backed by Stanley shareholder Ilyas Khan. Khan has been trying to wrest control of the club for some considerable time now, and is said to have put £250,000 into the Fund, although the club is unlikely to see very much of this money unless Khan takes control of the club, a situation which the current owners are loathe to to agree to. Despite the name, ASSF is not a Supporters Trust, rather a vehicle for Mr Khan to take control of the club. Whether this is a completely desirable or not may not be known until he takes control of the club, if he takes control of it but, for most supporters, this seems like their only option.

What happens next for Stanley, then? Well, first they have eight weeks of “going around with buckets to various places collecting money”, though how on earth this is going to raise them £308,000 in eight weeks anybody’s guess. Should they fail to raise the sum within this period (and comments from Heys such as, “we’re looking at ways of giving them around £200,000, pay off two-thirds of the debt and then they’ll hopefully give us extra time to pay off any more we might have to find” seem over-optimistic to the point of being reckless), they would ordinarily be put into receivership with the liquidators then asset stripping the club to pay off creditors. It is unlikely, however, that things would get that far – it is far more likely that they would enter into administration before this could happen.

This would mean an automatic ten point deduction, and the possible sale of the club by the appointed administrator to ASSF. Accrington have only earned three points from their opening five matches. It is far from guaranteed, of course, but a ten point deduction could prove to be the death knell of the club’s short time back in the Football League. Khan probably has the financial backing, but much of the medium to long term future of the club will come down to whether the actions of the people currently running the club. At this moment in time, ASSF have no automatic right of accession at The Crown Ground. Everything, for the time being, is up in the air at present.

Of course, it is the tax that has been put on the back burner rather than players’ wages (there are no reports at the time of writing of players not being paid by Accrington Stanley) and herein, for the thousandth time in the last couple of years, is the problem. Accrington haven’t been paying their bills. They are, therefore, insolvent by legal definition. There is every chance that the authorities will bend over backwards to see that the club at the very least completes this season in some form or another. Consider what they did for Chester City last month. Whether Accrington deserve their Football League place is another question, though.

Accrington drew an average home attendance of under 1,500 last season and things seem no better this season. They need to look very hard at whether they can afford to maintain full-time football on crowds of that size. In the Blue Square Premier this season, for example, both Luton Town and Oxford United seem likely to average crowds of four times that number. Football League and FA regulations should effectively ensure that clubs pay these bills first by giving HMRC preferred status alongside football creditors. In football terms, the Enterprise Act of 2006 (which removed preferred creditor status from HMRC under insolvency law) has been treated almost as a get-out clause for football clubs whose behaviour has come to seem like little more than tax evasion.

There is no moral alternative to this, and such a move would also ensure that in the future these circumstances (currently also being played out on a smaller scale on the south coast, where Blue Square South club Lewes also survived a winding up order after a donor paid £30,000 of a £110,000 bill to HMRC, giving the club a further three months to match the amount already paid) don’t reoccur. This constant mismanagement by football clubs drags the name of the game through the mud and drags the name of lower division football through the mud when there is absolutely no need for smaller clubs to be as badly run as they frequently seem to be. On top of all of this, no-one ever seems to get their comeuppance over it. The likes of Accrington (and others – they are the first this season, but almost certainly won’t be the last ) have been getting away with this sort of thing for too long and, as time goes on, it feels more and more like somebody will be made an example of.

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    10 Comments

  1. I am getting sick and tired of clubs mismanaging their funds.

    Once again clubs live beyond their means and once again you and I, the taxpayer, get stitched up, along with other smaller creditors.

    Relegate every team when this happens as 10 points deduction seems no deterrent.

    Jertzee

    September 3, 2009

  2. Whilst I agree that clubs should pay their bills and live within their means I think it is a bit rich to suggest that Accrington don’t deserve top ply their trade in the Football League whilst Oxford and Luton do because they have bigger crowds. Lets be honest, you would struggle to find two better examples of how not to run a football club over the past few years than Luton Town and Oxford United.

    If a small club runs a tight ship and manages its finances properly then there is no reason why they shouldn’t be in the Football League ahead of so-called “bigger” clubs.

    Rob Arnold

    September 3, 2009

  3. But these smaller clubs don’t run their finances properly, that’s the reason they keep featuring in these articles and it’s a big problem for football.

    Luton and Oxford have a much larger fanbase with goodwill to abuse and exploit.

    Martin

    September 3, 2009

  4. ‘But these smaller clubs don’t run their finances properly’

    Eh most football clubs don’t run their finances properly including Luton and Oxford.

    You can throw in Liverpool, Southampton, Norwich and may others too numerous to list.

    Paul

    September 3, 2009

  5. The problem with HMRC and the football creditors rule is the fact that one class of creditors (football creditors) are preferred at the expense of the other creditors. The policy of HMRC is to vote against any CVA which has the effect of preferring a class of creditors. Even if the CVA provided for the payment of HMRC’s debts in full, HMRC would vote against it in accordance with its stated policy.

    HMRC have a wider duty to promote commercial morality than the ordinary creditor, who is entitled to look after his own interests and only his own interests. HMRC have to look after the interests of all the trade creditors.

    Ron Ipstone

    September 3, 2009

  6. “The policy of HMRC is to vote against any CVA which has the effect of preferring a class of creditors. Even if the CVA provided for the payment of HMRC’s debts in full, HMRC would vote against it in accordance with its stated policy.”

    Not true. HMRC vote against CVAs there is a class of creditors who are to receive a higher percentage than the HMRC. Football creditors are considered super creditors (and therefore receive 100%).

    This has only been the case for companies that have entered administration since April 2003 (when the law changed and HMRC were no longer considered super creditors), and HMRC has voted against every CVA football club that has entered administration, starting with the Franchise in June 2003, purely on the basis that other creditors are receiving a greater share of their debts than HMRC are.

    For clubs that entered administration before the law change happenned (up to and inclusing Ipswich Town whose adminstration began in February 2003), HMRC received 100%, as did football creditos, so HMRC were happy. Not that the HMRC voted in those cases, as super creditors don’t get a vote in CVAs – because the CVA is to decide the percentage that creditors will receive, so only creditors and not super creditors get a say.

    Rob

    September 4, 2009

  7. I guess the really interesting question is why the Government took HMRC’s preference as a creditor away in 2003?

    It’s almost like they knew there was a recession coming…

    Martin

    September 4, 2009

  8. I am wondering whether it has reached the stage where, for good corporate practice, the preferential status of the football creditors should be removed. If Club A realises that its inability to meet future instalments on a transfer payable to Club B can tip Club B over the edge maybe, just maybe, the custodians of the clubs may start thinking slightly differently. Also, how can it be correct for say Leicester City, a few years ago, to pay St John’s Ambulance 10p in the £, whilst continuing to pay their top players £30,000 a week?

    Coming from a totally different angle, when Bury were in financial turmoil in 2001, Accrigton Stanley, then a Unibond League club organised a fund-raising match. Bury fans have not forgotten this, and are planning to attend the next Accrington home match in numbers next Friday.

    http://www.facebook.com/group.php?gid=265364155404

    Observer

    September 4, 2009

  9. If we follow the logic that clubs with bigger crowds should be the ones playing at the higher level, then Burnley’s promotion should immediately be revoked and Newcastle United reinstated in the Premier League. Oxford need to earn their return into the Ninety Two – and it would also help if they built their fourth stand.

    Accrington will soon be returning to the non-league or worse and deserve our opprobrium, but there are far bigger clubs in debt (Malcolm Glazer’s Manchester United being one) and the bulk of our ire should be directed towards those rather than poor Stanley.

    Lanterne Rouge

    September 5, 2009

  10. As an Oxford Fan, the financial management of Oxford has been appalling over the last 20 years, leaving us in a total mess, but hopefully one we can now recover from with the currentl excellent Chairman, Kelvin Thomas. unlike most owner/chairman, Kelvin is just the boss, not the owner, and seems a very capable manager.
    I dont agree that we deserve to be higher becasue we have bigger crowds, since the place need to be earned.
    Clubs will always spend crazy money to try and succeed, it will never change, but systems are now at last in place to make the penalty for failure worse, maybe making some clubs think again.
    Accrington will probably survive, even if it means Administration, but the 10 point penalty will make it certain relegation. what interest me is why do companies give Football clubs credit, when the record of admisitrations and suppliers losing out is so poor. In our industry its straight on proforma at the slightest whiff of financial trouble.

    Trampolines Man

    September 7, 2009

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