Dunfermline Athletic Likely To Be Saved… But At A Price

By on Mar 27, 2013 in Finance, Latest, Scottish Football | 3 comments

At the start of yesterday, the fate of Dunfermline Athletic hung very much in the balance, but at least by its end it was a little clearer. The Scottish First Division club had until five o’clock yesterday to pay an outstanding £134,000 bill to HMRC over unpaid tax or face the threat of liquidation, and in the middle of yesterday afternoon the club the club confirmed that it was to seek to enter into administration in order to side-step the inevitable insolvency proceedings brought against the club by the taxman. Such a decision buys the club a little more time and, considering the fact that no-one was likely to step in at the last minute with the money required to pay them off, this was effectively the only option available to the club.

What is interesting for viewers of this story from south of the border is the extent to which the difference in rules and regulations  are influencing the decisions to be made in Scotland. There is no football creditors rule in Scotland, meaning that players do not have the same level protection afforded to them as their counterparts in England would have. Once the club has entered into administration, the players may be requested to take a pay cut by the administrator, who cannot by law allow the club to continue to trade insolvently, and it would seem likely that many would see their contracts terminated in the summer in order to save costs. This, however, is probably a better option for them than the club being liquidated, since this would result in the termination of their contracts with immediate effect and with, under FIFA rules, only four days left until the 31st of March FIFA deadline, it is unlikely that many would get gainful employment again before the end of this season without special dispensation from the world game’s governing body.

The other significant difference between how these matters are dealt with in Scotland in comparison to England is the possible elasticity of any points deductions – or any other sanctions – that may be awarded against the club should permission to enter into administration be granted. In England, of course, the mandatory penalty for entering into administration is ten points, but there is nothing set in stone in Scotland. In 2010, for example, Dundee were docked twenty-five points with the apparent intention of relegating the club for entering into administration, only for the risk of adopting such a policy to be clearly spelled out when the club went on an unbeaten run which meant that it avoided that particular fate. In effect, it might well be argued that entering into administration leaves a club in Scotland open to the occasionally idiosyncratic whims of the Scottish Football Association and Scottish Football League and that this, in a way, is a punishment in itself. The SFL’s own ruling on how to deal with clubs in this predicament is to “deal with any member which acts against the best interests of the League in any way it sees fit” – a phrase which could be interpreted in any one of a number of different ways, and there will be some who feel that, in the wake of the Rangers debacle of last summer, that even demotion might be a reasonable punishment for clubs in this position these days.

A court hearing was held this afternoon at which it was confirmed that the majority share-holder is prepared to sell and that there is a potential buyer already lined up, with the lack of options at the club’s disposal already having been best summed up by its Director of Football, former manager Jim Leishman, whose statement yesterday afternoon said that, “There is a group of Dunfermline Athletic supporters who have underwritten the administrator’s fees, which is great. So we are back in the game. It was either liquidation where you are done and dusted, and you have nothing. But we are giving it a chance. We will be speaking to the administrator, if that gets the go ahead we will be speaking to him.” Bryan Jackson of PKF – the same company that is running the administration of Portsmouth Football Club in England – has been appointed into the position, and his first job will be to establish whether Dunfermline can continue as a going concern. The club isn’t out of the woods in that respect, just yet. HMRC, however, did not oppose the application this afternoon, which is a start.

The key man in much of this has been majority share-holder Gavin Masterton, who own owns a 94% share-holding in the club and the company which now owns the club’s East End Park home. Masterton is understood to be overwhelmingly the club’s biggest creditor, so the success or otherwise of any CVA that is put forward by PKF will come to depend very much on him. Meanwhile, while the fact that the separation of the ground from the club itself is as much of a concern as it has been at so many other clubs in recent years, the fact that the club itself as a legal entity doesn’t own it is, at this stage, probably good news. It can’t be included as an asset in any forthcoming agreement to be reached, and should Masterton’s company decide to sell, it is likely that he will receive the best price for it from anybody who wishes to use it as a football ground rather than somebody who may decide that the best thing to do with East End Park would be to level it and build something else in its place. Masterton has been regarded as the villain of this particular piece by supporters groups  at Dunfermline. Masterton is a subject that we will be returning to shortly. It is to be hoped, however, that common sense informs his next moves over this matter, and he did at least offer an apology to the supporters of the club this afternoon.

So, Dunfermline Athletic now seems likely to be saved, but this will come at a cost and that cost is jobs. The club’s players have been told to expect a “brutal” round of redundancies from the administrators, who have already stated that, “I’ll be honest and say this is as bad a situation as I’ve seen at a football club,” and this cost is one that we seldom hear about when we talk of football clubs and the ways in which they are mismanaged. Each redundancy, whether a player, an office worker or whoever else sees their income snatched away from them, is a minor tragedy in its own right and should be weighing heavily on the minds of all concerned with whatever has gone wrong at that football club over the last few months or years. This club will now most likely get its fresh start, but if there is one thing that should learned from this particularly sorry story, it must surely be “never again.”

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    3 Comments

  1. Small correction: I believe there is an automatic 10-point deduction for entering administration in the SPL. It’s only in the SFL (in which Dunfermline, of course, play) that ‘nothing is set in stone’.

    It is indeed a tragedy to see players and staff lose their jobs, with no real prospect for the players getting another club until June. A tragic mess.

    NumberNone

    March 29, 2013

  2. The problems at Dunfermline have been ongoing for years. However their ceo John Yorkston was very fond of ranting about, and lecturing other clubs in the past who have had this trouble. He had strong criticism of ‘cheating’ Dundee when it happened to them. He was keen to verbaly put the boot into Rangers last season as well. He’s been strangely quiet in recent days!
    As for Mr Masterton, he fell into the trap that others such as Dundee and Motherwell had fallen into, a trap unwittingly set by the supporters themselves. Pressure builds from supporters that not enough is being done and money needs spent to achieve some degree of success. With the prospect of dwindling crowds and personal criticism, owners then lose what bussiness sense they had and spend money that cant be afforded in the long term trying to chase success and satisfy supporters. Any success is short term, the crowds dont really grow much and the money dries up. Then supporters blame the owners for financial mismanagement!
    As for the punishment, they will likely have a 25-30 points deduction like Dundee, but enough to relegate them. They wont be relegated to the 3rd division as happened to Livingston. Their administration happened in pre season. Relegating during the season would cause chaos to the league regarding points etc. Hopefully Dunfermline will become supporter owned and now live within their means, but then again………

    dan

    March 29, 2013

  3. The problems at Dunfermline have been ongoing for years. However their ceo John Yorkston was very fond of ranting about, and lecturing other clubs in the past who have had this trouble. He had strong criticism of ‘cheating’ Dundee when it happened to them. He was keen to verbaly put the boot into Rangers last season as well. He’s been strangely quiet in recent days!
    As for Mr Masterton, he fell into the trap that others such as Dundee and Motherwell had fallen into, a trap unwittingly set by the supporters themselves. Pressure builds from supporters that not enough is being done and money needs spent to achieve some degree of success. With the prospect of dwindling crowds and personal criticism, owners then lose what bussiness sense they had and spend money that cant be afforded in the long term trying to chase success and satisfy supporters. Any success is short term, the crowds dont really grow much and the money dries up. Then supporters blame the owners for financial mismanagement!
    As for the punishment, they will likely have a 25-30 points deduction like Dundee, but enough to relegate them. They wont be relegated to the 3rd division as happened to Livingston. Their administration happened in pre season. Relegating during the season would cause chaos to the league regarding points etc. Hopefully Dunfermline will become supporter owned and now live within their means, but then again………

    dan

    March 29, 2013

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