The lead story on the BBC Football website this afternoon may have given Liverpool supporters (who, it has to be said, are now getting close enough to feelings of perpetual panic to be able to warrant the soubriquet “long-suffering”) further palpitations. After the confirmation that a sale of the the club to John W Henry’s New England Sports Ventures had been agreed, the BBC is now reporting that the ongoing legal wrangles that have inevitably followed the confirmation of the sale agreement may yet force the club into administration and that this may mean that the club incurs a nine point deduction. Nothing in this analysis of what could happen is untrue, however the key word here is “may”, and if the situation that could theoretically push the club into administration does come to pass, all eyes will fall upon the Premier League, because there are no guarantees that such a situation would automatically mean that the club would be docked points.
If the sale of Liverpool Football Club is not completed by the 15th of October, it has been widely accepted that the Royal Bank of Scotland will step in to take over the running of the club. Their intention is force the sale of the club come hell or high water. One of the key questions that remains definitively unanswered, however, is whether this constitutes the club being required to be placed into administration in the first place. Entering into administration is a manouevre that can be performed by one of the club’s creditors or by the club itself, and can be defined as notifying the Insolvency Service that the club is “insolvent” (by which we mean unable to meet its day-to-day financial obligations) and appointing a licenced insolvency practitioner to attempt to rescue it, by agreeing a CVA with creditors, selling the club or selling its assets and liquidating the company. The insolvency practitioner shouldn’t be influenced by any argument other than whether creditors are to be paid and whether the company can be maintained as a going concern.
So, Liverpool entering into administration (in a legal sense) is not something that automatically comes to pass if RBS takes over the running of the club. At Portsmouth last season, for example, the club didn’t enter into administration as soon as Balram Chainrai took over its running. It entered administration when Andrew Andronikou took over the running of it. If, however, the above process is followed. what may matter will be which company is put into administration. Liverpool’s ownership structure is a predictably complex series of holding companies, but it is Kop Football that is the holding company that owns Liverpool FC. If the holding company is placed into administration, the Premier League will have to decide whether Liverpool Football Club is, as a wholly-owned subsiduary of Kop Football, also insolvent as a result of this decision. They will then have to decide how they wish to act upon this, if at all. The glare of the public eye would be upon them and it would be widely expected that no “favours” would be granted because the club in question is one of its “bigger” ones. Would they have the nerve to see such a scenario through?
There are two opposing views, each relating to events involving specific clubs in recent years, which offer conflicting views of what would happen next. When West Ham United’s holding company entered into administration in November 2008, the club were not penalised by the Premier League because they were not the only business interest that the holding company. On the other hand, however, when Southampton’s former owners attempted to side-step a points deduction by putting the club’s holding company, Southampton Leisure Holdings, into administration, the Football League concluded that the two companies were “inextricably linked as one economic entity” and deducted the points from Southampton anyway. Taking a broader view of proceedings, however, the Premier League seems likely to favour to take a “lighter touch” view on financial problems than the Football League would (it is difficult to imagine, for example, the Premier League handing out the sort of punative points deductions that have come the way of the likes of Luton Town and Rotherham United), so quite what decision would be reached in such a circumstance is anybody’s guess.
In spite of the BBC’s headline, it seems highly unlikely that such a scenario would come to pass. The only interest of RBS is to recoup the money that it has borrowed, and a points deduction would make Liverpool Football Club less valuable than it currently is. We can only speculate as to what, specifically, the terms of the proposed to sale of Liverpool to NESV are, but it seems improbable that they take into account the possibility of the club being deducted nine Premier League points this season. Even without being able to precisely quantify what the “value” of those nine points would be (and bearing in mind that each place in the Premier League is worth £800,000 – the difference between finishing, say, eighth and fifteenth is £5.6m), it would be madness for RBS to step in and take action that would be likely to significantly devalue the very asset that they wish to sell, which a points deduction would certainly do.
The truth of the matter, however, is that Liverpool are sailing close to the wind – at least, far closer than most would have imagined that they could or would have done just a few months ago. There are plenty of villains and potential villains involved in this story, but the ultimate responsibility for this car crash lies with the Premier League and the Football Association. The Glazer leveraged buy-out of Manchester United took place in 2005, and the Gillett & Hicks take-over of Liverpool took place almost two years later. Even now, leveraged buy-outs are not banned under the financial rules of football even though they could be. Ultimately, it is the laissez-faire financial regulation of the game in this country that is responsible for what has been done to both Liverpool and Manchester United more than any individual (or group of individuals) could ever be, and this still doesn’t seem likely to be changed in the near future. As such, supporters of any club could be the next to fall victim to what has befallen Liverpool.