Fourteen Days Left To Save Hartlepool United…? Not Quite.
There has been something distinctly heart-warming about much of the reaction to the growing understanding of the extent of the difficulties faced by National League club Hartlepool United over the last few days or so. In febrile and divisive times it can be difficult to retain the knowledge that, as football supporters, we have considerably more in common than we could ever have between us. We do, though. We are family, ultimately. Some of us remember the offers of help and expressions of sympathy from when our own clubs were teetering on the brink. Some of us merely think, “there but for the grace of God go I.” Football supporters aren’t often celebrated for their compassion, but it’s right there, at times like these.
Over the last few days, headlines have blazed that there are “fourteen days left to save Hartlepool United.” These (presumably mostly) well-meaning headlines have already led to Just Giving pages being set up and other acts of generosity on the part of supporters of Hartlepool United as well as other clubs, but at an emotive time such as this it may be useful to step back and ask some questions concerning what the most effective way of helping Hartlepool United might be. It’s certainly a question that has been vexing some Pools supporters over the last couple of days, after all.
First of all, we have to get through the question of what, exactly, constitutes “Hartlepool United.” On the one hand, it’s a football team with players and staff who do a job for money, money that may not be paid when it next falls due on the twenty-fifth of this month. The sum required to ensure that the club’s obligations are met is reported to be £200,000. Then, of course, there is a thicket of limited companies connected to the club. There’s Hartlepool United Football Club Ltd., the company which holds the right to field a team in the National League every week. Then there’s HUFC Holdings Ltd., the company that bought Hartlepool United FC for a nominal sum at the end of last season. On top of that, there’s Sage Investments Ltd., the company that owns HUFC Ltd., which withdrew future funding from the club in December, the decision which has led to the situation in which we find ourselves today.
Then, however, there is something altogether more nebulous than the registers of Companies House or the eleven herberts who keep losing football matches every week. There is also Hartlepool United, the institution. The football club which has represented the town of Hartlepool since 1908. This version of Hartlepool United is that with which most supporters are the most familiar. It’s the supporters, the blue and white striped shirts, the badge and Victoria Park. It’s the fact that we kind of know roughly where we could find on a map, because they were a Football League club. It is because every club has a story like this that this interpretation of Hartlepool United is that which most supporters likely want to help. Few will feel much sympathy for Sage Investments should the very worst befall the club. They made a business decision – commonly agreed to involve a property development linked to the club – which has not turned out the way those concerned presumably expected. If the phrase “Fourteen days left to save Hartlepool United” is repurposed as “Fourteen days left to pay the basic business overheads of one of Sage Investments’ business concerns”, the idea of emptying coins into a bucket outside Victoria Park before their next home match somehow starts to feel like a little less appealing.
In order to understand the future of the club and what may best be done to help it, we should perhaps attempt to look into the future a little. Supporters of both Hartlepool United and other clubs have already performed some sterling work in raising money for the club, but let’s not presume that on the twenty-fifth of January the money is definitely going to be there to pay the wages or the bills. So, let’s imagine that they don’t raise it. Well, the one thing that we know for certain is that the club will not disappear on that day. Once players start to go unpaid, the contract between them and the club may be considered broken and they would be free to leave to go elsewhere. It’s not a certainty that this would happen to any significant extent, of course. Some may stay out of a sense of loyalty, others in the hope that the situation will resolve itself and that they won’t have to potentially undergo a period without work or having to uproot and relocate, others out of the belief that they may not get a better deal elsewhere and that staying at Victoria Park will be the best calculated risk of those available. Some may leave, others will stay. Attracting new players to replace those that do leave may prove to be a huge challenge, for sure.
An inability to pay outgoings as and when they fall due has a legal name. Insolvency. There has been much talk of the pros and cons of entering into adminstration in football circles for some time, but what does this mean in practice and what would the effect be on the club? Entering into administration is an admission of insolvency. The club appoints an Insolvency Practitioner (IP – also known as administrator) to run its affairs, and the IP’s job is to act to ensure that creditors’ interests are maximised while – hopefully – helping the company to recover, with the intention of selling it on as a going concern. The preferred method of doing this is a Company Voluntary Arrangement (CVA). A CVA is an arrangement by which a company’s creditors agreed to accept a reduced amount which may be paid as a lump sum or over a period of time. The decision on whether to agree a CVA proposal is taken at a creditors’ meeting at which those owed money get votes by a proportion of what they are owed. So, if one creditor is owed 75% of the total debt, they get 75% of the total vote. If the vote is carried, the CVA is adopted and there is no recourse for other creditors unless the IP themself has got something wrong procedurally. CVA proposals are made with a “pence in the pound” offer, and these offers can be exceptionally low. This isn’t always necessarily a terrible thing – in the summer of 2013, for example, creditors – mostly the former owner of the club – of Dunfermline Athletic accepted a CVA offer of zero pence in the pound in order to save the club and pass it into Supporters Trust ownership, and there have been others as well.
The matter of football clubs entering into administration is complex and has both risks and benefits for a club. On the risk side, overall responsibility for running the club passes to the IP, and their first responsibility is to creditors rather than players, directors or supporters. The IP could propose to liquidate the club and sell all of its assets should they choose to. CVAs also only apply to unsecured creditors as well, so those with debts secured against assets of the club – most commonly the ground itself – have to be dealt with separately. There are also further complications exclusive to football. It is standard procedure for governing bodies to demand that “football creditors” are paid in full, a rule put in place to prevent clubs racking up debt in purchasing other clubs’ players and then only paying them a small fraction of this after entering into administration. It’s a controversial rule, and one that has been challenged in court on several occasions by HMRC, but it still exists. Further information on the FA’s standardised rules regarding insolvency events at clubs may be found here, under Section 14. And on top of that, of course, a mandatory ten point deduction which would throw the club deep into a relegation battle at a time when it – both literally and metaphorically – cannot afford to be in one.
There are, however, also benefits to entering into administration. The most obvious is the most pressing. Entering into administration offers automatic security from being petitioned at court over outstanding debts. This applies right up to the last minute, and is pretty much essential with HMRC in the voracious mood that they’ve been in over the last few years. In addition to this, adminstration grants breathing space. The IP could, if they wished, close the club down and liquidate its few assets on the day that they take control of it, but this is highly unlikely in the case of Hartlepool United, a club for which there are few upsides beyond punishment for closing it – and whether those that have got the club into this position would even be punished by it might be considered a moot point by many – while there are benefits to rescuing it as a business if it can be appropriately restructured. A fresh start, with all creditors happy and a feeling that the club is back on an even keel, benefits everybody, ultimately.
But is it worth paying into these Just Giving pages or not, though? Well, that’s a matter of personal preference, though the club should issue a statement confirming that all money collected will be spent on wages and covering the club’s other priority creditors in order to assuage fears of supporters that money given to it will end up paying, say, director loans first. The Hartlepool United Supporters Trust have issued a request to the club to do precisely this today. If the club is to enter into administration, let it happen and pour money into the possibility of the Trust being able to buy a significant shareholding in the club with offers to creditors. The Trust does not wish for the club to enter into administration, and it is completely understandable that they should feel that way. If a solution can be found that doesn’t require it, then it should be pursued because entering into administration only ever benefits a tiny number of those affected by it. The club, meanwhile, finally issued a statement of its own regarding the events of the last few days on Thursday evening, but it didn’t address this subject in any way whatsoever:
The current financial position of the Club is challenging, and we whole-heartedly appreciate the way not only our own fans but fans from other clubs have rallied together to help Hartlepool United Football Club at this time.
Everyone at the Club has worked tirelessly to find a new owner in recent months and this hard work will continue. The current owner has provided significant funding to the Club but unfortunately a change of ownership is required. We need as many genuine people as possible to join together to buy the Club but if a consortium or a buyer cannot be found in the near future, administration is a very real prospect.
In the meantime, thank you once again to all of you who have shown your true heart, your efforts have not gone unnoticed or unappreciated by the Club.
But where does all of this leave Hartlepool United? As of now, the club still hasn’t opened its books for the Trust to see, so why, exactly, anybody should be giving them any money whatsoever is very much open to question. At the time of writing, Hartlepool United’s players and staff are paid up to date, and we shall see what happens on the twenty-fifth of January. But the ultimate fact of the matter remains that it should be the club’s responsibility to pay its players and staff, and that it shouldn’t even need to be down to supporters, Hartlepool supporters or the supporters of other clubs to be digging the club out of this hole. If Sage Investments’ due diligence on the business that they only purchased last year wasn’t fit for purpose, that ultimately is – and should be – their loss.