Developing Public Policy to Encourage Supporter...

DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 1

SupporterS Direct BrieFiNG paper No. 1

Developing Public Policy to

Encourage Supporter Community

Ownership in Football

“It is difficult to think of another social or cultural sector that has as wide a reach, as comprehensive coverage of the nation, as deep historical roots or as big a potential to deliver local social value than football.”

About Supporters Direct

Supporters Direct was formed in 2000 as an initiative of the UK Government. Its goal is to ‘promote sustainable spectator sports clubs based on supporters’ involvement and community ownership’.

Supporters Direct aims to create the conditions in which supporters can secure influence and ownership of their clubs, and campaigns for the wider recognition of the social, cultural and economic value of sports clubs.

It believes that sports clubs and competitions are increasingly being put at risk by short-term vested interests, poor financial management and inadequate standards of governance.

It began its activities in English football but is now working in more than 20 different European countries, and also works in rugby league, rugby union and ice hockey. It has offices in London and Glasgow.

It is a community benefit society registered with the Financial Services Authority and owned by its member supporters’ trusts.

Contents

Executive Summary 4

1 Introduction 8

2 Existing UK Legislation 12

3 New UK Legislation 18

4 Supporters DirectBriefingPaperNo.1

Executive Summary

Thecoalitiongovernment’sProgramme for Government madeaspecificpromiseto:

‘…encouragethereformoffootballgovernancerulestosupporttheco-operativeownershipoffootballclubsbysupporters.’

ThereisadirectrelationshipbetweenthestatedobjectivesofthecoalitiongovernmentandtheaimsofSupportersDirect.ThispaperofferssomepracticalmeansbywhichGovernmentpolicycanbeimplemented.

Supporters, Community and Local Social Value

SupportersDirectcontendsthatcommunitiesoffansshouldbeviewedbypolicymakersasimportant,dynamicandvitaltotheirlocalareas.

SupportersDirectbelievesthatpromotingtheownershipofsportsclubsamongstthecommunitiestheyservehasanumberofbenefitsforthesustainabilityandsuccessoffootballandfootballclubs,aswellastheircommunities.

Existing Company Law

Thereisnothingincompanylawthathelpsdeliverthecoalitionpromiseto‘encouragetheco-operativeownershipoffootballclubsbytheirsupporters’.

Community Asset Legislation

Thereisnothinginexistingcommunityassetlegislationthatgivespreferencetocommunityownershipinsportper se;ortothespecificissueoffootballclubownership,thenatureofwhichpresentschallengesforsupportercommunitieswhomightwishtoavailthemselvesoftheseopportunities.SupportersDirectcallforthesetobeaddressedineitherthelegislationortheguidelinestobeproducedfollowingenactment.

UK Sports Law

SupportersDirectbelievesthat,ultimately,aSportsLawprovidesthemostholisticandlong-termsolutiontoboththeproblemsfacedinthegovernanceofprofessionalfootballandasaroutetoencouragingsupporter


ownership.However,ifthisGovernmentwishesto‘encouragetheco-operativeownershipoffootballclubsbyitssupporters’,thenithastoadoptdifferentapproachesfrompreviousadministrationsinordertofulfilthisaim.

Localism Bill

Itisdifficulttothinkofanotherculturalsectorthathasaswideandfar-reachingpotentialtodeliverlocalsocialvalueacrossthenationthanfootball.

ThepotentialintheLocalismBillisthatitseemstocreateaframeworkinwhichsupporters’trustsareregardedaslegitimatecommunityinterestgroups(CIGs)andfootballgroundsandclubscouldbelistedasassetsofcommunityvalue(ACVs).

However:

l ClearerdefinitionsofbothCIGsandACVscouldallowsupporters’truststobeabletotakebetteradvantageofthelegislation;

l TheLandReform(Scotland)Act2003mayalsoofferawayforward;

l Atpresent,the‘righttobuy’containedintheLocalismBillisinfactlittlemorethana‘righttobid’;

l Initscurrentform,theBillseemstoencompasssupporters’groupsthatarehopingtotakeovertherunningoftheirclubs,butclearerguidelineswillassistthis;

l Thelegislationcouldnotatpresentbeviewedasthemeansbywhichthecoalitiongovernmentcouldbeseentohavefulfilleditspledgesonsupportercommunityownership,buttheweaknessesatpresentcouldbeaddressedintheguidelinestobeproducedafterenactment.

SupportersDirectrecommendsthat:

l Whilstproposalsarecurrentlydraftedbroadlyenoughtoembracesupporters’trusts(basedontheSupportersDirectmodel)asbona fideCIGswhocannominateACVs,itleavesthisdecisioninthehandsoflocalauthorities,whichcanleadtoinconsistency.SupportersDirectbelievesthatitwouldbebettertospecifysomegroups(includingwhatconstitutesagenuinesupporters’trust)withinguidanceand/orregulations.

l Likewise,althoughthecriteriafordefiningACVsarecurrentlystructuredsotheycanincludefootballgrounds,itwouldbepreferabletospecifythemassuch.


l CIGs,includingsupporters’trusts,aregivenagenuinefirst refusaltoensurethatthereisaright to buyandnotjustanopportunity to bid.

l CIGsaregiventherighttopurchasethefootballclubitselfaswellasthegroundasanACV,recognisingtheintegralrelationshipbetweenthetwoandtheirlinkstolocalsocialvalue.

l Supporters’trustsshouldhavefirstrefusalonbuyingmajoritystakesinclubsthatcomeupforsale.

l Critically,onceanACVislistedbyalocalauthority,restrictionsareplacedontheabilityofexistingownerstosecuredebtonitinordertopreventexistingownersmakingapurchasenear-impossibleinachieve.

l Themoratoriumperiodshouldbeaminimumof6months,giventheoftencomplexnatureoffootballclub-relatedfinances,andtheneedtoperformduediligenceinconstructingabusinesscasetopurchasefootballgrounds(andclubs).

l SupportersDirectisassistedinpressuringtheFootballLeagueandPremierLeaguetoamendtheirarticlesofassociationtoallowamutualformofownership(currentlyclubsarerequiredtobelimitedcompaniesandthismayrestrictcommunityownershipopportunities).

l Supporters’trustsaregiventherighttoappealinordertomaintainthelistingoftheirfootballground/clubasanACVbeyond5years.

l Supporters’trustsarerequiredtoproperlydemonstratethecommunityandsocialvaluetheyaredelivering.

l Supportisgiventosupporters’truststopreparethemforthespecificchallengesoflistingandbuyingfootballgrounds/clubs.

Financing Supporter Community Ownership

Big Society Bank

ThemostobviouswayfortheBigSocietyBanktohelpthegovernmentdeliveritspromiseofencouragingsupporterownershipinfootballisforittoenablesupporters’truststoputtogethertherequiredfinancetobuytheirclubasacommunityasset.Onewaytheycoulddothisistofacilitatetheissuingof‘communityshares’.SupportersDirectisrequestingthattheBigSocietyBankprovidematchedfundingtothatcomingfromfootballinordertohelpdeliverthisambition.


Finance from football

SupportersDirectisrequestingthat1%offuturetelevisionincomeisusedtosupportthegrowthofsupportercommunityownership,inconjunctionwithfundsfromtheBigSocietyBank.

Tax Regime

Ifanythingofgeneralbenefittosupporterownershipistobeprovided,anew,specificformofreliefwouldberequired.Asupporters’trustthatmeetstheappropriatecriteriacouldbeapropervehiclethroughwhichataxreliefmightbeimplemented.SupportersDirectbelievesthatthepresentcompaniestaxregimeencouragesbusinesslossestoberunupatfootballclubs(aspartofwidergroupcompanyownership),andthereforediscouragessupporterownership.

Community Shares

Withinsetparameters,thecommunitybenefitsocietymodelusedbythesupporters’trustmovementrepresentsasoundstructureforthedevelopmentofsupportercommunityownershipandsustainablefootballclubs.TheworkoncommunitysharesundertakenbytheDevelopmentTrusts’Association,Co-operativesUKandBakerBrownAssociatesdemonstratesthepotentialthesevehicleshaveforcapitalraising.

Fanshare Regulation

SupportersDirectcallsongovernmenttoworkalongsideit,theFinancialServicesAuthorityandHMRCtoresolveissuessurroundingthetaxandregulationregimescurrentlyappliedtoFanshareschemes.


1 Introduction

1.1 New Government, New Opportunities

TheelectionofthecoalitiongovernmentinMay2010hasresultedinsignificantchangesinthepublicpolicylandscape.Thesechangeshavehadsignificantimplicationsforthefutureoffootball,itssupporters,andtheworkofSupportersDirect,whosemissionisto:

‘Promotesustainablespectatorsportsclubsbasedonsupporters’involvementandcommunityownership.’

Anumberofnewinitiatives,aswellaslegislationandpolicythemes,haveemergedfromthecoalitiongovernment,whichrelatedirectlytothisaimofSupportersDirect.Chiefamongsttheseisthepromisemadeinthecoalitiongovernment’sProgramme for Government,to:

‘…encouragethereformoffootballgovernancerulestosupporttheco-operativeownershipoffootballclubsbysupporters.’

Inaddition,theAgreementalsostatedthattheGovernmentwould:

‘supportthecreationandexpansionofmutuals,co-operatives,charitiesandsocialenterprises,andenablethesegroupstohavemuchgreaterinvolvementintherunningofpublicservices.’

Therefore,thereisadirectrelationshipbetweenthestatedobjectivesofthecoalitiongovernmentandtheaimsofSupportersDirect.Thispaperofferssomepracticalmeansbywhichgovernmentpolicycanbeimplemented.

Theprincipalareasofpolicydevelopmentrelatingtothesetwocoalitionpromisesare:

l TheDepartmentforCommunitiesandLocalGovernment(DCLG)andtheLocalismBillwhichseekstocreatea‘communityrighttobuy’.ThisisexploredinSection3ofthisreport;

l TheDepartmentforCultureMediaandSport(DCMS),andinparticularthecurrentHouseofCommonsSelectCommitteeinquiryintofootballgovernance.AspectsofthisarealsocoveredinBriefing Paper No.2.

There is a direct relationship between the stated objectives of the coalition government and the aims of Supporters Direct.


However,therearealsoanumberofotherareasofpolicydevelopmentwhichrelatedirectlytotheaimsofSupportersDirect.

l TheCabinetOffice/OfficeofCivilSocietyandthedesiretoencourageco-operativeorcommunityenterprisesaspartofthe‘BigSociety’.

l TheTreasury,HMRCandFinancialServicesAuthority,andthefinancialregulationspertainingtomutualsandsupporterownership.

l Citizenshipandvolunteering,andthedevelopmentofaNationalCitizenService.

1.2 Supporters and ‘Community’

‘Community’isatermthatallrecentgovernmentshaveutilisedintheirapproachtopublicpolicy.Itimpliesasenseofbelonging,thesharingofvaluesamongstgroupsofpeople,togetherness,andasharedsenseofpurpose.Itisoverwhelminglyconceivedofasapositivevalue.

TheGovernmentitselfhastalkedoftheimportanceof‘community’inrelationtoownershipoflocal‘assets’:deliveryofpublicservices,improvinglocalareas,makingneighbourhoodssaferandcommunityself-helpprovidinglocalneeds.Theseunderpindiscoursesof‘civil’or‘big’society.

Peoplewhosupportfootballclubs(aswellasothersportsclubs)arebothimportantmembersoftheirownclub’sandlocality’scommunitiesaswell

ascommunitiesintheirownright..Indeed,amongstothersportsandformsofculturalexpression,footballinparticularseemstolenditselftosuchanunderstandingof‘community’.Thereisconsiderablehistorical,sociologicalandappliedresearchthatsupportsthisassertion.

l Sportshistorianshavedescribedhowfootballclubswereoneoftheprincipalagentsthroughwhichcollectivesocialidentitieswerecreatedandreinforced,thusenablingcommunitiesto‘knowthemselves’.1

1 Holt,R.(1989)Sport and the British: A Modern HistoryOxford:OxfordUniversityPress

People who support football clubs (as well as other sports clubs) are both important members of their own club’s and locality’s communities as well as communities in their own right.


l Sociologistshavedescribedhowfootballclubshelptocreate‘collectiveconsciousness’amongsttheirsupportersand‘repairmuch…socialdamagebyenhancingtheculturalbondingandintegrationofdisparateindividualswithinmodernsocieties’.2

l InSubstance’sresearchfortheFootballFoundation,Football and Its Communities,itwasarguedthat,evenincontemporarysociety,forfans:

‘beingafootballsupporterisaregular,structuringpartoftheirliveswhichenablesthemtoexperiencearealsenseofbelonginginanotherwiseuncertainworld….beingpartofafan‘community’isfarmoresubstantialthanmerelyanescapistformofmomentarybonding…[andis]basedon‘thick’tiesoffamily,kinship,friendshipandneighbourhood.’3

WesummarisewhyfootballshouldberegardedwithincontemporarypolicyframeworksinSection3ofthisreport.However,itisimportanttostateat

theoutsetthatitisSupportersDirect’scontentionthatcommunitiesoffanswhichformaroundfootballclubsshouldbeseenbypolicymakersasimportant,dynamicandvitaltotheirlocalareas,inthesamewayasothercommunitygroupingsbuiltaroundlibraries,publichouses,parksorother‘assetsofcommunityvalue’.

RecentresearchcommissionedbySupportersDirect,The Social and Community Value of Football,concludedthat:

Inanageofincreasingglobalisation,foreignownershipofEnglishclubs,debtandaperceptionofgrowingdistancebetweenclubsandsupporters,itisimportanttonotethatfootballclubsremainkeyplayerswithinlocalcommunities.4

2 Giulianotti,R(1999)Football: A Sociology of the Global Game, Polity:143 Brown,A,Crabbe,TandMellor,G(2006)Football and its Communities, London:Football

Foundation4 Brown,A(2010)etal,The Social and Community Value of Football, London:SupportersDirect

Supporters Direct believes that promoting the ownership of sports clubs among the communities they serve, notably their supporters, has a number of benefits for the sustainability and success of football and football clubs.


Furthermore,SupportersDirectbelievesthatpromotingtheownershipofsportsclubsamongstthecommunitiestheyserve,notablytheirsupporters,hasanumberofbenefitsforthesustainabilityandsuccessoffootballandfootballclubs,andthegenerationofwidersocialvalueforthecommunitiesinwhichtheyaresituated.Keyadvantagesofsupportercommunityownership5identifiedbySupportersDirectinclude:

l Clubs are able to integrate a variety of interests intothedecision-makingprocessesofclubs,creatinglongertermthinkingandmoresustainablefutures.

l Clubs can deliver greater social valuetotheirlocalitiesandvariousstakeholders,helpingtocreatecommunitycohesionandidentityformation.

l Community ownership adds value to enterprisebyunlockinggoodwillonthepartofsupportersandwiderprivate,commercialandpublicentities.

l Community ownership of clubswithinthedemocraticstructuresofsportsgoverningbodiesmeansthatsportsarethemselvesbettergoverned.

5 Thistermbuildsonworkbyresearchco-operativeSubstancethatidentifiedsupportersascommunitiesthatareroutinelyneglectedwithinclubs’formulationsofcommunitywork(seeBrown,CrabbeandMellor(2006)Football and its Communities, London:FootballFoundation).Supportercommunityownershipisusedtomeaninstanceswheresupportershavedemocraticandconstitutionalmeanstoinfluencetheclub’soperationsandstrategy.

Themostcommonmeanswouldbethroughasignificantstakeinthehandsofademocraticsupporters’trust(oritsmembers),withsignificancebeingwheretheclubhasnodominantownerorownerswhomakekeydecisionsandwherethetrust’sstakegivesthemrealinfluenceatboardroomlevel,uptoandincludinghavingamajoritystakeintheclubandontheboardofDirectors.

SupportersDirect’spreferenceisformodelsbasedonco-operativeandmutualstructures,withaclubboardaccountabletoitsmembers,butwithawidevarietyofcircumstancesatclubs,werecognisethatthereareotherstructureswhichmightdeliversimilarfeatures.Mostimportantoftheseisaboardaccountabletoanownershipbasefeaturingstrongrepresentationfromthesupporterbase,withnodominantownerordominantsmallergroupofshareholders,whichcanencompassclubsrunasmembersclubsorcompanieslimitedbyguarantee.


2 Existing UK Legislation

2.1 Company Law

IntheUKfootballclubs,likeallotherbusinessess,aresubjecttoUKcompanylaw.ThedominanceoftheprivatelimitedcompanyasthecorporateformofchoiceforBritishfootballclubsmeanstheyaretreatedexactlythesameasothercompanies.Successisdefinednarrowly(intermsoffinancialperformance)andthefundamentalbasisforthedutiesofdirectorsistherequirementtoservetheinterestsofshareholders,whichisalsopursuedinnarroweconomicterms.Thereisnorequirementtoreportontheirwidersocialorculturalrole,oronlevelsofcommunityengagementandownership(unlesstheyarespecifiedascompanyobjects).Attemptsatbroadeningresponsibilitytoembraceotherstakeholders(suchasthatintheCompaniesAct2006)havenotbeensuccessful.

Existinglegislationonthevariousmeansofbuyingandultimatelyowningandoperatinganundertakingisthereforeneutralasregardsthepossibilityofeitherasupporters’orcommunitygrouptakingoverafootballclub.Bythesametoken,there

isalsonothingtostopsuchagroupfrompurchasingaclubfromitscurrentowners.Theonlyrestrictionsarethoseimposedbythefootballauthorities–andnotthelaw–regarding,forexample,theappropriatenessofpurchaserstorunafootballclubandtheirneedtocomplywiththeOwners’andDirectors’Test.6

Whereaclubisintheprocessofdisposalbyitscurrentowners,thoseownersareeitherunderaprima faciedutytomaximiseshareholdervalue,orifwhollyownedtomerelysatisfytheirowninterestsandwishes.Theyhavenolegalobligationtoconsiderthelongterm,sustainableinterestofthatclub,oritscommunities.

Essentially,thereisnothingincompanylawwhichhelpsdeliverthecoalitionpromiseto‘encouragethemutualownershipoffootballclubsbytheirsupporters’.

6 Football League Handbook 2010-2011, Appendix4andPremier League Handbook 2010-2011 RuleD2.

Essentially, there is nothing in company law which helps deliver the coalition promise to ‘encourage the mutual ownership of football clubs by their supporters’.


2.2 Local Assets

Therehasbeenagrowinginterestoverthepreviousdecadeinregardingdesignatedsites,businessesorbuildingsasformsof‘communityasset’.Section2oftheLocalGovernmentAct2000gavelocalauthoritiesthepowertoundertakeactionstheyconsiderlikelytoenhancetheeconomic,socialorenvironmentalwell-beingofitsarea.TheLocalGovernmentAct1972:TheGeneralDisposalConsent(England)2003gavelocalauthoritiesfreedomtodisposeoflandatlessthanthebestpriceandgrantaleaseinexcessofsevenyears,whereitcouldbedemonstratedthatitcouldhelpsecurethepromotionorimprovementoftheeconomic,socialorenvironmentalwell-beingofitsarea.

‘Communityassettransfer’,asitcametobeknown,allowedlocalauthoritiestotransferlandorbuildingsfromthemselvestoacommunity,voluntaryorothernon-statutoryorganisationeitheronleaseholdover25yearsorfreehold.

GiventheprivateownershipoffootballclubsintheUK–andinthemajorityofcasestheprivateownershiporlong-termleasingoftheirgrounds–ithastodatehadlittlerelevanceinencouragingcommunityownershipoffootballclubs.

Assuch,thereisnothinginlocalassetlegislationthatgivesparticularpreferencetocommunityownershipinsportper se,andthecharacteroffootballownershipinparticularmeansthatithasevenlessrelevance.TheLocalismBill,whichisexploredinthenextsection,hasthepotentialtohaveagreaterimpact.

2.3 Sports Policy and Sports Law

TherehavebeenanumberofoccasionswheretheUKGovernmenthaspassedlegislationspecificallyrelatingtosport–andinparticularfootball.Theseinclude:

l TheSafetyatSportsGroundsAct1975l TheFootballSpectatorsAct1989l Football(Offences)Act1990l FootballDisorderAct20007

7 Seefurther:M.James,Sports Law,(PalgraveMacmillan2010)chs9and10.


However,thereisnolegislationthatseekstoregulatefootball,orsport,inordertopromoteparticularformsofownership.Thereisalsonothingincurrentlawthathelpsthegovernmentdeliveritspromiseofencouragingsupporterownershipinfootballclubs,leavingfew–ifany–specifictoolstoshapesportinresponsetothesepublicconcerns.

Thus,themoststraightforwardwayforthegovernmenttodeliveronitspromisetoencouragetheco-operativeownershipoffootballclubsbysupporterswouldbetoenactlegislationtodoso.Intheory,therewouldbenothingtostopParliamentenactingprimarylegislationthat

soughttopromotethesupporterownershipoffootballclubsspecifically,orthatsoughttocreateaspecialstatusforsportsclubsaslocalcommunityassets.

Todosowouldrequiresomelegalteststobemetconcerningrestrictionsonprivatepropertyownership–whicharediscussedinrelationtothe‘righttobuy’below–anditwouldhavetosatisfybothEuropeanandFIFAregulationsaboutinterferenceinfootball.However,recentstatementsbyUEFAsuggestthatsuch‘interference’wouldnotbeanissueandindeedthatsports-specificlawtoenforcefootballgovernancereformwouldbewelcomed.8

2.3.1 A Sport Law for the UK?

Anotherwayinwhichsupporterownershipinfootballcouldbeencouragedisthroughachangeinthelegislativerelationshipbetweenthestateandsportinthiscountry.Admittedly,suchachangeislikelytotakesometime,andwouldrequireaconsensusacrosstheworldofsport.Afullexplorationofthepossibilitiesisbeyondthescopeofthispaper.However,weprovidesomethoughtsonthisbelow.

i) What would the long-term aim of a Sports Law be?

Onewayinwhichbothsupporterownershipandwiderconcernsaboutthegovernanceoffootball(andsport)couldbeaddressedwouldbeforParliamenttoenactaSportsLaw.Parliamentissovereignandcancreatenewlawsatanytime,providedtheyareincompliancewiththeUK’svariousinternationaltreatyobligations.

8 ‘SportslawtoforcethroughreformofFAwouldbewelcomedbyUEFA’,Guardian23rdMarch2011

The most straightforward way for the government to deliver on its promise to encourage the co-operative ownership of football clubs by supporters would be to enact legislation to do so.


Theadvantagesofthiscouldinclude:

l Provisionofaframeworkforgovernanceofallsports,similarinscopeandpurposetothe‘LoiduSport’inFrance;

l ItsscopecouldbeaswideorasnarrowasParliamentconsiderednecessaryandappropriate;

l Itcouldprovidefortheincreasedregulationofgoverningbodies,andrequirestandardlegalformsandprocessestobeutilisedbysportsgoverningbodies;

l Itcouldcreatenewlegalformsforsportsclubs,enablinggreatersupporterinvolvementintherunningofsportandownershipofsportsclubs.

SupportersDirectadvocatesaSportsLawthatwill:

l Recognisethatsportisaspecificanddiscretesectorofculturallifewhichisincrucialareasfreetobetreateddifferentlythanothercommercialsectors;

l Providelegalcertaintytogoverningbodieswithregardstotheirregulatoryrole,whilstfacilitatingthemeanstoensurethosegoverningbodiesareactingproperly,proportionatelyandinthewiderpublicinterest;

l Providestatutoryforceforthespecificityofsportanddiscouragesuddenlegalchangebasedoncaselaw;

l Createspecificlegalvehiclesforsportsclubsthatenablethemtobetterbalancecommercialactivitieswiththeirsportingandsocialpurposes.

ii) A Long Game

Sportis,ofcourse,subjecttothelawandmustcomplywithitatalltimes.Further,initsapplicationtosportthelawacknowledgesthatvariationsfromthenormmayattimesbebothnecessaryandproportionate(suchasthefootballspectatorlegislationmentionedabove).

Theenactmentofsuchfar-reachinglegislationwouldrequireafundamentalchangeinParliament’sattitudetosport.UnlikemanyEuropeanjurisdictions,sportintheUKhasalwaysbeenconsideredtobeaprivateactivitywithtraditionallyaminimallevelofstateinvolvement;meaningthatParliament

Unlike many European jurisdictions, sport in the UK has always been considered to be a private activity with traditionally a minimal level of state involvement.


hasbeenextremelyreluctanttolegislateforsportinallbutthemostexceptionalofcases.ThetraditionaldemandwithinsportthatitsresponsibleministerhaveCabinetstatusmissesthebiggerpointthat,regardlessoftheirrank,withoutlegislationtheywillstillhaveveryfewpowerstoact.

Thus,todatetherehasnotbeenthepoliticalwillorthenecessarystakeholdersupportfora‘SportLaw’.Thatisnottosaythatthiscannot,orwillnot,happenbutinorderforittodoso,itwillrequire:

l Extensivelobbyingfromallsectorsofallsportsandalloftherelevantstakeholdersinsport;and

l Forsporttooccupyamuchmoreimportantpositiononthepolicyagendathanithaseverpreviouslymanaged.

Thatsaid,SupportersDirectbelievesthatultimatelyaSportsLawprovidesthemostholisticandlong-termsolutiontoboththeproblemsfacedinthegovernanceofprofessionalfootballandasaroutetoencouragingsupporterownershipofclubs.

iii) Interim Measures

IntheshortertermSupportersDirectcallsontheGovernmenttofulfilitsCoalitionProgrammepledgetoencouragesupporterownershipthroughaninvestigationofthefollowingmeasures:

l Creationofanewlegalformbywhichsportsclubsareownedrequiringaminimumdegreeofsupportercommunityownership;

l Creationofameansbywhichfootball’sregulation(somethingwhichisinthewiderpublicinterest)canbeensured,includingalicensingsystemforclubsthatenshrinessupportercommunityownership.WesuggestParliamentshouldlegislatetogiveministerspowertoreformfootballgovernanceifthegameiseitherunwillingorunabletodoso.WeexplorethisfurtherinourBriefing Paper No.2 onfootball’sregulation;

l Identifyfootballgrounds,clubsandfansascommunityformationswithinnewlegislation(seesection3ontheLocalismBill).

2.4 The Problem of Neutrality

Theproblemswiththe‘neutral’legalstatusoffootballclubsandtheabsenceofmeasuresencouragingsupportercommunityownershiparetwofold.Firstly,itdoesnothingtoencouragesupportercommunityownership–andthereforedoesnotassistinachievingtheCoalitionAgreementpromise.


Secondly,supportercommunitiesoftenfacesignificantdisadvantagescomparedtootherpotentialownersoffootballclubs–suchastheabilityofotherownerstooperateatalossthatiswrittenoffagainstwidergroupprofits,whichwediscussbelow.

Someofthesedisadvantagesarecommontomanycommunity-basedmutualorganisations–theyarelargelyvoluntary,oftenpoorlyresourcedandfacerestrictionsonthewaysinwhichtheycanraisefinance,leadingtothembeingcomparativelyunder-capitalisedrelativetothealternativebidders.Othersarespecifictofootball,especiallywhereaclubisinadministrationorforsale–supporters’trustscanbecompetingagainstindividualsorconsortiathathaveaccesstocapitalthroughownershipofotherassets.Also,judgementsbyadministratorsorvendorsaboutwhoisbestplacedtotakeoveraclubarealmostalwaysmadepurelyonmarketvalueatthatparticularpointintheenterprise’scycle,ratherthanthebroadersocial,culturalandsustainabilityadvantagesthatsupporters’trustscandeliverinthefuture.

Asuccessionofgovernmentshaveconsideredtheissueofbothsupporters’involvementinfootballandtheroleoffootballclubswithintheircommunities,rangingfromtheLordJusticeTaylor’sInquiryintotheHillsboroughDisasterandtheFootballTaskForcefrom1997-2000.Despitenumerousrecommendationsofhow

thegamecouldbetterreflectthewiderinterestsofsupporters,noneofthesehaveresultedinpolicyorlegislativechangesthatencouragesupportercommunityownershipinfootball.

Indeed,callsforsupporterrepresentationdateasfarbackastheChesterReportin1968,whichrecommendedsweepingchangestotheFA’sgovernance,tightercontrolsoverclubfinancialmanagementandsupporterrepresentationontheboardsofclubs.Despitegovernmentsupportforchangeatthetime,nothingwasimplemented.

ThekeyconclusionisthatifthisGovernmentistofulfilitspromiseto‘encouragetheco-operativeownershipoffootballclubsbyitssupporters’,thenithastobothsummonupthepoliticalwillandadoptdifferentapproachesthanpreviousadministrationsinordertodoso.

Inthenextsectionweconsideranumberofnewlegislativeandpolicyinitiativesthatcouldhelpchangethis.

Supporters Direct believes that ultimately a Sports Law provides the most holistic and long-term solution to both the problems faced in the governance of professional football and as a route to encouraging supporter ownership of clubs.


3 New UK Legislation

3.1 The Localism Bill

TheLocalismBillwasintroducedbeforeParliamentinDecember2010andisexpectedtoreceiveRoyalAssentinautumn2011,withtherighttobuyelementscomingintoforceinApril2012.Aconsultationdocument,Proposals to Introduce a Community Right to Buy – Assets of Community ValuewasreleasedbytheDepartmentforCommunitiesandLocalGovernmentinFebruary2011.

Initsstatedaimofcreatingameansbywhichcommunitiescanidentifyandlistassetsofcommunityvalue,andalsogivethemtherighttobuythoseassetsandrunservices,itistheareaofnewlegislationthatperhapsoffersthemostpotentialforencouragingandfacilitatingtheownershipoffootballclubsbycommunitiesofsupporters.

3.1.1 Context

TheLocalismBillneedstobeseenwithinthebroadercontextoftheCoalition’sstatedaimto:

l Encouragedecentralisation,transparencyandnewfinanceinpublicservicedelivery;

l Creategreaterlocalinvolvementinthedeliveryof‘publicservices’;

l ‘Empowercommunities’toimprovetheplatformforsocialenterprise,co-operativesandcivilsocietyorganisationsintenderingforpublicservicecontracts;

l Encourage‘civilsociety’organisations(charities,communityorganisations,co-operativesandsocialenterprises)especiallyinthedeliveryoflocalservicesandinincreasing‘citizeninvolvement’;

l Creategreatersocial,environmentalandeconomicvalueinlocalities;

l Increaselevelsofgivingandmutualsupportinoursocietyandcatalyseacultureshiftthatmakessocialactionasocialnorm.

Theseaimshavebeenpositedwithinawiderbriefto‘decentralise’powerandempower‘communities’:

‘ThegovernmentbelievesthatitistimeforafundamentalshiftofpowerfromWestminstertopeople.Wewillpromotedecentralisationanddemocraticengagement,andwewillendtheeraoftop-downgovernmentbygivingnewpowerstolocalcouncils,communities,neighbourhoods


andindividuals.Wewillintroducenewpowersandopportunitiestohelpcommunitiessavelocalfacilitiesandservicesthreatenedwithclosure,andgivecommunitiestherighttobidtotakeoverlocalstate-runservices.’9

Aspartofthis,theCoalition Programme for Government pledgedto:

l ‘Givecommunitiestherighttobidtotakeoverlocalstate-runservices’;

l Introducenewpowersforcommunitiestosavelocalfacilitiesandservicesthreatenedwithclosure;

l Supportthecreationandexpansionofmutuals,co-operatives,charitiesandsocialenterprises;

l Givecommunitiesthetimetobidtobuyandmanageassetsthatwouldotherwiseclosedown.

Theseaimsarebeingpursuedthroughanumberofinitiatives,notably:

l TheLocalismBilll TheGreenPaperonModernisingCommissioningl TheGreenPaperonGiving

TheGovernmentusestheterm‘differentlyorbetter’todescribethetypesofapproachesandbusinessmodelstheyexpecttoencouragethroughthesemeasures,includinginnovation,social/communityvalueandresponsiveness.Thisapproachhasbeencriticisedasbeingdifficulttoimplementatatimeofwidespreadcuts,10basedonabeliefthatthe‘thirdsector’candeliver‘moreforless’11

andisa‘shorthandforcheaper’.Cost-savingiscertainlyanelementofthegovernment’sapproach:‘introducingacommunityrighttochallengewill…helplocalpublicbodiesmakesavings’.12Nonetheless,itisanapproachthatseemstoofferdistinctpossibilitiesforsupporters’trustsasorganisationsthatare‘alternative’andsociallyresponsive.

9 Thecoalitiongovernment(2010)Our Programme for Government10 PhillipBlond‘BigSocietyunderpressure’GuardianOnline24thJanuary2011

http://www.guardianpublic.co.uk/tory-advisers-raise-big-society-concerns11 StephenBubbspeechtoAcevo27May2010‘BigSocietyfromromanticismtoreality’,

availableathttp://www.acevo.org.uk/Document.Doc?id=682andPublicFinance23rdSeptember2010http://www.publicfinance.co.uk/features/2010/09/the-big-issue/

12 DCLGLocalism Bill: community right to buy Impact assessment

The clear potential in the Localism Bill for Supporters Direct, supporters’ trusts and football supporters more generally is that it may be possible for them to identify football clubs or their grounds as Assets of Community Value; and be given the ‘right to buy’ them under certain conditions.


3.1.2 The Localism Bill and Community Ownership in Football

i) The Potential

TheclearpotentialintheLocalismBillforSupportersDirect,supporters’trustsandfootballsupportersmoregenerallyisthatitmaybepossibleforthemtoidentifyfootballclubsortheirgroundsasAssetsofCommunityValue;andbegiventhe‘righttobuy’themundercertainconditions.

Further,forfootballclubsmoregenerallythereisthepotentialforthosethatareconstitutedasmutuals,orforfootballclubcommunitydepartmentsformedascharitabletrusts,tobidtorunlocalservicesas‘civilsociety’organisations.However,inorderforthispotentialtoberealised,furtheranalysisisneededofthepoliticalandlegalcaseforasupporters’righttobuy,thecurrentprovisionsandpotentialchangestothoseprovisions.

ii) ‘Right to Buy’ – The Case for Football as an ‘Asset of Community Value’

IntroducingtheabilitytonominateandlistfootballclubgroundsasACVsandgivesupporters’truststhe‘righttobuy’them–inthecaseofdisposal,administrationorbankruptcy–canbejustifiedonanumberofgrounds.ThemostobviousisthattheCoalitionhaspromisedtofindwaysofencouragingthe‘co-operativeownershipoffootballclubsbysupporters’.WhilsttheProgramme for Governmentmakesspecificreferencetothegovernanceoffootball,inmanywaystheLocalismBilloffersamorerealisticandeasyroutetothatend.

Inorderforthistoberationalised,weneedtoconsiderreasonswhyfootballshouldbeconsideredalongsidepostoffices,shops,pubsandlibrariesasvitalcommunityinstitutions.

Firstly,footballisthenationalsportandengagesmorepeopleasplayers,spectators,consumersandprofessionalsthananyother.IthasbeenacentralpartoftheculturallifeoftheUKsincethelate19thcentury

andhasrootsthatspreadintoeverycornerofthecountry.Indeed,therearemanymoreplaceswithoutalibrary,shoporpostofficethantherearewithoutafootballclub.

Secondly,footballclubsareimportanthistoricalinstitutionswithintheirlocality.Bornascommunityorganisations(mostlyinthelate19thcentury)theycamefromchurches,workplacesandfactoriestoplayacentralroleintheformationoflocalcommunityidentity.Theyarealsosportinginstitutions

Football is the national sport and engages more people as players, spectators, consumers and professionals than any other.


asmuchasfinancialones.ThisissomethingthatusedtobeenshrinedwithintheFootballAssociationRule34(whichpreventedpaymentofdirectorsanddistributionofprofittoprivateshareholders13)buttherulewasabolishedinthe1990s.

Thirdly,thereisahugevolumeofresearchwhichsuggeststhatfootballclubscontinuetoactasafocalpointforanumberofdifferentcommunityformations,includinglocalresidents,businessesandsupporters14aswellaslocalauthorities.Indeed,thebenefitsofclosecollaborationbetweenlocalauthoritiesandsupportercommunityownedfootballclubshasbeenhighlightedinSupportersDirect’sresearchintofootball’ssocialvalue:

‘Althoughgenerallyrelationshipswithlocalauthoritiesweredescribedaspositive,therewasasenseofgreatersharedagendasandpartnershipsinthesupportercommunityownedclubsthaninothers…Thissuggestsaroleforlocalauthoritiestofurtherdeveloprelationshipswithclubsand,whereopportunitiesarise,derivevaluefromassistingorencouragingsupporterownership.Thereareimportantadvantageshereforlocalauthoritiesworkingwithsupportercommunityownedclubstorealisetheirownagendas.’15

Fourthly,footballclubscandeliversignificantsocialvaluetotheircommunitiesinbothinstrumentalandintrinsicways.

l Instrumentally,footballhasdevelopedanextensiverangeofcommunitytrustsandcharities,programmesandprojectsthatseektoinfluenceorchangethelivesoflocalpeoplethrougheducation,sportdevelopment,crimereductionandhealthwork.16

l Intrinsically,thecorebusinessoffootballclubscandeliversocialvaluetolocalcommunitiesthroughitsday-to-dayoperation:aslocalemployersandcompaniesthatdeliverlocaleconomicbenefit;tosupportersasasourceoflocalprideandidentification;andasstrategicallyimportantlocalinstitutionsthatdevelopnewfacilitiesoractasthehubforarangeofinstitutionalrelationships.17

13 Conn,D.(1997)The Football Business; Brown,A.(2000)‘Takentotask:TheFootballTaskForce,governmentandtheregulationofthepeople’sgame’inGreenfield,S.andOsborn,G.(eds.)Law and Sport in Contemporary Society, London:FrankCass

14 Brown,A.Crabbe,T.andMellor,G.(2006)Football and its Communities, London:FootballFoundation

15 BrownA.etal(2010)opcit,London:SupportersDirect:5316 FootballFoundation(2009)Kickz Progress Report: Monitoring and Evaluation 2009, London:

FootballFoundation.PremierLeague(2009)Creating Chances Report; PremierLeague(2006)TheF.A.Premier League Community Report 2005/06.

17 Brownetal(2010)opcit:56


Finally,footballclubsareimportantcommunityorganisationsforindividuals,playingastructuringpartinsupporters’livesasthesiteforthedevelopmentoffamilyrelations,wide-rangingfriendships,leisureactivityandculturalidentity.ThesurveyofsupportersconductedforSupportersDirect’ssocialvalueresearchconcludedthat:

‘Thevaluefansderivefromclubsarethereforeallspecificallysocialaspectsintermsofthebenefitsfansfeeltheyreceivefromthem.Thisindicatesthatthewayfansvaluetheirclubsisintermsofthesocialbenefitstheygetfromthem–atogetherness,belongingandsenseofbeingpartofsomethingtightknit.Theseareallaspectsweassociatewiththepositivenotionsofcommunityanditsuggeststhatforthesestakeholders,clubsneedtobeunderstoodaspredominantlysocialinstitutions,notasbusinessones.’18

Inshort,itisdifficulttothinkofanothersocialorculturalsectorthathasaswideareach,ascomprehensivecoverageofthenation,asdeephistoricalrootsorasgreatapotentialtodeliverlocalsocialvaluethanfootball.

Ofcourse,footballcanalsoplayanegativeroleincommunities–attimesasasourceofcrimeandanti-socialbehaviour–butalsoasasourceofdisillusionmentanddisenfranchisement.Thedevelopmentofclubsaslargecommercially-driven

organisations,theacceleratednatureofthatcommercialisationinthe1990sand21stcentury,andtheconcomitantandreciprocalstrugglesofmanysmallerclubstosurvivealsomeanthatthe‘socialvalue’thatcanbederivedfromfootballislimited,curtailedandunderthreat.81clubswhichhaveplayedinthetopfivedivisionofEnglishfootballhavesoughtprotectionfromcreditorssincethecurrentinsolvencyregimewascreatedin1986.

Theco-operativeownershipoffootballclubsviasupporters’truststhusoffershugebenefitsnotonlytothewaythatthegameisrun,butalsotolocalcommunities.Indeed,thisasmuchhasbeenrecognisedbythespecialstatusandfocusplaceduponsupportercommunityownershipintheCoalition Programme.Suchownershipalsohasdistinctbusinessadvantagesincludingsustainability,somethingsetoutinSupportersDirect’sBriefing Paper No.4 – The Business Advantages for Supporter Community Ownership.

18 Ibid:32

The co-operative ownership of football clubs via supporter trusts thus offers huge benefits not only to the way that the game is run, but also to local communities.


iii) Right to Buy – The Legal Context

Inorderforfootballsupporterstobegivena‘righttobuy’theirclubs,thereareanumberofrelevantlegalargumentswhichneedhighlighting.InAugust2010,CobbettsLLPoutlinedtheseintheirpaperA Fan’s Right to Buy – Making it Happen.

Company Law

IntheirpaperCobbettspresentedthebasisonwhichclubsareownedatpresent:

‘Thereisanunderlyingassumptionthatthereisapublicinterestinallowingownersofpropertyfreedomtoexploitanddevelopthatproperty.Thishasbeenthethrustoflegislationsinceatleasttheindustrialrevolutionandstateinterferencewithprivatepropertyrightshasbeenextremelylimitedandalwaystoserveaclearpublicinterest.Furthermore,wherepropertyhasbeentakenoutofprivatehandsithasalmostinvariablybeentransferredtopublicownership,bywayofexampleunderthecompulsorypurchaseoflandregime.Itisthislegalandsociologicalstructurewhichmakestheconceptofasupporters’righttobuyinfootballcontroversial.’

Cobbettsoutlinedtwooverarchinglegalrequirementsthatneedtobemetforasupporters’righttobuytobeenacted,giventheprovisionsoftheHumanRightsAct1998,Article1,namelythat:

l Anyinterferencewiththerightsofownersofclubstopeacefulenjoymentoftheirpossessionswillhavetobeinpursuitofaclearlyidentifiedpublicinterestand‘subjecttotheconditionsprovidedforbylaw’;

l Anylawsaimedatcontrollingtheuseofpropertywillhavetobe‘inaccordancewiththegeneralinterest’.

Supporters’ trusts

Thepapergoesontoarguethatfootballmeetsthesetestsintwoprincipalways:

l Thatfootball‘bringscommunitiestogether’,apointthatrelatescloselytothewiderargumentsmadeabove;

l Thatsupporters’trustsusingthemodelrulesdevelopedforSupportersDirectembodythedeliveryofawidercommunitybenefit(orgeneralinterest)intheircorporateformofcommunitybenefitsociety,astheyare‘requiredbystatutetooperateforthebenefitofthecommunityandnotforthebenefitofitsmembers’.


Legal Framework

CobbettsusetheexampleoftheLandReform(Scotland)Act2003asaprecedentforhowsuchlegislationmightbedeveloped.Thisisbecauseitallows:

l Theregistrationofa‘communityinterest’inlandwiththeconsequencethatthelandcannotbesoldexceptthroughtheproceduresetoutintheAct;

l Thecommunitytohavetherighttobuythelandprovidedthecommunityhasvotedtodoso;

l Thepurchasepricetobeagreedbetweenthelandownerandthecommunityorfixedbyanindependentvaluation.

Anumberofparallelsareoutlinedwithapotentialsupporters’righttobuy:

l Theneedforaconstitutedcommunitybodythatcannotdistributesurplusfundsandassetstoprivateindividuals(members)butmustuseitforcommunitybenefit(whichcanbeprovidedthroughastatutoryassetlockinsupporters’trusts);

l Thatthecommunitybodymustdeliversustainabledevelopment(providedforintrustObjects);

l Thatasignificantnumberoftheindividualshaveadirect‘substantialconnection’totheassetinquestions(thattrustsembodythroughsupporters’connectionstoclubs)

l Thatthecontrolonuseofprivatepropertyisbasedona‘generalinterest’(asreferredtoabove);

l Thattheconditionsforthistotakeplacearebasedinlawandtheseareconsistentwithother(includingEuropean)law.

Capacity and Delivery

Finally,Cobbettsarguedthatany‘righttobuy’forsupporterswouldhavetoentailanumberofconditionsforsupporters’trustsiftheyweretobethevehicle:

l Thecapacitytomeetlegislativerequirements(suchasraisingfinance);

l Thattheyareopentoallmembersofthecommunity;

l Thattheycandevelopasustainablecommunitybenefitstrategy;

l Thattheycanmeasureandreportthesocialandeconomicbenefitstheydeliver(suchasthroughrobustmonitoringandevaluationandsocialauditing).


3.1.3 The Localism Bill and a Supporters’ ‘Right to Buy’?

i) Provisions

TheLocalismBillPart4Chapter4containstheprincipalelementsofthecommunity‘righttobuy’proposals.Itprovidesforlandtobeidentifiedas‘landofcommunityvalue’andClause71givestheSecretaryofStatethepowertodetermineregulationsspecifyingcriteriaforthis.TheBillaspresentlydrafteddoesnotimposeanyrestrictiononthepowersoftheSecretaryofStateindefining‘landofcommunityvalue’.

TheParliamentaryresearchpaperrelatingtotheBillgivesexamplesofcommunitiesbeingabletotakeoverfailingfacilitiesthatareotherwiselikelytoclose,orlandandbuildingsthatarealreadyunusedorderelictandwhichcouldbeputtobetteruse

bythecommunitiesinwhichtheyarebased.19

Theschemewillenablea‘communitynomination’tobemadebyparishcouncils,localresidentsorcommunityorganisationstoapplytolocalauthoritiestohavelandand/orbuildingsregisteredas‘AssetsofCommunityValue’(ACV).WherepropertyisenteredontothelistofACVs,theownerwillnotbeallowedtodisposeofthatlandorbuildingwithoutfirstnotifyingthelocalauthorityoftheirintentiontodoso.Atthisstage,acommunityinterestgroupcanmakeawrittenrequesttobetreatedasapotentialbidderfortheACV.

Itshouldbenotedthatatpresent:

l ACVscanbedesignatedlandorbuildings,butnotservicesorbusinesses(althoughthesemayalsobeacquiredormaybeintegral);

l Thenominationistobemadebyacommunityinterestgroup(CIG)viathelocalauthority,whowillhavesomediscretionastowhattheyaccept–ornot–asanACV

l Clause79oftheBillprovidesthataCIGmeans‘apersonspecified,orofadescriptionspecified,inregulationsmadeby[theSecretaryofState]’.TheBillimposesnorestrictionsonthepowerofdefinition,whichislikelytobedeterminedinsecondarylegislation.

19 HouseofCommonsLibrary,Localism Bill: Local government and community empowerment [Bill No. 126 of 2010-11] Research Paper 11/02,p48,availableat:http://www.parliament.uk/briefingpapers/commons/lib/research/rp2011/RP11-002.pdf.

The Parliamentary research paper relating to the Bill gives examples of communities being able to take over failing facilities that are otherwise likely to close.


TheprocessisoutlinedintheBillasfollows:

i) ACIG(withanappropriateamountoflocalsupport)willnominateanassettoitslocalauthority;

ii) IfthelocalauthorityacceptsitasanACV,thenitmustlistitassuchforaperiodoffiveyears,aswellaspublishitandinformtheownerthatithasbeenlisted;

iii)Anownermayappeal(althoughthisprocessandthebasisonwhichappealsaremadearenotclear);

iv)AownerwhowishestosellisthenpreventedfromdoingsointhenormalwaybutmustsubmitittoaproceduretogivetheCIGa‘windowofopportunity’–onceanassetcomesupforsale–toorganiseandfundraisesotheycanbidfortheasset;

v) Theprocedurewillinvolve:– Theownernotifyingthelocalauthorityoftheirintentiontosell;– Aninterim‘windowofopportunity’beingprovidedforCIGsto

expressaninterestintheasset;– Ifnoexpressionisreceivedtheownercansellasnormal;– Ifanexpressionisreceiveda‘fullwindowofopportunity’isgranted

totheCIGtoprepareabid;– Compensationwillbeduetotheowner.

Thisopensawayforsocialenterprises,co-operativesandother‘civilsociety’organisationstomanagelocalcommunityassets,whichcouldincludesupporters’trusts.Italsoseemstocreateaframeworkinwhichfootballgroundscouldbelistedascommunity

assetsandsowheresupporters’trustscoulddelivernewformsoflocalcommunityownershipinfootball.Itcouldenabletruststomakefootballgroundssustainablecommunityhubs,deliveringwidersocialvaluetotheareaandaccessingnewformsoffinance,suchascommunityshares.

ii) Limitations of the Bill – A right to Bid, Not Buy?

Current Lack of Definition

Theprimarylegislationis,however,lackingindetailinanumberofrespects.

First,therearenooverallcriteriatodefine‘communityasset’.IfthisisnotprovidedintheRegulations(secondarylegislation)itwillbeself-determined

This opens a way for social enterprises, co-operatives and other ‘civil society’ organisations to manage local community assets, which could include supporters’ trusts.


withineach‘community’orlocalauthorityarea.Whilstthismaybebroadenoughtoencompass,forexample,footballgrounds,itmeansthatdifferentlocalauthorities(andindeeddifferentlocalcommunities)maydefineACVsdifferently,resultingindifferentoutcomesfromareatoarea.

ThisfactorislikelytobecriticalindeterminingwhetherfootballgroundscouldbedeemedtobeanACVornot.Inaddition,thecurrentdraftoftheBillstatesthatonlythelandandgroundoccupiedbytheclub–ratherthantheclubitself–couldbeconsideredanACV.However,thereisnodoubtthattheclub’sconnectiontoaparticulargroundisanimportantelementinitsvaluetothecommunity.Assuch,ifthecommunitybenefitpotentialistoberealisedprovisionneedstobemadeforsupporters’truststoacquiretheclubaswellasground.

Secondly,thereisnocleardefinitionofthelocalcommunityinanygivencircumstance–whichcouldbeverydifferentforapostofficeandafootballclub.AsyetthereisnodefinitionofwhatwillconstituteaCIGandwhatcriteriaonewillhavetomeet–suchaspotentiallybeingaformallyconstitutedorincorporatedbody,havingcommunitybenefitobjects,havinganassetlockorbeingopentoallmembersofthecommunity.

Withinafootballclub’ssupporttheremaybedifferent‘communities’offansandwithinalocalitytheremayberivalbidders.Assuch,inthecaseoffootball,onlyproperlyconstitutedsupporters’trustswhichfollowtheSupportersDirectmodel–withopenmembership,democraticstructuresandassetlocks–shouldbeeligibleasCIGs.

ItissuggestedintheguidancetotheBillthataCIGwillhavetobeeitheraparishcounciloragroupwithlocalconnectionswhichsatisfiestwoormoreoftherequirementsthey:

l Areincorporated;l Havecharitablestatus;l Haveanassetlockinalegalform;l Includeintheirconstitutiontheyarenon-profitdistributing.

However,therewillneedtobeclearerdefinitionsofbothCIGsandACVsifcommunitygroupsingeneral,andsupportersinparticular,aretobeabletotakeadvantageofthelegislation.

Scottish Land Reform Act

ThislackofdetailissomethingthatSupportersDirectfeelsneedsaddressing,andtheLandReform(Scotland)Act2003mayofferawayforward.Thefeaturesoftheframeworkdefiningacommunitybodymaybesignificant:


l Anysurplusfundsandassetsofacommunitybodyhavetobeappliedforthebenefitofthecommunityandcannotbereturnedtomembers(anassetlockofthekindprovidedforinthelegislationforcommunitybenefitsocietiesinEnglandandWales);

l Thereneedstobeministerialconfirmationthat‘themainpurposeofthebodyisconsistentwithfurtheringtheachievementofsustainabledevelopment’(consistentwiththeobjectsoffootballsupporters’trusts);

l Theremustbeevidencethat‘asignificantnumberofthemembersof[thecommunityrepresentedbythecommunitybody]haveasubstantialconnectionwiththeland’or‘thelandissufficientlyneartolandwithwhichthosemembersofthatcommunityhaveasubstantialconnectionandthatitsacquisitionbythecommunitybodyiscompatiblewithfurtheringtheachievementofsustainabledevelopment’.Thismakestheconceptofmembershipinthesupporters’trustmodelpotentiallysignificant.

Supporters’trustsasincorporatedbodieswithanassetlockwouldqualifyunderthesecriteria.Sometechnicalissuesarisearoundtherelationshipbetweenthefundingofcommunitybenefitsocietiesthroughsharecapitalandtheassetlockprovisions;butthesearecapableofbeingresolved.

A Right to Bid?

Thereisnoexplanationofthebenefit,orotherwise,ofexpressinganinterestinpurchasinganACV.Inparticular,withrespecttotheright tobuy,thereisnoindicationthataCIG:

l IstobetreatedasapreferentialbidderfortheACV;

l Willgetfirstrefusalontheoptiontopurchaseit;or

l Willsimplybegivennoticeoftheowner’sintentiontosellandthereforetheopportunitytobidfortheAssetinanopenprocess(i.e.preventingaprivate,unadvertisedsale).

Thus,atpresentthe‘righttobuy’intheLocalismBillisreallya‘righttobid’andlittlemore.

Also,thereisnoclarityontheappealsprocessforeitheraCIGdeniedalistingbyalocalauthorityoranownernotifiedofalisting.Noristhereclarityonthelevelofdiscretiontobegiventolocalauthorities,althoughitappearsthatthismaybeconsiderable–somethingwhichcouldresultinanunevenapplicationofthelegislation.


ThereisnoconfirmationonthelengthoftimeCIGswillbegivenineithertheinterimwindowofopportunityorafullwindowofopportunity,althoughtheDCLGConsultationPapersuggeststhatthiswillbeeither3monthsor6months.Noristhereclarityonhowthesituationistoberesolvedshouldtherebeeithermorethanonecommunityorganisationbiddingorarival,privatesector,bidforanACV.Inthecontextofthe‘righttoprovide’publicservicesthereisanestablishedrighttotakeintoaccount‘social’factorsinthecommissioningprocess;20andtheLocalismBillcontainstheprovisionthatlocalauthoritiesmustconsidertherelevant(andproportionate)social,economicandenvironmentalvalueofexpressionsofinterest.

SupportersDirectsupportstheapplicationofthisprincipletotherighttobuy.Indeed,thisapproachisadvocatedinThe Social and Community Value of Football report,whichcalled

forpublicauthoritiestorequirefootballclubsthey,workedwith,orgavepreferentialtreatmentto,todemonstratethepublicvalueofthatwork.AmendmentstotheBilltabledinFebruarywhichcallforClause68to‘improveequalityforpeoplewhowork,studyorliveintheauthority’sarea’21arealsosupported,astheseareconcurrentwiththeaimsofsupporters’trusts.

TheRegulationsarealsolikelytobecrucialindeterminingexemptionsthatcouldoccurwhereassetsare:

l ReturnedtopreviousownersunderCrichelDownRules;

l Exerciseofapre-existingoption,nominationright,pre-emptionrightorrightoffirstrefusal;

l Transferwhereassetsandresourcesthataretiedtoongoingservicedeliveryareshifted.

Specificprovisionmayhavetobemadeforinsolvencyortheexerciseoflender’srights,althoughitseemsclearthattherighttobuyisintendedtobecapableofapplyinginthesecases.Alsouncertainareissuesrelatedtothelevelofcompensationtoexistingowners.TakingtheScottishlandreformlegislationasanexemplar,thiscouldbeorganisedthroughanindependently-determinedvaluebasedoncurrentmarketvalue.

20 SeeBuying Social – A Guide to Taking Account of Social Considerations in Public Procurement, http://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=978&furtherNews=yes

21 http://www.publications.parliament.uk/pa/cm201011/cmbills/126/amend/pbc1261002m.89-95.html

Thus, at present the ‘right to buy’ in the Localism Bill is really a ‘right to bid’ and little more.


Anothercriticalissuecommoninfootballisthesecuringofmortgageorotherloansonthevalueofthelandorstadium.ThisposesthreeproblemsevenifafootballgroundisdesignatedasanACV.Firstly,anydebtsecuredagainstitwillbecomealiabilityforthecommunitybeyondtakingownership.Indeed,itishighlylikelythatanylendersmightmakesatisfactionofloansnecessaryaspartofthetransfer.

Secondly,thevalueoftheloanmaybemuchmorethanthecurrentvalueoftheasset.Thiscouldbebecausethechargeholderusesthevalueofthesiteunderalternativeusage(usuallyretailorresidential).Alternatively,theloanmaynotbefromacommerciallenderbutinsteadbearelatedparty,whohasloanedmoneytotheclubandsecureditagainstthegroundownedbytheclubtheythemselvesalsoown.Asaresultofowningboththeclubanditsassets,theymighthavebeenmuchmoresanguineaboutthemismatchbetweentheamountloanedandtheassetvalueasaworkingsportsgroundthanacommerciallendermight.

However,inthealltoocommoninstancesofassetstrippinginfootball,thisscenarioisoftendeployeddeliberatelyinordertogaincontrolofthelandasaworkingsportsground(whereithaslessvalue)inordertodevelopitforalternativeresidentialandcommercialuses(whereithasmuchmorevalue),ratherthanarisingasaconsequenceofpoorfinancialcontrols.

AfinalrelatedpointisthatunderthecurrentBillprovisions,asaleintheeventofamortgagedefaultwouldnotbeonewheretheCIGcanmakeabid.Therehavebeenagreatmanyinstancesinrecentfootballhistorywhereindividualshavetakenownershipofthegroundinlieuofmonieslenttotheclubwhilsttheyownedit.Insomecases,thishasbeenbywayofrecoveringfundsthathavebeenimprudentlylent,butinsomecases,whereindividualshaveusedownershipofclubstogetatthelandassetcurrentlyworthlittleasafootballstadiumusedbyanimpoverishedclub,butworthsignificantlymorethroughalternativeusage.Inbothcases,thelendingofthegroundisnot‘normal’commerciallendingaspartofbusinessgrowth,buteitherknowinglyimprudentoraspartofanattempttostripassets.UndertheprovisionsoftheBill,bothofthesecouldcontinuewithoutimpediment.

AssuchSupportersDirectbelievesthatonceanACVislistedbyalocalauthority,restrictionsareplacedontheabilityofexistingownerstosecuredebtonit.

Finally,giventhatthepurposeofthelegislationistocreatenew,localformsofcommunityownership–inordertodeliverwidersocialbenefits–thereislittleonhowthisistobemeasuredshouldacommunitypurchase


takeplace,whoistomeasureit,orwhatsanctionscanbeimposedifthecommunitygroupfailstodeliverthatbenefit.

iii) Encouraging Supporter Ownership in Football?

Initscurrentform,theBilldoesnotovertlyassistsupporters’groupsthatarehopingtotakeovertherunningoftheirclubs,althoughmuchwilldependonthepreciseguidelinesandthewaylocalauthoritiesinterpretthem.Groupssuchassupporters’trustsappeartobeabletoapplytohavetheirclub’shomegroundlistedasanACV,butthereisnoaccompanying‘righttobuy’foreitherthecluborthegroundwhenitnextcomesupforsale;onlyanotificationofanyimpendingintentionoftheownerstosellandtobegivensometimetodevelopabid.

ThepurposeofthispartoftheBillappearstobetoenabletheACVtocontinuetobeofusetoitscommunitywhenthereisapossibilitythatitmightotherwisebecloseddown.Ifthatisthecase,thenasupporters’groupwould

onlybeinapositiontoexploitthepowerproposedintheBillwheretheirclubwasinseverefinancialdifficultiesandtherewerenootherprospectivepurchasers,leavingtheclubasanACVlikelytoclosepermanently.Alternatively,thesepowersmight,perhaps,beabletobeusedtopreventthesaleandredevelopmentofaground,butnottherelocationoftheclubtonewpremises.Eitherway,initscurrentproposedform,thisisnotthe‘righttobuy’thatmanywerehopingfor.

iv) Supporters Direct Recommendations

Inorderforthelegislationtoproperlyencourageco-operativeownershipinfootball,SupportersDirectcallsonthegovernmenttomakeanumberofchangesandclarifyotherelements,whetheraspartoftheBillorinthesettingofRegulations.

a)SupportersDirectsupportstherecommendationsmadebythePlunkettFoundationthatthereshouldbe:

l AnappealsprocessforCIGsintheinstancewhenlocalauthoritiesturndownrequestsfromcommunitiestoaddanassettothelist;

l Anobligationfortheassetownertospeaktoaninterestedcommunitygroupduringthewindowofopportunity;

l Aminimumofa6-weekfullwindowofopportunity;

In its current form, the Bill does not greatly assist supporters’ groups that are hoping to take over the running of their clubs.


l Arecognitionoftimerequiredforacharity/incorporatedcommunityorganisationtoregisterwithinthe6-weekinterimwindow.

b) Withspecificreferencetocommunityownershipinfootball,SupportersDirectwouldliketogofurtherandrecommendthat:

l Whilstproposalscurrentlyaredraftedbroadlyenoughtoembracesupporters’trusts(basedontheSupportersDirectmodel)asbonafideCIGswhocannominateACVs,itleavesthisdecisioninthehandsoflocalauthorities,whichcouldleadtoinconsistency.SupportersDirectbelievesthatitwouldbebettertospecifysomethatsupporters’trustsaredefinedasbeingCIGwithinguidance(withastatementofwhatconstitutesabonafidetrust)andfurthermore,wherethereisabonafidesupporters’trust,theyhaveexclusiverightstobidduringthewindowofopportunity;

l Likewise,althoughcriteriaforACVsarecurrentlystructuredsotheycanincludefootballgrounds,itispreferabletheyarespecifiedassuch;

l CIGs,includingsupporters’trusts,aregivenagenuinefirst refusal toensurethatthereisaright to buyandnotjustanopportunity to bid;

l CIGsaregiventherighttopurchasethefootballclub(business)aswellasthegroundasanACV,recognisingtheintegralrelationshipbetweenthetwoandtotheirlocalsocialvalue;

l Supporters’trustsshouldhavefirstrefusalonbuyingmajoritystakesofclubsthatcomeupforsale;

l Themoratoriumperiodshouldbeaminimumof6months,giventhecomplexitiesofsomefootballclubfinancesandtheneedtoperformduediligencetoproperlyconstructabusinesscasetopurchasefootballgrounds(andclubs);

l SupportersDirectisassistedinpressuringthefootballauthoritiestograntanexemptiontoclubsinadministrationandfacingpointsreductionpenaltieswhenthatclub’sgroundislistedasanACV;andtheCIGispreparingabidundertheinterimand‘fullwindowofopportunity’;

l SupportersDirectisassistedinpressuringtheFootballLeagueandPremierLeaguetoamendtheirarticlesofassociationtoallowamutualformofownership(currentlyclubsarerequiredtobelimitedcompaniesandthismayrestrictcommunityownershipopportunities);

l Supporters’trustsaregiventherighttoappealinordertomaintainthelistingoftheirfootballground/clubasanACVbeyond5years;


l Supporters’trustsarerequiredtoproperlydemonstratethecommunityandsocialvaluetheyaredelivering;

l Supportisgiventosupporters’truststopreparethemforthespecificchallengesoflistingandbuyingfootballgrounds/clubs.

v) Beyond the Legislation

Eveniftheaboveweretobeadopted,thereareanumberofotherareasthatSupportersDirectisnowaddressingsothattrustscanbeinthebestpossiblesituationtotakeadvantageofthelegislation:

l Apaperoutliningwaystoraisefinance,includingcommunityshares;

l Modelconstitutionsandrulestoallowcommunityshareissues;

l Amodelassetlock;

l Anoutlineoftheimplicationsforfootballgovernance–suchasgivingexemptionfrompointspenaltiesifaclubinadministrationissubjecttoacommunityrighttobuy;

l Anoutlineofanevaluationframeworkforsupportercommunityownedclubstodemonstratethatsocial,economicandwell-beingoutcomes,aswellaswidersocialvalue,aredelivered.

3.2 The Big Society Bank

3.2.1 Context

TheCoalitionProgrammeforGovernmentstated:

‘Wewillusefundsfromdormantbankaccountstoestablisha‘BigSocietyBank’,whichwillprovidenewfinanceforneighbourhoodgroups,charities,socialenterprisesandothernon-governmentalbodies.’

3.2.2 Proposals

FollowingtheimplementationofProjectMerlin,22themajorhighstreetbanks(Barclays,HSBC,Lloyds,andRBSandtoalimitedextenttheSpanishbankSantander)haveagreedtoprovide£190bnincredittosmallandmedium-sizedenterprisesinordertoboosttheeconomy.Whathasnotbeenannouncediswhetherthesenewlinesofcreditwillattractpreferentiallendingtermsorwillbeatthebanks’normalcommercialrates.Itispossible

22 Seehttp://www.hm-treasury.gov.uk/d/bank_agreement_090211.pdf.


thatthesefundscouldbemadeavailabletosupporters’groupsseekingtotakeoverfootballclubs.

Atpresent,thedetailsabouttheBigSocietyBank(BSB)havenotbeenfullyexplainedtothepublic,althoughthegovernment’sstrategyforgrowingthesocialinvestmentmarketwaslaunchedon14February2011.23ThefourmajorBritishhighstreetbanks

haveagreedtoprovideafurther£200mtotheBSBtobeusedtoinvestinoperationsthatprovidefundingtosocialcauses.

ThusitwouldappearthatCIGs,possiblyincludingsupporters’groups,willnotbeeligibletoapplydirectlytotheBSBinordertoaccessthesefunds.Instead,theywillhavetoapplytothirdparties,whohavethemselvesdevelopedfundingforsocialprojects,andwhohaveaninterestinsupportinginitiativesthatcanproducemeasureablesocialandcommunityvalue.However,therearealsowaysinwhichtheBSBproposalsofferopportunitiesfortheCoalitiontopromotesupportercommunityownershipinfootball.

3.2.3 The BSB and Supporter Community Ownership in Football

i) Community Shares

ThemostobviouswayfortheBigSocietyBanktohelpthegovernmentdeliveritspromiseofencouragingsupportercommunityownershipinfootballisforittoenablesupporters’truststoputtogethertherequiredfinancetobuytheirclubasacommunityasset.Onewaytheycoulddothisisinrelationtotheissuingof‘communityshares’.

Communitysharesisatermusedtodescribenon-votingcapitalfundsharesissuedbyacommunitybenefitsocietyasdefinedunderIndustrialandProvidentSocietylegislation.Itisanincreasinglypopularwayforco-operativestoraisecapitalandwouldbeamajorcontributortotheabilityofsupporters’truststopurchaseclubsorrelatedassetsunderrighttobuylegislation.CommunitySharesarediscussedinmoredetailinSupportersDirect’sBriefing Paper No.3: Financing Supporter Community Ownership in Football.

TheDevelopmentTrustsAssociation,Co-operativesUKandBakerBrownAssociateshaverecommendedaseriesofwaysinwhichcommunitysharescouldbeencouragedthroughuseofBigSocietyBankfunds.

23 Thedocumentisavailableat:http://www.cabinetoffice.gov.uk/sites/default/files/resources/404970_SocialInvestmentMarket_acc.pdf.

The four major British High Street banks have agreed to provide a further £200m to the BSB that will be used to invest in operations that provide funding to social causes.


Thesearetoestablish:

l A Pioneer Fundprovidingmatchfundingforinitialpioneerinvestmentenablingthemtobecomeinvestment-ready;

l An Underwriting Fundtoprovidesupportfortime-boundcommunityshareoffers;

l A Subscription Fundtoprovideshort-termfinancetobridgegapsforsubscription-investmentoffers.

ThesewouldalsobesupportedbyaReinvestment Fund (whichcouldbespecifictotradeactivitiessuchasfootball)togetsupportfromethicalinvestorstochanneladditionalresourcestosocietiesthroughtheabovefunds.

SupportersDirectcallsonthegovernmenttosupporttheserecommendations.

ii) Supporters Direct Ownership Fund

SupportersDirectisalsorequestingthatBigSocietyBankfundsaremadeavailabletosupportitsownschemetoassisttrustsinlaunchingcommunityshareschemes.ThiscomesalongsideSupportersDirect’sproposalthatitshouldreceivearound1%ofrevenue

fromcurrenttelevisiondeals(whichwouldcurrentlyyieldaround£12m).

Thiswouldbeusedtofinancetheorganisationtoassistitinfulfillingthecoalitionaimofsupportingco-operativeformsofsupporterownershipinfootball.ItwillalsohelpestablishaSupportersDirectfundtofacilitatethecreationofcommunitysharesschemesamongstsupporters’trusts.Thiswill:

l Providefinancialsupporttotrustsinitiatingcommunityshareschemes;

l Encourageprofessionalmanagementatsupporters’trustslaunchingcommunitysharesschemes;

l Onlybeavailabletosupporters’trustsmeetingtheSupportersDirect‘fitnesstofund’criteria;

l Encouragefundingfromotherparties(suchassocialinvestorsandhighnet-worthindividuals).

l SupportersDirectrequeststhattheBigSocietyBankprovidesmatchedfundingtothatcomingfromfootballinordertohelpdeliverthisambition.

Supporters Direct requests that the Big Society Bank provides matched funding to that coming from football in order to help deliver this ambition.


iii) Capacity Building

SuchfundingwouldalsoallowSupportersDirecttoplayakeyroleinbuildingthecapacityofsupporters’truststobe‘righttobuy-ready’.Thiscouldinclude:

l Onceenacted,trainingforsupporters’trustsabouttheopportunitiesoftheLocalismAct;

l Developmentof‘howto’guidesforsupporters’trustsontheopportunitiesof‘righttobuy’and‘righttoprovide’;

l Providingsmallgrantsforsupporters’truststodevelopfinancepackagesincludingcommunityshares;

l Fundinglegalhelpforsupporters’trustswithregardtoassetlocksinrulesandcommunitysharesoffers.

3.3 The Tax Regimes

3.3.1 Preferential Treatment for Supporter Community Ownership

OnemeansoftheGovernmentactivelyencouragingsupportercommunityownershipoffootballclubswouldbethroughthetaxregime.Forpresentpurposes,taxincentivesareprovidedintwopolicysituations:

l CharitieswhichserveapublicinterestandareregulatedbytheCharityCommissiondonotpaytaxandhavetheadvantagethatgiftstothemcanbetreatedastheirincomeandnottheincomeofthedonorfortaxpurposesundertheGiftAidscheme;

l Newenterpriseshavearangeoftaxincentivestoencourageinvestment.ThemostrelevantforpresentpurposesistheEnterpriseInvestmentScheme(EIS)which,subjecttodetailedconditions,permitsaninvestortoset30%ofthecostoftheirinvestmentagainstincometaxwithfurtherreliefsfromcapitalgainstax.

Therealityisthatmoneyraisedtofundthepurchaseofafootballclubdoesnotfitintoeitherofthesepolicysituations,withtheresultthattheavailabletaxreliefsdonotreadilyprovideassistance.

Whilstelementsofsomesupporters’trusts’activitiescouldproperlyberegardedascharitable,thebasicactivityofafootballclubisnotcharitable.ThisseverelyrestrictstheextenttowhichGiftAidishelpfulinthecontextofsupporters’trustsbuyingfootballclubs.WhilsttherearesomeextensionsofGiftAidtoactivitieswhicharenotstrictlycharitable(suchasCommunity


AmateurSportsClubs)itwouldbeastrainconceptuallytoregardtaxreliefinconnectionwithsupportercommunityownershipoffootballclubsasanextensionofsupportforcharitablegiving.

SimilardifficultiesexistwithEISrelief.Asthenamesuggests,thereliefisintendedtopromoteenterpriseandinvestment,whereasthesituationunderconsiderationinthispaperisoneinwhichanexistingbusinessisbeingtakenoverandthemoneyintended

tobeusedisnotaninvestmentinthenormalsenseoftheword.Therehavebeenanumberofcases,includingsomeinsport,inwhichpurchasersofsharesinacommunitybenefitsocietyorco-operativehavebenefitedfromEISreliefbutsomeofthelimitationsinthescheme(suchastheprohibitionofanexitrouteorarightofredemption)makeitdifficulttouseinpractice.Again,giventheunderlyingpurposeoftherelief,itwouldbedifficultconceptuallytoviewtaxincentivesforsupporters’trustsraisingmoneytobuyfootballclubsasanextensionofEISrelief.

Thereforeifanythingofgeneralbenefitforsupportercommunityownershipistobeprovided,thecreationofaspecificnewformofreliefwouldberequired.Thiswouldnecessarilybealong-termprojectandinvolveconsultationandconsiderationsofEuropeanlawandinparticulartheregimeaffectingStateAid.Subjecttothat,thefollowingobservationsmightbemade:

l EISreliefprovidesamodelforthekindofreliefthatwouldbeappropriateiftheGovernmentwasencouragingpeopletousetheirmoneyinaparticularway;

l Asupporters’trustwhichmeetsthefollowingcriteriawouldonthefaceofitbeapropervehiclethroughwhichataxreliefmightbegiven:

– Itisregisteredasacommunitybenefitsociety;

– Ithasobjectsfocusedonusingafootballclubasmeansofdeliveringcommunitybenefit;

– Itisraisingmoneyforapurposedirectlyrelatedtoitsobjects(suchastheacquisitionofsupportersharesofthekinddescribedintheseparatepaperonRegulation);

– Ithasastatutoryassetlock.

l Areliefofthiskindwouldinevitablybeconsideredinabroadercontext.Thiswouldbringinothercandidatesforsimilarreliefinsportand

One means of the Government actively encouraging supporter community ownership of football clubs would be through the tax regime.


elsewhere,includinganyexerciseofacommunityrighttobuy.ThiswouldbealegitimateexerciseaspartoftheBigSocietyinitiativebutitisnotlikelytobeaswiftprocess.

3.3.2 Group Taxation Issues

SupportersDirectbelievesthatthepresenttaxregimeforgroupcompaniesencouragesbusinessownershipoffootballclubsandthereforediscouragessupporterownership.Thebasicruleisthatwherecompaniesareincommonownershiporinasubsidiary/parentrelationship(definedastheownershipofatleast75%ofacompany’sshares),lossesinonecompanycanbeoffsetagainstprofitsinanother.

Theeffectofthisinafootballcontextisthatsomeonewhoownsasuccessfultradingbusinessandafootballclubcanusethelossesinthefootballclubtoreducetaxontheprofitsinthesuccessfulbusiness.Thiscanencourageorallowthoserunningfootballclubstodosoinawaywhichisnotsustainablewerethatclubtobeindependentofanygroupbecausetheycanspendmorethantheyearn.Indeed,itturnsclubswhichmightotherwiseseemunprofitableandunsustainableenterprisesintousefulvehiclesforthepurposeoftax-efficiencywithinagroupofcompanies.

Arelatedconsequenceofthisisthatcorporategovernanceinclubssuffersasthestrategicandoperationaldecisionsbecomeconcentratedinthehandsofalimitednumberofbeneficialownersandtrustedexecutives,andinnovationintheseclubsbecomessecondarytosecuring

regularongoingsubsidiesfromparententities.Theselosses,though,remainontheclub’sbalancesheet,andthepotentialforsuddenwithdrawalremainsakeysourceofinstabilityforclubs,andwesaymuchmoreaboutthisinBriefing Paper No.2: Developing Football Regulation to Encourage Supporter Ownership Community in Football.

Furthermore,thisencouragementtorunupoperatinglossesisacriticalcontributortothesystemiclevelsofinstabilityinfootball’sfinances,andpresentsasignificantchallengeforcommunity-ownedenterprises;astheyhavenoparentbodytoprovideequivalentsupportwhenitcomestotradinglosses,andsofindthattheiravowedaimofsustainableoperationsleavesthemout-spentintheracefortalentandlikelytobepoorerperformingonthepitchhoweverwelltheydooffit.

Supporters Direct believes that the present tax regime for group companies encourages business ownership of football clubs and therefore discourages supporter ownership.


Stoppingclubownersbeingabletogettaxreliefontheirlosseswouldleveltheplayingfieldforsupportercommunityownershipandensurethetaxpayerwasnotsubsidisingpoorgovernanceandfinancialperformanceinfootball.

Suchaproposalmightbeviewedascontroversialbythosecurrentlybenefitingfromit,whocouldarguethattheresultoflegislationalongtheselineswouldbetotakemoneyoutoffootballandplaceclubsatrisk.However,theseclubsareonlyimperilledinthefirstinstancebytheparticularapproachtofinancialsustainabilitythatgroupownershiptaxationencourages.Prioritymustbegiventoendinganyincentivising.Furthermore,ifthetaxforegonewereredeployedtoincentivisecommunityownership,footballwouldstillreceivereliefs,butthattheroutefortheseintofootballwouldbemorecloselyalignedwithwidergovernmentpolicythantheyareatpresent.

Fromalegalandpolicyperspective,justificationwouldneedtobemadeastowhyfootballshouldbegivenexemptiontosuchrules,anddifficultiesofprincipleanddefinitioninthedraftingofstatutoryprovisionswouldneedtoberesolved.However,shortofsignificantreformintheregulationoffootball,withtherightpoliticalwillandadvice,addressingthisissuewouldbeonewayinwhichthegovernmentcouldfulfilitspromisetoencouragecommunitysupporterownershipinthegame.

3.4 Regulation of ‘Investment’ in Community Benefit Societies

Supporters’trustsareformedascommunitybenefitsocietiesunderindustrialandprovidentsocieties24andassuchtheregulationofthem,andinparticularofhowtheycanraisefinancetosupportcommunityownershipoffootballclubs,needstobeunderstoodandrefined.FCUnitedofManchesterhavepioneeredraisingfinancethroughinvestmentincommunitysharestoundertakeitsowngrounddevelopment.Thishasraised£1.3mtodatebuthasalsohighlightedsomeissueswithregardtotheregulationofinvestmentincommunitybenefitsocieties.

24 IndustrialandProvidentSocietiescanbeclassedaseithercommunitybenefitsocietiesorbonafideco-operatives.ImpendingsecondarylegislationwillallowthemtobecalledCommunityBenefitSocietiesandCo-operativeSocietiesrespectively,andthroughouttheseriesofpapers,weusethisnewterminanticipationofthischange.SupportersDirectandallthesupporters’trustsusingitsmodelrulesarecommunitybenefitsocieties.


Theregulatoryframeworkforcommunitybenefitsocietieshasremainedlargelyunchangedforgenerations.Thismeansthattherearetechnicalissuesaboutthenatureofsharesinthemwhichwillneedtoberesolvedifcommunityownershipusingthesupporters’trustmodelistobestraightforward.

Theproblemisthatsharesinacommunitybenefitsocietyorco-operativearenotthesameassharesinanormalcompany.Ina‘normal’companythereisanobligationtomaximiseshareholdervalueandtheprimaryaimofthecompanyistodeliverthis,butincommunitybenefitsocietiesandco-operatives,thereareover-ridingcompanyobjectivestobenefitthecommunity(intheformercase)andco-operativemembers(inthelattercase).Also,communitybenefitsocietiesandco-operativesmustbedemocratic.Thatmeansthatthepurchaseofshareswithinthemdoesnotgiveentitlementbeyondtheonememberonevoteprinciple.

Issuesalsoexistaboutconsumerprotectioninthecontextofoffersforsharesincommunitybenefitsocieties.Societiesenjoysubstantialexemptionfromfinancialregulationprovidedtheyareraisingmoneyforthecommunitypurposeforwhichtheyareregistered;butrecentdevelopmentsinthisareaarelikelytocausetheFSAtoreviewitsapproach.CurrentFSAguidancestatesthatinterestpayableonsharesinaco-operativeorcommunitybenefitsocietymust‘notbemorethanareasonableratenecessarytoobtainandretainenoughcapitaltorunthebusiness’.ItisunlikelythattheGovernmentortheFSAwillallowcommunitybenefitsocietiestobeanunregulatedsectorfor‘investment’onthebasisofattractiveinterestrates.

CobbettsLLPandCo-operativesUKhaveproducedpapersinthisareawhichsuggestawayforward.Co-operativesUKhasalsoproducedsomehelpfulguidanceonhowsharesincommunitybenefitsocietiesandco-operativesshouldbemarketed,alongwithaproposalforco-regulation.Finally,theMutuopaperPunk Finance – Capital: Made Mutualcontainsananalysisofwhatispossibleandwhatshouldbepossible.Insummary,regulationofthesectorneedstoensurethat:

l Asocietywhoseabilitytodelivercommunitybenefitisrestrictedbyitsobligationtopayinterest(ordividend)onthosesharesshouldnotbeentitledtoimmunityfromregulationinthesaleofshares;

l Interestshouldnotexceeda‘savingsaccount’rateofinterest;

l Communitybenefitmustbedeliveredbeforeinterestispaid;

l Thegovernanceoftheenterprisemustenshrineavoiceformemberstoself-regulatetheuseofsurpluses;


l Ifthereisarighttointereston,orrepaymentof,shares,creditorsshouldbeprotectedintermsandconditions.

Itshouldnotbepossibleforacommunitybenefitsocietytotakeonanobligationtopayinterestwhichunderminesitsconstitutionalcommitmenttousesurplusestobenefitthecommunity.Withintheseparameters(andarguablybecauseofthem),thecommunitybenefitsocietyandthesupporters’trustrepresentasoundstructureforthedevelopmentofcommunityownershipandsustainablefootballclubs.

InSupportersDirect’sBriefing Paper No.3: Financing Supporter Community Ownershipoptionsforcommunitybenefitsocietiesasexamined,wellascodesofconductandmutualself-regulationareexplored.

3.5 ‘Fanshare’ Schemes

ArsenalSupporters’trusthasdevelopedanotherpioneeringwayofraisingfinancetoassistsupportercommunityownership,theFansharescheme.ThisisdiscussedinfullinBriefing Paper No.3: Financing Supporter Community Ownershipbutitisrelevantheretohighlightaregulatoryconcernwhichneedstobeaddressed.

The‘fanshare’ideaallowssupporterstoinvestinafundthatthenbuysupavailablesharesintherelevantclub,helpingsupporters’trustsbuildupastakeinthatclub.However,suchschemesfacetworegulatoryobstacles:

i) TheyarenoteligiblefortaxreliefsuchasEISbecauseitisnotaninvestmentin‘newbusiness’andreturnstothetaxpayerviacapitalgainstaxareunlikely;

ii)Theyfaceregulationasiftheywerea‘normal’vehicleforinvestinginshares–inwhichpeopleinvestinordertoreceiveafinancialreturn–wheninfactsuchinvestmentbyfootballsupportersismadechieflyforotherreasons(suchasemotionalattachment).

Withregardtothefirstofthese,itisunlikelythatsomethinglikeEIScouldbeadaptedtomeetthe‘fanshare’scenario.However,itshouldbepossibletodeviseaformofpersonaltaxrelief,understrictconditionssuchaslengthofinvestmentandminimalfinancialreturn,whichencouragessupporterstosupportsuchschemes.

Withregardtothesecond,therearegoodreasonswhyregulationisinplace–theprotectionoftheinvestorinaparticularlyunsuccessfulareaoftheeconomyforinvestment.However,regulationalsoneedsto:


l Findabetterwayofidentifyingriskandmitigatingagainstit,

l Identifythecriteriaunderwhichexemptionmightbegiven;

l Recognisetheinvestmentisinaspecificsector(inthiscasefootball),withinaspecificregime(inthiscasethesupporters’trust)andisundertakenforspecificreasons(concernforthelongterminterestofthefootballclub);

l Identifywhatis,andwhatisnot,‘bywayofbusiness’.

SupportersDirectcallsongovernmenttoworkwithit,theFSAandHMRCtoresolvetheseregulatoryandtaxationissuesinordertoencouragesupportercommunityownershipoffootballclubs.

The Supporters Direct Briefing Papers

In 2011 Supporters Direct will launch four Briefing Papers prepared by Substance in conjunction with a number of partners, including Cobbetts LLP, Salford University, Manchester Metropolitan University and Westminster University. The papers are:

l Briefing Paper No.1: Developing Public Policy to Encourage Supporter Community Ownership in Football

l Briefing Paper No.2: Developing Football Regulation to Encourage Supporter Community Ownership in Football

l Briefing Paper No.3: Financing Supporter Community Ownership in Footballl Briefing Paper No.4: The Business Advantages of Supporter Community

Ownership in Football

This paper was prepared by Dr. Adam Brown at Substance. The research team was comprised of:

Kevin Jaquiss, Partner, Cobbetts LLPDr. Mark James, Salford UniversityDr. Annabel Kiernan, Manchester Metropolitan UniversityProf. Guy Osborn, Westminster University

For further information about Supporters Direct’s work and campaigns, please contact:

Tom HallHead of Policy and DevelopmentSupporters Direct 3rd FloorVictoria House Bloomsbury Square London WC1B 4SE

020 7273 1657 [email protected]

For further information about Substance, please contact:

Adam Brown Substance 3rd Floor Fourways House Hilton Street Manchester M1 2EJ

0161 244 [email protected]

Printed on 100% post-consumer waste recycled paper, using Bio vegetable oil based inksDesign and print www.calverts.coop

Supporters Direct3rd Floor, Victoria HouseBloomsbury SquareLondon WC1B 4SE

Tel: 020 7273 1595

www.supporters-direct.coop

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