Vol 1 (2004) - Issue 5

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Wimbledon Football Club - A Successful Outcome for a Well-Structured Voluntary Arrangement

Introduction

Football clubs and insolvency law appear to be in many instances inseparable companions, but the recent challenge to a company voluntary arrangement proposed to its creditors by Wimbledon Football Club raises issues which go beyond the domain of football. In fact, had the challenge brought by the Inland Revenue succeeded, then many cases of so called trading voluntary arrangements may well have been placed in jeopardy by an adverse ruling. However the Court at first instance, as well as the Court of Appeal, have made it clear that voluntary arrangements will be carefully scrutinized to ensure that they are not in some way a device to get round the Insolvency Act and Rules. That scrutiny will be very much in evidence in cases where there is differential treatment between creditors. Therefore, even those who believe that the Wimbledon case is really restricted to football clubs and the ‘football creditor’ rules which exist would do well to consider the further ramifications of this case.

The Football League rules and policies

The Football League has an authorized share capital of 100 shares of 5 pence each and 72 of the shares have been issued to Member Clubs. Only Member Clubs may play in League matches. The articles of the League stipulate that the Board of the League may serve notice upon the member in question requiring it to transfer its share to such person who is nominated by the Board for a nominal consideration. The Board will serve such a notice in the event that a winding-up order is made against a member club and also when an administration order is made. However the provisions of the Articles do permit the Board to suspend such a notice in the event that a member club satisfactorily exits from the relevant insolvency proceedings.
In its policy document in this regard, the League sets out the matters which are considered in a case where a member seeks to have the notice suspended or withdrawn. One of the matters which the Football League requires is the payment in full of the so-called ‘Football Creditors’ prior to any withdrawal of notice and also prior to any proposed transfer of the member’s share to a new or another company. Article 70 of the Articles sets out who those Football Creditors are: viz. employees, former employees, players, and former players as well as other member clubs who are owed money.

Wimbledon’s administration

As supporters and non-supporters of Wimbledon Football Club may be aware, Wimbledon FC went into administration (old style administration) on 5th June 2003. Originally the administrators hoped to be able to secure sufficient funding to enable the football club to survive and indeed they did obtain funding which enabled them to start the new season in August 2003. The Club was hopelessly insolvent with debts in excess of GBP 20 million. The funding the administrators obtained enabled the Club to continue in existence and more importantly to be able to start the season and play its games in the Football League. The administrators sold off players and made cuts and the Club commenced the season in August 2003. The Football League had served the appropriate notice of withdrawal of membership and then suspended it to enable the Club to commence the 2003 season on the basis that it was satisfied that the Club had secured sufficient funding to enable it to play that season.
In fact the administrators had secured a series of loans from a third party, Inter MK Limited (‘IMKL’), a company who was interested in bringing football to Milton Keynes. IMKL advanced in excess of GBP 1.5 million to enable the Club to play the 2003/2004 season, which came to an end on 9th May 2004. In the meantime, the administrators had succeeded in negotiating a sale agreement with IMKL which would enable the Club to be acquired by another company and ultimately be controlled by IMKL.