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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.
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
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 5
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.
6 Supporters DirectBriefingPaperNo.1
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.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 7
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.
8 Supporters DirectBriefingPaperNo.1
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.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 9
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.
10 Supporters DirectBriefingPaperNo.1
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.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 11
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.
12 Supporters DirectBriefingPaperNo.1
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’.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 13
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.
14 Supporters DirectBriefingPaperNo.1
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.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 15
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.
16 Supporters DirectBriefingPaperNo.1
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.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 17
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.
18 Supporters DirectBriefingPaperNo.1
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
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 19
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.
20 Supporters DirectBriefingPaperNo.1
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.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 21
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
22 Supporters DirectBriefingPaperNo.1
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.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 23
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’.
24 Supporters DirectBriefingPaperNo.1
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).
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 25
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.
26 Supporters DirectBriefingPaperNo.1
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.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 27
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:
28 Supporters DirectBriefingPaperNo.1
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.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 29
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.
30 Supporters DirectBriefingPaperNo.1
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
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 31
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.
32 Supporters DirectBriefingPaperNo.1
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;
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 33
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.
34 Supporters DirectBriefingPaperNo.1
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.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 35
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.
36 Supporters DirectBriefingPaperNo.1
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
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 37
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.
38 Supporters DirectBriefingPaperNo.1
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.
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 39
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.
40 Supporters DirectBriefingPaperNo.1
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;
DevelopingPublicPolicytoEncourageSupporterCommunityOwnershipinFootball 41
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:
42 Supporters DirectBriefingPaperNo.1
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]
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