New rules which are to be implemented within the Football League will now ensure that unsecured creditors receive at least 25% of their debt.
The Football Creditors’ Rule, which guarantees 100% repayment of debts to clubs and players for transfers and wages, will be retained, however these new rules will attempt to increase the return to creditors.
The 25% must be paid on takeover of the clubs assets, failing to do so will mean that the percentage will rise to a minimum of 35% payable of a term of three years. Failure to comply will also mean a 15 point deduction at the start of the new season.
Changes are also to be made in respect of the Administrator and the way in which they market the club. On appointment the Administrator will need to market the club for at least 21 days, meet with the supporters trust and also provide them with the opportunity to bid for the club.
The League has also removed the need for a Company Voluntary Arrangement and will instead transfer the clubs share in the Football League to the highest bidder, subject to compliance with the leagues other requirements.
The reasons for doing so? To lower the costs and period of the Insolvency procedure, increase the return to unsecured creditors and to prevent the administration process being controlled by the club’s previous owner.
Source: Accountancy Age