Football Creditor Rule – the latest news

In a previous article we explained that the Football Creditor hearing between the Premier League and Her Majesty’s Revenue and Customs (HMRC) has been adjourned to enable the parties to consider whether there is anything in the Lehman decision which affects their position.

The Lehman case relates to the anti-deprivation principle (the Principle) – that parties cannot contractually agree that assets belonging to one party will, on that party’s insolvency, become the other party’s property. Such a clause would unfairly deprive the insolvent estate, and therefore creditors, of assets. The Premier League rule allows for various monies to be paid directly to football creditors and therefore the argument is that this rule breaches the Principle.

The Court held that there are four characteristics of the Principle – an intention to evade insolvency laws, deprivation on insolvency, the “flawed asset” analysis and the substance of economic interests. Applying these characteristics to the Lehman case, the “flip provisions” were held to be valid – that should Lehman default on then priority would “flip” and Lehman’s claim would become secondary to other creditors.

It was held that the transaction made commercial sense and that there was no suggestion that the flip provisions were intended to evade insolvency laws. Does the Football Creditor rule make commercial sense? It could be argued that it is included to protect fellow members, the integrity of the game and that it also helps to ensure the future of the club by offering security to the players and fellow clubs who, without it, may hand in their 14 days’ notice and leave or simply cease any trade with the club. Players’ contracts are not like normal employees – there is no automatic right to terminate should their employer become insolvent and their registrations can be transferred/sold. Most Clubs survive (and give a better return to all Creditors than a liquidation would) by selling some of their players, and trading until a purchaser can be found.

It was also stated that the timing of the deprivation may be relevant – it may well go against the Premier League that the Football Creditor rule only applies on an insolvency event whereas the Football League rule applies on the default of payment by the club.

Despite this, the Committee for Culture, Media and Sport (CCMS) has told the UK Government to abolish the FCR. The CCMS advises “If the football authorities do not take the initiative themselves, and HM Revenue and Customs loses its legal challenge to the FCR, we recommend that the Government consider introducing legislation to abolish it”.

The FCR will be in Court in November, so watch this space!

For more information or specific advice, please contact our legal specialists using the details below:

Call Mark Hovell on +44 (0) 161 234 8810 or send an email

Call Matthew Chantler on +44 (0) 161 234 7819 or send an email