Football Governance - Culture, Media and Sport Committee Contents


Written evidence submitted by Hendon Football Club Supporters Trust

SUMMARY

—  The level of governance in England and Wales is gradually improving, but much more needs to be done to properly regulate the game.

—  Debt is having a detrimental effect on the game at both professional and semi-professional games and can affect the competitive balance of a league during a season.

—  While Supporters Trusts are well placed to help a Football Club ride out a crisis better than the individual ownership model, the Trust suffers from certain financial penalties that can discourage community activities.

Are football governance rules in England and Wales, and the governing bodies which set and apply them, fit for purpose?

1.  While some rules have been brought in at various levels to improve the level of governance in football, it is my belief that these offer little protection to Football Clubs themselves from owners with goals that don't align with the club's. This has been evident at two recent stages in Hendon Football Club's history.

2.  In 1993, the club was owned by a Mr Victor Green, who midway during the season was courted by Stevenage Borough (then playing in the Isthmian League, a division below Hendon) to invest at their club rather than into Hendon. As his plans to renovate the ground at Hendon's Claremont Road ground were stalling while awaiting planning permission, he decided his future lay with Stevenage, but not before releasing the club's two star players—Gary Crawshaw and Simon Clark—on free transfers. Both players soon signed contracts at Stevenage.

3.  Two days after releasing these players, Victor Green resigned as chairman of Hendon FC and sold his shares to his wife, Elaine Green while he—in an apparent conflict of interests—joined the board of at Stevenage Borough FC. Elaine ran the club through to the end of the season before deciding to sell her interest in the club, and with few interested parties until the last minute, Hendon were only saved at the last minute by local firm Arbiter Group PLC (a local firm who primarily traded in musical instruments) on Monday 15 August 1994.

4.  Not only were few questions asked by the football authorities about the Green family's apparent conflict of interests during the 1993-94 season, but Hendon were allowed to start the season on Saturday 13 August, before any takeover had been agreed, despite public knowledge that the club was liable to fold within days.

5.  It is fair to point out that the Isthmian League, and most other football bodies, have made significant moves to resolving the latter situation—usually now requiring bonds of member clubs in trouble and suspending clubs until problems are resolved as a matter of duty of care to other teams and players (See Croydon Athletic, 2010).

6.  However, I believe that that more needs to be done to ensure that owners of football clubs cannot easily get around the long standing rules preventing them from having a significant interest in two teams or from taking assets (players or otherwise) from one club to another as easily as they currently can. In a more recent example, Graham Westley made a similar mid-season move from being majority shareholder and manager at Farnborough Town to manage Stevenage Borough, taking as many as seven contracted players with him.

7.  The Arbiter Group invested heavily in the team at Hendon, as well as building a set of costly banqueting facilities. However, unbeknown at the time to supporters, all the investment in Hendon Football Club Limited was being put through the accounts as a loan from the parent group. By the middle of the 2000s, the football club had a liability of over £2 million to the Arbiter Group who by now had moved in private ownership and were no longer willing to fund the football club.

8.  The company made clear to the supporters that they would no longer fund Hendon FC and that their intention was to work with Barnet Council (who owned the freehold of the club's ground at Claremont Road) to sell the land for development, sharing the receipts between council and the Arbiter Group Ltd. Arbiter Group would then allow Hendon FC to be sold to any interested group for a token fee.

9.  With the help of Supporters Direct, supporters of Hendon FC formed a Supporters' Trust and signalled their intention to purchase the club following the sale of Claremont Road and continue running it. Without going into full detail of the various agreements that took place between the FA, Hendon Football Club Ltd (the Arbiter Group), Barnet Council and Hendon Football Club Supporters' Trust, suffice to say that Claremont Road is now owned by a company called MontClare Developments and lying derelict, while Hendon Football Club have been taken over by the Supporters, albeit now homeless and unable to play in their community.

10.  While the Football Association did their best to request that Barnet Council and the Arbiter Group agreed to provide a token sum to the Supporters' Trust before agreeing the transfer of the football club's membership to the Trust, it was plainly apparent they were unable to impose any conditions to assist the Trust, nor prevent the owners from separating the Football Club's primary asset from the club for their own benefit.

11.  However, it is fair to say that Hendon FC's case, while the process was delayed by their attempts at intervention in the ground situation, the FA's membership committee were helpful throughout the transfer of membership, as were the Isthmian League and both London and Middlesex Football Associations.

12.  As has proved the case at numerous other clubs, a lack of transparency, lack of asset protection and lack of accountability of owners to the fans, community and football authorities has allowed debt to build and generate a situation where the football club have been forced out of their community to survive, and local people in a deprived area of London have lost access to a community asset.

13.  With more oversight of clubs from the governing bodies and/or some form of licensing, as pioneered in the Bundesliga with the Lizenzierungsordnung, some of these problems could most likely be averted due to the danger of being denied entry into competition while for most of the others, it would at least act as some form of early warning system.

Is there too much debt in the professional game?

14.  In terms of the professional game, I have little evidence to offer. However, it is worth noting that wage inflation in the professional game, partly fuelled by debt incurred as clubs "chase the dream" has a significant impact on wage demands at lower (semi-professional) levels.

15.  Indeed, debt isn't solely a problem in the professional game—many non-league clubs have suffered for similar reasons in recent years. A significant number of clubs have become insolvent and entered administration with mounting debt or folded as a result in recent years either partly or largely as a result of high wage costs, For example, Hornchurch FC (2005), Weymouth FC (2009), Lewes FC (2008), Leyton FC (2011), Kingstonian FC (2004).

16.  In a number of cases, these clubs have been forced to play severely weakened teams at very short notice mid-season, distorting the league table where some teams had played a much stronger side than others. For example, after jettisoning their first team as their problems first mounted in December 2007, Leyton lost 11-1 to home to Hendon and only managed to earn one point out of a total of 16 that season in their remaining fixtures.

17.  Indeed as outlined above, Hendon FC loss of the facilities at Claremont Road is partially down to the unchecked and mounting debt built by Arbiter Group Ltd/Plc, much of which was down to overspending on wages—in the 1998-99 season, Hendon spent their entire gate receipts (approx £28k) on a single player's wages (Junior Lewis).

What are the pros and cons of the Supporter Trust share-holding model?

18.  It is my belief that a Supporters' Trust provides the most stable ownership model for a Football Club, as the interests of the owners are unlikely to diverge from those of the club itself and the community around the club. The model rules drafted by Supporters' Direct ensure that a club cannot be stripped of assets (such as their ground) for the benefit of the owner, while it is in the interest of the fans not to run up unsustainable debts as the club would most likely suffer sporting penalties such as a points deduction.

19.  The Trust also helps ensure that a club does not become reliant on a single benefactor/director, benevolent or otherwise, who may be the only individual with the power to fund the club, yet—through outside circumstances—suddenly be unable to do so. Croydon Athletic FC suffered this problem during the 2010 Pakistan Cricket Betting scandal, and both Gretna FC suffered terminally in 2008. By contrast, as a Trust has to have a board of a certain size by law and even if it encounters funding problems, should consequently always be in a position to at least function.

20.  Indeed, in Hendon Football Club's case, it is clear that had the Supporters' Trust not been formed, there would no longer be a club at all as no "white knight" came forward to take over and the attached youth setup—albeit limited at present—would most likely have folded entirely, leaving youngsters without a team. Similarly, it has been particularly noticeable from experience at Hendon FC that the emotional buy-in, and community spirit fostered by supporters owning our own club has encouraged more people to volunteer and help with fundraising, administration and matchday activities.

21.  Supporters Direct's original model rules also ensure that the board is legally obliged to work in and with the local community, to strengthen bonds between Club and community and promote sport as beneficial to the local community. At Hendon this has led to the Trust nominating a local charity, Rays of Sunshine, as the club's charity and now directing funds from some fundraising activities this way, while larger clubs have worked with local junior clubs, assisted with Football in the Community Schemes, or in Brentford's case have gone as far as to take on the scheme themselves.

22.  It is, however, clear that a Trust owning a club is no silver bullet to all of the problems of other ownership models: Notts County, for example, suffered from problems with supporter pressure for investment ultimately leading to the Trust selling the club and the recent abortive Munto/Quadbak takeover. Similarly the Trust model has been slightly modified and used to take-over, or run clubs without the emotional attachment normal amongst traditional Trusts.

23.  MyFootballClub.com experimented with this model and took over Ebbsfleet United FC, but although they reached 31000 paid members by September 2008, only around 800 members renewed by February 2010, leaving a large deficit in finances. Similarly, Southill Alexander FC were formed by disaffected MyFC.com members under a similar format to start the 2009-10 season, but midway through their second season in January 2011 the club withdrew from their league amid some acrimony.

24.  As rewarding as running a semi-professional football club is, it can also be somewhat difficult to balance the books, even while running on an uncompetitive wage bill. As such, it can be difficult to justify the funding of youth football, particularly as the Club can often be denied funding from some schemes available to other Youth Football Clubs based on the status of the Senior team.

25.  Similarly, it can be difficult to obtain funding for larger schemes such as the building of a new ground (FC United of Manchester), important for a homeless club to build community links—It would assist heavily if tax-breaks were available to Community-based Supporters Trusts developing large scale capital-schemes where a community benefit can be demonstrated. This would help level a currently uneven playing field, where individual owners can lend money to their clubs and borrow personally at tax efficient rates.

26.  Similarly companies owned as part of a wider group have another tax benefit over Trust clubs, where the parent group can offset tax due on their wider profits against losses made by the football club. Due to the nature of Trusts, the effect is again to provide a financial opportunity to other models that simply isn't available to Trusts. Again, a corresponding break targeted at assisting Trusts would help encourage community ownership.

January 2011


 
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© Parliamentary copyright 2011
Prepared 29 July 2011