Winding up the Silkmen
On 16 September 2020 it was announced that Macclesfield Town FC (“MTFC”) – or to be precise the company entity of MTFC: Macclesfield Town Football Club Limited (CRN: 00415853) – had been wound up following an order made by Prentis ICCJ sitting in the High Court, Chancery Division, Insolvency and Companies List.
Over the past year MTFC has been a regular recipient of charges from the English Football League (“EFL”) for breaches of the EFL Regulations, and subsequently of sanctions from Independent Disciplinary Commissions (“IDC”) and League Arbitration Panels (“LAP”). Those sanctions, MTFC’s financial conduct that, inter alia, resulted in those charges and sanctions, and the abandonment of the EFL League Two 2019/2020 season all contributed to the relegation of MTFC to the National League at the end of the EFL League Two 2019/2020 season. Above that, though, it begs the question of how did MTFC come to be in the position of being wound up?
This article will provide a chronology of MTFC over the past year to try and explain how MTFC came to be in this position, and explain what being wound up means for MTFC.
MTFC, from bad to worse
On 12 November 2019 the EFL announced that it had been in discussion with MTFC over recent months in respect of MTFC’s non-payment of players’ wages. The EFL announced that it had opened an investigation in to MTFC pursuant to EFL Regulations, regulations 63.7 and 83, and that if matters could not be resolved then the EFL would commence disciplinary proceedings against MTFC. The EFL also announced that it had put MTFC on notice in respect of whether it could field a team for its scheduled EFL Trophy match against Shrewsbury Town FC. The EFL also explained that a failure to field a team in that match would result in MTFC forfeiting the match and being expelled from the EFL Trophy (EFL Regulations, EFL Trophy Regulations, regulation 20.6 (formerly regulation 20.2)).
On 14 November 2019 the EFL announced that it had charged MTFC with misconduct pursuant to EFL Regulations, regulation 63.7 and 83 following MTFC’s non-payment of players’ wages. The EFL also announced that MTFC had failed to field a team in its EFL Trophy match against Shrewsbury Town FC, triggering EFL Regulations, EFL Trophy Regulations, regulation 20.2.
On 5 December 2019 the EFL announced that it planned to meet with MTFC to ‘discuss the current situation at the Club, amid ongoing concern of the impact of late payments of wages on the health and wellbeing of those involved and their willingness to fulfil the Club’s scheduled League Two [fixtures]’. The EFL stated that should MTFC fail to field a team for its scheduled EFL League Two fixtures, then MTFC would face a charge for misconduct pursuant to EFL Regulations, regulations 31.2 and 83. The EFL also confirmed that a hearing before an IDC was scheduled to take place later in December 2019 in respect of the charge of misconduct against MTFC announced on 14 November 2019. Further, the EFL noted that a hearing of a winding-up petition presented by HMRC in respect of sums owed by MTFC to HMRC had been adjourned.
On 6 December 2019 the EFL announced that MTFC had informed the EFL that it would not be in a position to fulfil its fixture obligation in respect of an EFL League Two match against Crewe Alexandra FC scheduled for 7 December 2019. The EFL also confirmed that, consequently, MTFC was deemed guilty of misconduct and would be referred to an IDC for sanctioning (EFL Regulations, regulation 31). Further, on 7 December 2019, it was reported that MTFC’s game against Crewe Alexandra FC was postponed due to MTFC’s players refusing to play ‘in protest over unpaid wages’.
Also on 7 December 2019, Mr Amar AlKadhi, the majority shareholder, sole director and chairman of MTFC, announced that he was in ‘advanced negotiations with various third parties, with a view to selling his stake in [MTFC]’.
On 19 December 2019, the EFL announced that a hearing before an IDC had taken place in respect of the charge of misconduct announced on 14 November 2019 and for MTFC’s non-fulfilment of its match against Crewe Alexandra FC. MTFC had pleaded guilty to ‘multiple charges in respect of non-payment of players on applicable due dates and also non-fulfilment of a fixture in relation to its match with Crew Alexandra’. The IDC sanctioned MTFC with a ten-point deduction, with four points suspended. Accordingly, MTFC received an immediate six-point deduction, subject to appeal.
On 20 December 2019, the EFL announced that MTFC’s match with Plymouth Argyle FC was not to go ahead as planned on 21 December 2019, contrary to MTFC’s belief. EFL matches are required to be played with fans present (EFL Regulations, regulation 33.1). MTFC’s Moss Rose had been ‘issued with a zero capacity notice by the local Safety Advisory Group’ and, as the EFL had refused to grant permission for the match to be played behind closed doors (how times have changed), the game could not go ahead. The EFL also announced that as a result of this breach of the EFL Regulations, MTFC was to be charged with misconduct (EFL Regulations, regulations 31 and 83).
On 7 January 2020, MTFC announced that it had lodged an appeal against the IDC’s decision announced on 19 December 2019.
On 15 January 2020, Mr AlKadhi announced that bids had been ‘accepted in principle’ for his stake in MTFC.
On 20 January 2020 the EFL and MTFC confirmed that MTFC had been charged with misconduct for its failure to fulfil its fixture obligations in respect of the match with Plymouth Argyle FC.
On 9 March 2020 the EFL announced that it had charged MTFC with misconduct for non-payment of players’ wages in February 2020.
On 17 March 2020 the EFL and MTFC announced that MTFC had been successful in appealing against the IDC’s decision announced on 19 December 2019. The LAP decided that the point deduction imposed by the IDC should be revised to ‘a seven-point deduction, with four of those points to be applied immediately and three to be suspended’. Accordingly, MTFC’s immediate point deduction was revised from a six-point deduction to a four-point deduction.
On 23 April 2020 MTFC announced that it had placed all of its players, backroom staff and a majority of its office staff on furlough.
On 7 May 2020 the EFL and MTFC announced that an IDC had found that the charges of misconduct against MTFC announced on 9 March 2020 and for non-fulfilment of its match against Plymouth Argyle FC had been proved. The IDC’s decision dated 5 May 2020 (“IDC 5.5.20 Decision”) activated the suspended three-point deduction from the LAP’s decision announced on 17 March 2020, and sanctioned MTFC with an immediate four-point deduction and a suspended two-point deduction. Accordingly, MTFC’s running total for deducted points following the IDC 5.5.2020 Decision was 11 points. The IDC 5.5.20 Decision also identifies:
MTFC had admitted the charges brought against them and that the suspended three-point deduction from the LAP’s decision announced on 17 December 2019 should be activated as a consequence of the same (IDC 5.5.20 Decision, paragraph 19).
MTFC had paid Plymouth Argyle FC wasted expenses for MTFC’s non-fulfilment of that match planned to take place on 21 December 2019, totalling £7,481.83 (IDC 5.5.20 Decision, para 26).
MTFC’s players had not been paid regularly in accordance with their contracts since January 2019 (IDC 5.5.2020 Decision, paragraph 43)
MTFC unsuccessfully sought to explain its non-payment of players’ wages by stating that EFL’s basic payments and the FA Premier League’s solidarity payments had been withheld from MTFC by the EFL, such payments totalling nearly £151,000 as at January 2020. The EFL explained that such payments were being withheld as a consequence of Mr Sol Campbell’s claim against MTFC for ‘unpaid remuneration’ and the EFL Board’s power pursuant to the EFL’s Articles of Association, articles 48.1 and 48.1.5 (see IDC 5.5.20 Decision, paragraphs 44-47).
The EFL also argued against MTFC’s unsuccessful explanations for MTFC’s non-payment of players’ wages by stating that ‘MTFC either lacked or had mismanaged its finances so as to be unsustainable absent financial support from Mr AlKadhi which, despite his assurances that he had some £3 million available for such contingencies, he had not provided’ (see IDC 5.5.20 Decision, paragraphs 47).
In respect of MTFC’s explanations and mitigation arguments generally for its non-payment of wages, which were rejected, the IDC stated:
‘MTFC appears to have demonstrated that it does not have the finance or the sound financial management to meet its most basic obligations; and that whilst Mr AlKadhi may present himself as underwriting its needs, he does not promptly perform and has arguably exposed the club more recently to further (and repeated) sanction in failing to do so. It was said on behalf of the club at the hearing that he is not obliged to, and that MTFC should stand on its own feet. That is a laudable hope, and Mr AlKadhi has in the past provided sterling support, but he cannot claim credit for this and so lend comfort as to MTFC’s sustainability, whilst at the same time dragging his feet so as to put MTFC in breach of the Regulations again and again’ (IDC 5.5.20 Decision, paragraph 59).
In respect of the possibility of MTFC again committing a non-payment of players’ wages, the IDC stated:
‘… [the IDC] should make it clear that it does not consider that MTFC’s tardiness (yet again) to pay the players’ remuneration for March on time necessarily requires a further charge. Given its reasoning and conclusions as above, it would require strong persuasion to impose a yet further points deduction for any such breach (albeit the sixth monthly failure this season to pay players promptly)’ (IDC 5.5.20 Decision, paragraph 70).
MTFC had been ordered to pay the EFL’s costs of £10,200 plus VAT (representing EFL’s counsel’s fees only) (IDC 5.5.20 Decision, paragraph 73) and the IDC’s costs, to be notified.
Notwithstanding the IDC’s comments in the IDC 5.5.2020 Decision, on 2 June 2020 the EFL announced that it had charged MTFC with misconduct for ‘failing to pay a number of players… in March 2020’ and for ‘failing to act with utmost good faith in respect of matters with the EFL and for breaching an order, requirement, direction or instruction of the [EFL]’.
On 9 June 2020 the EFL announced that EFL League Two clubs had voted to curtail the EFL League Two 2019/2020 season, with those clubs’ final league placings to be determined on an ‘unweighted points per game’ basis. As things stood at this time, MTFC were in 23rd place of EFL League Two, one above the 24th and relegation place of the EFL League Two 2019/2020 table.
On 17 June 2020 MTFC announced that a hearing of a winding-up petition presented by HMRC in respect of sums owed by MTFC to HMRC had been adjourned to 9 September 2020. This was reportedly the eleventh adjournment that had been ordered.
On 19 June 2020 the EFL and MTFC announced that an IDC had found that the charges of misconduct announced on 9 June 2020 had been proved. The IDC’s decision dated 19 June 2020 (“IDC 19.6.20 Decision”) activated the suspended two-point deduction from the IDC 5.5.20 Decision, sanctioned MTFC with a suspended four-point deduction and fined MTFC £20,000. Accordingly, MTFC’s running total for deducted points following the IDC 19.6.20 Decision was 13 points. The IDC 19.6.20 Decision also identifies:
MTFC had been ‘largely dependent on funding by or through its owner and chairman Mr Amar AlKadhi’ and ‘living a particularly hand-to-mouth existence’ (IDC 19.6.20 Decision, paragraphs 7-8, 32 and 54).
In March 2020 the EFL told members clubs it was making available loan advances of up to £199,600 each and MTFC applied for such a loan on 6 April 2020 (IDC 19.6.20 Decision, paragraph 10). On 10 April 2020 the EFL indicated that it was prepared to advance to MTFC a loan of £84,861.38 (“the Loan”), being the total due for non-payment of players’ wages in March 2020 and other wages (IDC 19.6.20 Decision, paragraph 13). The Loan was provided on the condition that Mr AlKadhi would use the same ‘in the first instance… to settle all outstanding employees’ salaries’. MTFC paid 80% of those unpaid wages upon receipt of the Loan on 14 April 2020, but did not pay the remaining 20% until 6 May 2020 (IDC 19.6.20 Decision, paragraphs 14-23).
The charges of misconduct against MTFC in respect of ‘failing to act with utmost good faith in respect of matters with the EFL and for breaching an order, requirement, direction or instruction of the [EFL]’ related to the Loan and EFL Regulations, regulation 3.4. In particular, it was alleged that MTFC had breached the Loan and EFL Regulations, regulation 3.4 by not settling ‘all outstanding employees’ salaries’ on 14 April 2020 when the EFL paid the Loan to MTFC.
MTFC had admitted the charges of misconduct in respect of non-payment of players’ wages but submitted that the suspended two-point deduction from the IDC 5.5.20 Decision should not be activated, relying on, inter alia, the comments made in that decision at paragraph 70 (IDC 19.6.20 Decision, paragraph 39).
MTFC denied the charges of misconduct in respect of the Loan and EFL Regulations, regulation 3.4 on the basis that it had used the Loan as agreed and ‘was never asked to and never did agree a date with the EFL by which payment of salaries should be paid’ (IDC 19.6.20 Decision, paragraph 41).
The IDC was satisfied that MTFC had ‘breached the fundamental conditions of [the Loan]’ by not using the Loan to immediately settle ‘all outstanding employees’ salaries’, although there was no finding of dishonesty against MTFC or Mr AlKadhi in this respect (IDC 19.6.20 Decision, paragraphs 45-49).
The IDC considered that, notwithstanding the comments made in paragraph 70 of the IDC 5.5.20 Decision, the suspended two-point deduction from the IDC 5.5.20 Decision ‘must be activated’ as it was ‘necessary and appropriate in the circumstances’ (IDC 19.6.20 Decision, paragraph 52).
The IDC also noted that the grand total of 13 deducted points when applied on an ‘unweighted points per game’ basis equates to a 16-point deduction (46 games in a standard season ÷ 37 games played in the 2019/2020 season at the point of curtailment x 13 points = 16.16 points). The IDC also noted that if MTFC was sanctioned with a further points deduction, this would force MTFC in to 24th place in EFL League Two and relegate MTFC to the National League. The IDC consequently considered that it was ‘fair, sufficient and proportionate’ to impose a suspended four-point deduction (IDC 19.6.20 Decision, paragraphs 56-59).
The IDC also sanctioned MTFC with a £20,000 fine, and a requirement to submit to the EFL by 31 July 2020 a business plan ‘demonstrating how it will be properly managed and funded on a stable basis (and one which will be properly implemented) for next season and going forward, to ensure compliance with its regulatory and other obligations without recourse to Mr AlKadhi’s ad hoc (and seemingly often wayward) methods and decisions’ (IDC 19.6.20 Decision, paragraphs 61-62 and 65). In respect of the £20,000 fine, however, the IDC invited the EFL ‘to consider at its absolute discretion whether to defer, waive or repay’ the same depending upon the contents and implementation of the business plan (DC 19.6.20 Decision, paragraph 66).
MTFC had been ordered to pay the EFL’s costs of £7,235 plus VAT and the IDC’s costs, to be notified (IDC 19.6.20 Decision, paragraph 68).
Mr Mark Blower, a former chairman of MTFC, had been assisting Mr AlKadhi in improving the management of MTFC (IDC 19.6.20 Decision, paragraph 28).
On 3 July 2020 the EFL announced that it had lodged an appeal against the IDC 19.6.20 Decision, much to MTFC’s disappointment.
On 8 July 2020 MTFC announced that the proposed purchaser of Mr AlKadhi’s stake in MTFC referred to in announcements made in December 2019 and January 2020 had not progressed with the purchase. However, it was also announced that Mr AlKadhi still wanted to sell his stake in MTFC.
On 31 July 2020 MTFC confirmed that it had submitted to the EFL a business plan as ordered in the IDC 19.6.20 Decision.
On 4 August 2020 MTFC announced that Mr AlKadhi had stepped down as MTFC’s chairman but that he ‘will remain as majority shareholder until the sale of his stake in the Club is finalised and he remains committed to concluding this at the earliest possible opportunity’. MTFC also announced that Mr Blower would oversee the management of MTFC until the announcement of a new chairperson.
On 11 August 2020 the EFL and MTFC announced that the EFL’s appeal against the IDC 19.6.20 Decision had been successful. The LAP’s decision dated 18 August 2020 (“LAP 18.8.20 Decision”) confirmed the IDC 19.6.20 Decision’s activation of the suspended two-point sanction from the IDC 5.5.20 Decision, but also changed the suspended four-point deduction from the IDC 19.6.20 Decision to an immediate four-point deduction. Consequently, MTFC were forced in to 24th place in EFL League Two and relegated to the National League. The LAP 18.8.20 Decision also identifies:
The EFL had lodged its appeal on the basis that the sanctions imposed in the IDC 19.6.20 Decision were too lenient and/or that the IDC had taken into account irrelevant matters when deciding on the appropriate sanction. In particular on that second ground, the EFL contended that the IDC should not have taken into account MTFC’s relegation if a three-point or greater points deduction had been imposed immediately (LAP 18.8.20 Decision, paragraphs 3-4).
The LAP agreed with the EFL that the IDC had erred in considering the relegation of MTFC when determining the appropriate amount of points to deduct when sanctioning MTFC. The LAP emphasised that the ‘correct approach is to impose a sanction that reflects the seriousness of the wrongdoing’ which should be ‘separated from the question of what impact that might have on league position or relegation’ (LAP 18.8.20 Decision, paragraph 22). The LAP also reminded itself that MTFC had committed the same act of misconduct – non-payment of players’ wages – on six occasions during the EFL League Two 2019/2020 season, in addition to MTFC’s breach of the duty of upmost good faith in respect of the Loan. The LAP noted that to impose a less severe sanction than in earlier proceedings against a history of escalating and repeating misconduct – with each act of misconduct being analogous to an aggravating factor – was too lenient (LAP 18.8.20 Decision, paragraph 25).
Considering the above, the LAP considered that an ‘immediate sporting sanction was the only appropriate sanction’ and that whilst the four-point deduction calculated in the IDC 19.6.20 Decision was correct, that four-point deduction was to have immediate effect (LAP 18.8.20 Decision, paragraph 26).
On 16 August 2020 MTFC announced that it had made an application to the EFL pursuant to EFL Regulations, regulation 7.7A (which applied to the EFL League Two 2019/2020 Season only) to reprieve MTFC’s relegation to the National League:
‘7.7A The Board shall have the power, exercisable at any time, to reprieve the one Club that would otherwise cease to be a member of the League and join the National League at the end of Season 2019/20 where the National League is unable to guarantee to the Board’s satisfaction that competitive fixtures in the National League National Division will commence within a reasonable period of time. In determining whether to exercise that power, the Board will take into account the decisions the League has taken to that date in relation to commencement of League Two fixtures in Season 2020/21’.
On 17 August 2020 the EFL announced that the EFL Board had rejected MTFC’s request made pursuant to EFL Regulations, regulation 7.7A to reprieve MTFC’s relegation to the National League. In making that decision, the announcement identified that the EFL Board had considered:
The National League’s intention and plans to start its 2020/2021 season on 3 October 2020;
That the EFL League Two 2020/2021 season had already been scheduled to start on 12 September 2020; and
That if the EFL was to reprieve MTFC’s relegation, this would activate the additional requirement of a vote from 65 of the EFL’s 72 member clubs in favour of increasing the EFL’s member clubs from 72 to 73. (Although Bury FC had ceased to be a member club of the EFL during the EFL League Two 2019/2020 season, and therefore reducing the number EFL member clubs to 71, (i) at the end of that season only one team was to be relegated from EFL League Two; and (ii) two teams had been promoted from the National League (Barrow AFC and Harrogate Town AFC) to the EFL League Two, bringing the number of EFL member clubs back to 72.)
Those IDC and LAP decisions were catastrophic for MTFC, and it is understandable why fans and MTFC were unhappy with the LAP 18.8.20 Decision. For example, in EFL v Birmingham City FC, when determining the appropriate points deduction to be applied to Birmingham City FC the IDC noted that for ‘relegation or promotion outcomes potentially to be affected by a points deduction only announced in the last few weeks of the season is far from ideal’.[1]. Similarly, that reasoning was applied in EFL v Sheffield Wednesday FC with an outcome that Sheffield Wednesday’s 12-point deduction took effect in the EFL Championship 2020/2021 season rather the EFL Championship 2019/2020 season, much to the disappointment of Charlton Athletic FC.[2] Nevertheless, one distinguishing factor – and which was a significant consideration in the LAP 18.8.20 Decision – was MTFC’s repeated misconduct throughout the EFL League Two 2019/2020 season.
MTFC in liquidation
A frequent observation in those IDC and LAP decisions was to MTFC’s lack of ‘finance or… sound financial management’, and its ‘hand-to-mouth existence’. It is notable that the business plan submitted by MTFC to the EFL and the help of Mr Blower was insufficient to salvage MTFC’s finances. The winding up of MTFC seems to have been inevitable, or at the least it is unsurprising. Reports surrounding the winding-up petition that had been presented against MTFC and which ultimately resulted in MTFC being wound up state that MTFC owed £182,000 to its former manager Mr Campbell, £173,000 to is former manager Mr John Askey, and £190,000 in tax to HMRC. Further, it was reported that the winding-up petition from HMRC had originally been served in ‘early 2019’.
The winding up of a company is a compulsory form of liquidation ordered when a creditor (not uncommonly HMRC) can establish, inter alia, that a company is unable to pay its debts (Insolvency Act 1986 (“IA 1986”), s. 122). Liquidation results in the appointment of the Official Receiver, and frequently thereafter an insolvency practitioner, to act as liquidator of the company (IA 1986, ss. 136 and 139). The liquidator will, inter alia, collect and realise (i.e. sell) the company’s assets, and then distribute those realisations to the company’s creditors (IA 1986, s. 143(1)). Such distributions are made in accordance with a statutory order of priority. Following the process of realisation and distribution of the company’s assets, the company is then dissolved (i.e. ceases to exist).
Therefore, the winding up of MTFC is a drastic consequence, albeit there is still a possibility that all hope is not lost for MTFC:
It had been reported that MTFC intended to apply to rescind the winding-up order. However, such an application can only be made by a creditor or the company jointly with a creditor (Civil Procedure Rules (“CPR”), Practice Direction – Insolvency Proceedings (“PDIP”), paragraph 9.10.3). Further, such an application should have been made within five working days of the winding-up order being made, and there has been no announcement of such an application being made (Insolvency Rules 2016, rule 12.59). However, it is not impossible that an out-of-time application could be made.[3] Nevertheless, in any event, if such an application was to be made, it would need to demonstrated that MTFC’s circumstances are materially different from the time when the winding-up order was made.[4]
There is still a possibility that an application could be made to stop (i.e. ‘stay’) the liquidation of MTFC (IA 1986, s. 147). There is no time limit for such an application. However, such an application can only be made by the Official Receiver, liquidator or creditor (IA 1986, s. 147). Whether or not such an application is successful is at the discretion of the court but will usually only be successful where the company can demonstrate it is solvent or that it is in the public interest that a stay is granted.[5] The stay can be permanent or for a limited time and made upon such terms and conditions as the court thinks fit (IA 1986, s. 147).
Further, MTFC may consider an appeal against the winding-up order on the basis that it was ‘wrong’ or ‘unjust because of a serious procedural or other irregularity’ (CPR, rule 52.21(3)). If an appeal is to be made, then MTFC would firstly need to seek permission to appeal and must file an appellant’s notice within 21 days of the winding-up order being made (CPR, rule 52.12 and PDIP, paragraphs 17.4(4) and 18.1). However, it is unlikely that MTFC would pass the test for such permission, as there is nothing to suggest that MTFC has a ‘real prospect of success’ or that there is ‘some other compelling reason’ for the appeal to be heard.
It is surprising that there is yet to be any statement or announcement from MTFC in respect of the winding-up order. Without knowing any further information it is not possible to say whether any of those three options in respect of the winding-up order are being considered or are likely to be exercised.
Similarly, there is yet to be any statement or announcement from the National League in respect of the winding-up order. As the winding-up order was made when MTFC was a member of the National League, then MTFC will be subject to The FA’s Standardised Rules (“the Rules”). It is anticipated that the National League will make a statement or announcement shortly with the National League still intending to begin its 2020/2021 season on 3 October 2020. In particular, it is anticipated that the National League will make a statement or announcement considering the following:
A Club which ceases to exist will automatically cease to be a member of the National League (the Rules, rules 1.5 and 12.8);
The Rules state that certain rules take effect on the occurrence of an ‘Insolvency Event’, which includes a winding-up order being made against a club (the Rules, rule 1.1);
Upon the occurrence of an ‘Insolvency Event’ a National League club ‘must inform and keep informed the [National League]’ and the National League Board ‘shall have the power to suspend [the club] on notification of it having entered an Insolvency Event’ (the Rules, rule 2.15);
Upon the occurrence of an ‘Insolvency Event’ a National League club will be subject to a ten-point deduction (the Rules, rule 13.A.1);
Upon the occurrence of an ‘Insolvency Event’ a National League club will be subject to an embargo on player registrations (the Rules, rule 42(a)); and
Upon the occurrence of an ‘Insolvency Event’ the National League will have the right to not make any payments from central funding to the affected club (the Rules, rule 39.1).
It is hoped that a party will be interested in acquiring MTFC’s assets and creating a “phoenix club”, and there has been some reported interest of the same. Notwithstanding the bleakness of the activation of certain rules in Rules upon the occurrence of an ‘Insolvency Event’, rule 2.9.2 of the Rules provides some comfort:
‘In the event that any Club that is subject to an Insolvency Event resolves to transfer its membership of the Competition to a new entity, the Board will use the following minimum criteria in deciding whether or not to approve that transfer:
a. The shareholders or members of the Club have voted to agree to the transfer of the Club’s membership to the new entity and/or a licensed insolvency practitioner(s) appointed to the Club has agreed to sell or transfer some or all of the Club’s assets to the new entity;
b. All Football Creditors in the Club must be Paid in Full and evidenced as such;
c. The proposed new entity has provided financial forecasts to The FA and the Competition showing its ability to fund the Club for the next twelve (12) months or to the end of the Playing Season following transfer (whichever is the longer) and that evidence of funding sources has been provided;
d. The FA must have given approval for the transfer to take place; and
e. All other creditors in the Club must be satisfied and evidenced as such…
In the event that requirement (a) and/or (e) is not fully complied with, and only where the Board, at its absolute discretion, deems there to have been exceptional circumstances surrounding the application for the transfer, it may approve the transfer (subject to compliance with all other provisions above) and may apply such conditions as it deems appropriate including, without limitation, the deduction of points’.
Accordingly, if a party does acquire MTFC’s assets to create a “phoenix club”, MTFC’s creditors can be paid and/or satisfied, and if an application is made to the National League Board pursuant to the Rules, rule 2.9.2, there could be a good prospect of MTFC rising from the ashes. However, considering the limited time between now and the planned start of the National League 2020/2021 season on 3 October 2020, it is this author’s opinion that that process will have to happen quickly to be successful.
A further consequence of MTFC being wound up could be a claim for damages being brought by the Official Receiver or liquidator against Mr AlKadhi for, inter alia, a breach of directors’ duties (Companies Act 2006, ss. 170-177) if it can be established, for example, that Mr AlKadhi did not ‘promote the success of the company’ or ‘exercise reasonable care, skill and diligence’ and this caused a loss to MTFC (IA 1986, s. 212). If such a claim is made it will be treated as an asset of MTFC, and will be pursued and realised for the benefit of MTFC’s creditors. Considering some of the comments made about Mr AlKadhi in the IDC’s and LAP’s decisions explained above, this author would expect such a claim to be given serious consideration.
This author wishes the very best for those affected by the winding-up order made against MTFC, and for all football clubs in the lower levels of the football pyramid suffering the financial difficulties caused by COVID-19 – or by poor management and ownership.
Footnotes
[1] The English Football League v Birmingham City Football Club, 22 March 2019, [31]-[33].
[2] The English Football League v Sheffield Wednesday Football Club, 4 August 2020, [23].
[3] Preston and another v Green and others [2016] EWHC 2522 (Ch).
[4] Credit Lucky Limited and Gui Hui Dong v National Crime Agency [2014] EWHC 83 (Ch).
[5] Re Lowston Ltd [1991] BCLC 570.
28 September 2020
29 September 2020
On 29 September the National League announced that it had decided to suspend and remove MTFC from the National League.