The UK Football Governance Bill: Impact on ownership

The wider context

Despite the Premier League’s global success, there have been long-standing concerns about the resilience of English football. Almost 14 years ago, the Culture, Media and Sport Committee’s report on football governance identified expenditure (for example, on players’ wages) as one of the “big challenges” facing the game and warned that “over-ambitious or otherwise incompetent or duplicitous owners” threatened the sustainability of clubs.¹ Since the report, there have been various instances which have underscored the systemic issues within the English football pyramid and its self-regulatory structures.

All of these challenges have led to renewed calls for reform to the way football is governed. The independent Fan-Led Review of Football Governance, commissioned in April 2021, aimed to explore how the governance, ownership and financial sustainability of clubs in English football could be improved. Its 10 strategic recommendations were reiterated in a subsequent White Paper, ‘A Sustainable Future - Reforming Club Football Governance’, published in February 2023, which received broad cross-party support. The proposals included the establishment of an independent regulator of English football to prevent widespread financial failures and the resulting social and economic damage to fans and communities. This culminated in the Bill which was introduced in the House of Lords on 24 October 2024 and, at the time of writing, has passed its Third Reading at the House of Commons.

What is the Football Governance Bill aiming to achieve?

The Bill aims to establish a new regulatory framework for the top tiers of English men’s football, primarily through the creation of the IFR. It will apply to all football clubs operating in the top five leagues of the men’s game and will require those clubs to obtain a licence from the IFR to operate their teams and compete in such leagues.

This licensing regime mandates football clubs to meet certain financial and governance criteria, including providing financial documentation and demonstrating compliance with core requirements.

Additionally, the Bill includes provisions for the suitability testing of prospective and incumbent owners and officers, assessing their suitability and financial soundness.

The Bill also mandates enhanced fan engagement, requiring clubs to consult supporters on key decisions such as strategic direction, ticket pricing, and home ground relocations. Furthermore, the Bill seeks to protect club heritage by requiring football clubs to take reasonable steps to establish that changes to club names, crests, and home shirt colours are supported by a majority of the club’s fans in England and Wales.

Notably, the regime does not currently apply to the women’s game; however, the Secretary of State will retain discretion to expand the competitions to which the regime applies, and one would expect, given the growth and popularity of the women’s game, that such an extension would only be a matter of time.

These new requirements will have important implications for existing owners, and for those seeking to invest in relevant clubs. Our experience of similar regimes in other regulated sectors is that the regulator’s approach to the determination of licence applications and suitability assessments is as important as the statutory framework itself. Navigating the complexities of a new regulatory relationship can be challenging, and clubs (and their owners) will be keen to understand how this new relationship will be calibrated.

For those in club management and governance, and for owners, it will be important to understand the way in which the IFR interprets and applies the statutory framework in practice – all of which remains to be seen, but which will become clearer as the regulator continues to be stood up by the Department for Culture, Media and Sport in anticipation of the passage of the Bill.

Objectives of the new Independent Football Regulator

The IFR’s main objective will be to ensure the heritage, financial soundness and resilience of English football and its clubs by overseeing their financial health and governance practices.²

As its name suggests, the IFR will operate independently but, when exercising its functions, it must have regard to certain regulatory principles that are set out in the Bill and these are supplemented by the Secretary of State who will issue guidance about the exercise of the IFR’s functions.³ The government will also appoint the chair and the non-executive directors of the IFR.

So that it may meet its objectives, the IFR has been equipped with extensive investigatory powers including the ability to enter business premises and interview any person relevant to the investigation and to receive / share information with various public and private bodies, including industry bodies, other regulators, and law enforcement agencies. It has also been granted equally extensive enforcement powers including sanctions of a civil and criminal nature.⁴

How will this affect the clubs?

Clubs that operate a team in specified competitions⁵ (regulated clubs) will become subject to a number of new duties (the duties). Some of these duties will apply to all regulated clubs, whether they have obtained a license or not, and a subset of these duties will even apply to “formerly regulated clubs” (previously subject to regulation under the Bill within the past five years).

For example:

1. Prohibited competitions:⁶ Regulated clubs will be explicitly prohibited from operating a team in any competition prohibited by the IFR.
2. IFR/Fan approval: Regulated clubs must:
   1. Obtain approval from the IFR before disposing of or creating a security interest over their home ground or relocating their home ground;⁷ and
   2. In order to change its crest, home shirt colours, or name, regulated clubs must take reasonable steps to establish that such changes are supported by a majority of its fans in England and Wales.⁸ In the context of insolvency, regulated clubs must also seek IFR approval before appointing an administrator and must keep fans informed of any insolvency proceedings⁹.
3. Notification requirements:¹⁰ Regulated clubs must notify the IFR of any material changes in circumstances relevant to these duties or any other functions of the IFR.

Licensing regime: What you need to know

All regulated clubs will need to comply with a licensing regime, overseen by the IFR, in order to compete in their respective competition. As part of this, two types of operating licences exist: “provisional” and “full”. By virtue of having an operating licence, a regulated club would be considered a “licensed club”.¹¹

The first step for regulated clubs is to apply to the IFR for a provisional licence. This will necessitate the preparation and submission of certain required documentation, including a business plan with financial information, compliance assurance and a personnel statement detailing the decision-makers at the club.¹²

Regulated clubs must demonstrate compliance with core requirements¹³ in order for the IFR to grant a provisional licence. The provisional licence allows Regulated Clubs to continue operating while working towards meeting the IFR’s thresholds for a full operating licence. The provisional licence period will last for a maximum of three years (although the IFR may extend this). During this transitional period, the IFR will monitor the Licensed Club’s progress and compliance.¹⁴

The IFR will proactively assess licensed clubs for their full operating licence before the end of their provisional period. Licensed clubs must satisfy a statutory test, set out in the Bill, which includes continuing to meet the core requirements and threshold requirements.¹⁵ The IFR will also conduct suitability testing for owners and officers (which is discussed in further detail below).¹⁶

The Bill does aim to limit the regulatory burden on regulated clubs: Licensed clubs do not need to reapply to initiate the IFR’s full licence assessment. Furthermore, once granted, licensed clubs will not need to periodically renew their full licence.¹⁷ Nevertheless, regulated clubs will need to be prepared to demonstrate their financial soundness and forecasting with documentary evidence as soon as they enter into scope of the regime and to comply with certain continuing obligations.

Several consequences may follow if a regulated club submits incomplete documentation when applying for a licence, including either a delay in the licensing approval or the potential rejection of the application. Ensuring all required documentation is complete and accurate is therefore critical for a smooth licensing process and continued participation in specified competitions.¹⁸

How will this affect ownership of regulated clubs?

Whilst the Premier League, English Football League and National League already have an “owners’ and directors’ test”, the Bill introduces stringent measures to assess the suitability of owners and officers of all regulated clubs. The IFR is empowered to determine the suitability of prospective new owners and directors, as well as incumbent ones under certain circumstances. Before becoming an owner of any regulated club, each prospective owner will need to satisfy the IFR of its suitability to do so.

For these purposes, ‘ownership’ includes individuals who hold, directly or indirectly, more than 25 percent of the shares or voting rights in the regulated club, or has the right, directly or indirectly, to appoint or remove an officer of the regulated club, or who has the right to exercise “significant influence” or control over the activities of the regulated club.¹⁹

If a person fails to obtain an “affirmative determination” before becoming a new owner of a regulated club, the IFR will issue a notice to the new owner and the regulated club. The notice will either:

1. make an immediate determination that the new owner is not suitable to be an owner of that regulated club; or
2. require the new owner to apply to the IFR for a determination of suitability within a specified timeframe which, if not complied with, will result in a notice to the effect of (1) above.

Notably, the IFR will publish all notices in which it immediately determines that the person is not suitable to be an owner of the regulated club.²⁰

Incumbent owners and directors are not automatically subject to suitability determinations but may be re-evaluated if the IFR has grounds for concern about their suitability²¹. Individual owners and officers (and regulated clubs) are also obligated to notify the IFR of changes in circumstances relating to their suitability.²²

This suitability test will comprise two elements:

1. Fitness test:²³ This assesses an individual’s integrity, honesty, financial soundness, and competence (in the case of directors). It draws on similar “fit and proper persons” tests used by other regulators like the Financial Conduct Authority and HM Revenue & Customs. Individuals must also demonstrate compliance with other legal and regulatory standards.
2. Source of wealth test:²⁴ Prospective owners must demonstrate sufficient financial resources (of which none is connected to serious criminal conduct²⁵) and provide a detailed plan for operating the regulated club, including estimated costs and funding sources.

For investors, this will mean a thorough examination of their financial history and business dealings.

Any lack of transparency regarding financial interests or sources of wealth, questionable financial practices/associations with entities under investigation or insufficient evidence of financial ability to sustain the regulated club is likely to raise red flags and may result in a negative determination by the IFR.

In the context of incumbent owners and officers, the IFR may re-evaluate their suitability and potentially remove them from their position. In more severe cases, an individual may be banned from managing or owning any football club and the regulated club itself might be subjected to sanctions, including financial penalties.²⁶

Investors must ensure that their financial plans for sustaining the regulated club, and financial dealings are transparent, well-documented, and align with the regulatory expectations set forth by the IFR.

How clubs and owners should prepare

As mentioned earlier, the Bill has had its Third Reading, during which the House of Commons voted by 415 to 98 to pass the Bill. It is now poised to become law. When enacted, it will come into force on such date or dates as the Secretary of State may determine. When enacted, it will come into force on such date or dates as the Secretary of State may determine.

It is difficult to foresee the exact impact the Bill will have on investment and ownership in football in England and Wales.

On the one hand, the increased regulation aims to enhance financial sustainability, transparency, and accountability within the sport, which can attract more responsible and long-term investors. By ensuring clubs are well governed and financially stable, the Bill can create a more secure environment for investment, reducing the risk of financial failures and protecting the heritage of clubs. The financial sustainability promoted by the Bill might lead to the enhanced profitability of regulated clubs, which could result in increased investment.

On the other hand, the stricter regulatory framework might act to disincentivise investment in the game generally. The regulatory burden on regulated clubs is likely to far exceed what it was previously - the impact assessment published by the government estimated a total ‘familiarisation cost’ to regulated clubs of £400,000-£1.2 million, dwarfed by a further ‘compliance cost’ of £17.9 million-£35.8 million.²⁷ This, combined with the additional risk to investors of criminal or civil sanctions, public censure or information sharing with regulatory bodies, might fetter investment into regulated clubs and divert it towards other European leagues where no such level of regulation exists.

The Premier League itself has expressed its concerns that the Bill’s “rigid banking-style regulation” could “have a negative impact on the League’s continued competitiveness, clubs’ investment in world-class talent and, above all, the aspiration that drives our global appeal and growth”.²⁸

Therefore, it remains to be seen how the Bill will impact clubs but at the very least it is clear that the Bill introduces a stricter regulatory framework that clubs and their investors will need to take seriously and prepare for.