Football’s financial crisis: first-aid to bridge the crisis

November 24, 2020

#Insolvency #DebtManagement #FinancialCrisis #FootballClubs

Tuesday 24 November 2020 – Last week, the Belgian Pro League announced that Belgian professional football clubs have suffered a combined loss of income of 275 million euros since March 2020. Now that the burden of the Covid-19 crisis becomes ever clearer, many clubs face severe financial difficulties. The question arises as to how clubs can protect themselves to alleviate to some extent the short-term financial consequences. Although there is no magic bullet for cash-flow problems, clubs can try to create financial leeway with well thought-out interventions. Finally, there is also the option of a judicial reorganisation, although the Belgian Football Association’s regulations would seem to complicate achieving a successful judicial reorganisation.

Financial crisis weighs on club’s (too) limited reserves

The Pro League has calculated that, despite an improved media rights contract, all the professional football clubs have together lost 275 million euros in revenue compared to the same period last season. This equals an unprecedented decrease of about 50% in revenue. Moreover, in April 2020, it appeared that even without the Covid-19-related financial damage, several clubs already had difficulties in proving their business continuity until the end of June 2021. The Belgian FA refused several clubs the necessary licence to compete in professional football, although most clubs, by providing additional guarantees or funds, were able to overturn this decision during an appeal procedure in front of the Belgian Court of Arbitration for Sports.

“Various clubs have financial difficulties”

As a result of the ongoing health crisis, the Pro League clubs have lost most of their match day income. In addition, transfer fee earnings and sponsorship income has dropped, and some clubs’ financial reserves are insufficient. In addition, football traditionally has a (too) high wage burden. Recourse to temporary unemployment is politically sensitive, given that professional clubs pay limited social security contributions. As a result, various clubs have financial difficulties.

Clubs with financial struggles could benefit from a careful short-term strategy to initially meet their financial obligations and eventually obtain their professional licences for the 2021-2022 season in April 2021.      

Timely action is the key to optimal protection

Although there are no miracle solutions to cash flow problems, it is important not to wait until it is too late and so it is critical to act proactively. Clubs that are in financial difficulties should map out all their problems carefully by making an overview of their creditors’ claims and the nature of those claims. In addition, it is important to make an inventory of the claims outstanding with debtors.

Clubs must also check whether securities have been correctly established and registered. A point for attention here is to verify the scope of the guarantees that are sometimes relatively easily provided by Ultimate Beneficial Owners to obtain the Belgian FA’s licence to compete in professional football.

“Clubs must also check whether securities have been correctly established and registered.”

As soon as the club has a clear overview of the situation, it can map out the route to be followed. This can range from implementing a few simple interventions (e.g. dialogue with creditors) to more far-reaching measures (e.g. starting a judicial reorganisation as protection against creditors).           

Anticipating problems through negotiations and securities

To solve liquidity problems, clubs can negotiate with their debtors so the clubs can receive their future earnings ahead of time at, for example, a financial discount. Examples of this include amounts that would normally only be due in the future on the basis of a previous transfer or sponsorship agreements. Some clubs are already attempting to negotiate outgoing transfers for players for a transfer at the end of the 2020-2021 season, with the first instalment being paid immediately.

On the credit side, too, clubs could be proactive by, for example, asking their creditors to temporarily postpone or allow the spreading out of payments over time. The club could also give its creditors a pledge on claims the club has against its own debtors. In such a scenario, the (final) debtor must be informed. The most obvious example, given its share in the costs of a professional club, is to try to renegotiate certain pay conditions with players and staff. Many clubs already do this, either with the players individually or collectively with players’ representatives. The latter practice sometimes causes problems. Usually the captain or the team’s players’ council presents itself as the club’s negotiating partner, but often there is little more than a verbal commitment from players to represent them. For the sake of legal certainty, it is advised to work with a formal mandate from all the players or with a trade union representative, who can, if necessary, bind all the players via a collective labour agreement.

“A constructive dialogue with debtors and creditors can help a club to solve financial problems in the short-term. A club can also benefit from careful use of securities.”

Clubs can hold debt rescheduling talks with lenders. Another option could be to appeal to the shareholders, who could be granted legal privileges in exchange for their extra efforts. For new debts, clubs may consider providing new securities, subject to certain conditions.

To ensure continuity, clubs could also consider establishing new securities on already existing debts. However, there is a risk that an insolvency administrator, in a possible subsequent insolvency, would claim that these (new) securities cannot be invoked for the particular creditor’s old debts. Such a problem could be solved by recourse to an amicable out-of-court settlement, in which, with a view to ensuring the club’s continuity, an agreement is concluded between the club and at least two of its creditors. The formal requirements and procedural conditions for such an agreement would be rather limited. Moreover, the agreement would remain confidential.

Judicial reorganisation as protection against creditors

Clubs for which the solutions above do not provide an adequate remedy could resort to judicial reorganisation in order to preserve the company’s continuity. The key idea here is to seek protection against creditors by temporarily suspending creditors’ enforcement rights without depriving the debtor of its power of disposal (“debtor in possession”). To start a judicial reorganisation procedure, a threat to the company’s continuity is sufficient cause. Access to the procedure is thus relatively simple, and the mere filing of a request and corresponding annexes with the competent court will already ensure the initial protection against bankruptcy and creditors’ enforcement measures. However, the suspension does not benefit those providing personal securities.

The judicial reorganisation not only offers (temporary) protection to the debtor towards its creditors, but also various options for this debtor to reorganise its activities in which, for example, a significant reduction of the existing debts could be realised.

“Judicial reorganisation offers temporary protection towards creditors and options to reorganise a club’s activities in which, for example, a significant reduction of the existing debts could be realised.”

The problem with the judicial reorganisation option, however, is that the Belgian football association’s regulations require an irrefutable presumption that the club’s continuity is guaranteed in such a scenario. A club is thus in danger of losing its professional licence as long as the judicial reorganisation is not finished when a club applies for its licence.  

The gravity of this penalty hangs like a sword of Damocles over professional clubs’ heads, all the more so because failure to obtain the professional licence implies automatic relegation to non-professional football. Such relegation implies a huge loss of income, which could deprive such a club of the chance of a successful judicial reorganisation. The practical consequences of the Belgian football association’s penalty are at odds with the objective of the judicial reorganisation procedure of trying to preserve continuity.

The legality of the licensing provision in question is disputed. The legal framework concerning the judicial reorganisation prohibits the termination of existing (contractual) obligations solely on the basis of a request for a reorganisation procedure. In this context, reference can be made to the recent Belgian Competition Authority decision, in which interim measures were imposed on the Belgian FA for prima facie violating competition law by imposing too harsh licensing conditions.

Conclusion: do not wait for accidents to happen

The timely detection of weak spots and opportunities is essential to avoid slipping into a situation in which it is too late to take adequate action. A constructive dialogue with debtors and creditors can help a club to solve the initial problems in the short-term. Careful use of securities can also help the club to deal with some of these problems. If these solutions are not satisfactory, then clubs could try to protect themselves against their creditors by obtaining a judicial reorganisation.

For this article, the Atfield team was able to rely on the dedicated assistance of ALTIUS lawyer Bart HEYNICKX (

If you have questions regarding this matter, please contact:

Niels Verborgh (