Ruling out new financial regulations

Never in the politics of the governance of football has there been a time when rank hypocrisy has been in evidence. Ok, apart from differing punishments for Torquay and Herford compared to West Ham (regarding Carlos Tevez) for essentially the same crime. And allowing a very rich man with a below par human rights record taking over a club, whilst talking of the Fit and Proper Persons Test. And probably a few other cases too, at least.

Another example has emerged this week regarding Birmingham City and the murky world of football finances. Under new Premier League and FA regulations that were put in place following the fiasco that was the Portsmouth affair, clubs have to undertake external, independent audits of their finances, to be submitted to the Premier League.

By the 1^st March each year, clubs must submit the details of these audits, with notes required from the auditors about possible problems and by the 31^st March, clubs must also submit “future financial information” to highlight any possible funding and stability problems for football clubs in the short-term future. Should a club become a cause for concern, the Premier League can impose sanctions such as a ban on player contracts being improved or extended, the enforced sale of players or a withholding of a licence to play in UEFA competitions, such as the case of Portsmouth in this year’s Europa League.

This is where Birmingham City comes in, due to winning the Carling Cup this season. The audits submitted to the Premier League for the club’s accounts stated, despite a small profit being made, doubts about the club and its parent company (Birmingham International Holdings) as a “going concern”, with the Premier League seeking more information about the ownership structure at the club and the recent share activity.

The holding company released under-written shares (shares that are guaranteed to sell and raise money) back in March which raised £6.8 million and another share release aimed at raising capital occurred recently, which were not underwritten and so not guaranteed to sell. These have so far failed to raise the £17.3 million aimed for and an extension has been made on the offer until May.

However, Carson Yeung, who completed his takeover of the club in 2009, has recently bought a further 8.66% of the shares of the holding company (from an unidentifiable third party due to the company being registered in the Cayman Islands) to take his total to 24.91%. Yeung provided assurances to the Premier League last year about club’s financial stability.

The case of for Birmingham City is indeed a bit hazy as any audit that express doubt over a company’s ability to function in the future needs to be taken seriously, but here’s the rub. Bigger clubs in the Premier League should have far bigger question marks over their financial future but the auditors there do not seem to have raised these concerns.

For example, whilst clubs such as Manchester City and Chelsea can cite the whereabouts of their capital, foreign mega-rich owners, this causes problems for the future long-term financial stability of said clubs. If these owners decided to pack up and leave, the resulting loss of income would lead to an inability to pay costs at a club and place the existence of the club at risk. But, these clubs are also the ones which raise most income for the Premier League as they are the biggest worldwide brands in football and thus push up income from TV rights and give the Premier League more clout in Europe by doing well in UEFA competitions, so it would be damaging to them to enforce regulations that combat overreliance on foreign owners.

The new financial regulations of the Premier League should be applauded as they ensure that the ownership of clubs is a little bit more clearer and where investment in clubs comes from. However, it would also appear they only cover a very specific area of the financial affairs of football clubs, their ownership, and not the overdependence clubs have on rich sugar daddies that may very well go spectacularly wrong when the football boom ends.

That said, this blogger can't see Birmingham City being denied a place in the Europe League this season as some compromise will be found to save the PR face of the Premier League or the club's owners will find some accounting way around the regulations.