Don't recall seeing this article posted before. Gives an insight into a couple of the small businesses still owed money by Pompey...
http://www.thisismoney.co.uk/money/news/article-2099855/Grudge-match-soccer-rule-favours-clubs-players-creditors.html
Grudge match over soccer rule that favours clubs and players over other creditors
By Dan Atkinson
Last updated at 9:24 AM on 12th February 2012
The taxman suffered a humiliating defeat last week when Tottenham manager (and next England boss?) Harry Redknapp was found not guilty of tax evasion.
But still smarting from its 1-0 trouncing at Southwark Crown Court, Revenue & Customs is hoping for a better result as early as this week in the High Court in a quite separate grudge match with the Football League.
At stake are tens of millions of pounds in taxes that the Revenue claims it loses from football clubs that go bust, while players and other football clubs are given priority.
Losing out: Builder Terry Clark is owed £55,000 by Portsmouth FC
The system gives protection to some creditors in a way that is unique to football – and the losers over the years have included dozens of small businesses that have lost thousands of pounds.
The Revenue’s lawyer has dubbed it ‘the ugly side of the beautiful game’. But the Football League’s supporters insist that it is essential to protect the sport from financial crises and foster a ‘rescue culture’.
Clubs have this special bankruptcy status under the ‘football creditor’ rule, established by the Football League nine years ago. Under the rule, clubs that fail to keep paying players or honour debts to other clubs cannot stay in the League. Any club that is ejected from the League is doomed as a business.
The effect is that an administrator – who is legally bound to maintain an insolvent company as a ‘going concern’ – has no choice but to honour the football creditor rule and pay players and other clubs before all other creditors. That includes small traders and suppliers – and the taxman.
The issue may seem like a fine point with all the relevance for everyday life of the offside rule, were it not for the fact that since 1992 half of all the clubs in the Football League have been in administration.
Casualties have included Leeds United, Derby County, Exeter City, Crystal Palace, Wrexham and Premier League Portsmouth. Since it was introduced in 2002, the football creditor rule has cost taxpayers tens of millions.
Bankrupt: Derby County football club
The Revenue launched its case in November. Its QC, Gregory Mitchell, has argued that the rule awarded some football creditors a unique and preferential status in insolvency law – a status that could only be legitimately granted by Parliament. Not surprisingly, the Revenue is keen to stress that it is championing the cause of all non-football creditors, not just the taxman.
‘We are talking about people who have worked for the club and are left with very little because the football creditors get preferential treatment,’ said a Revenue source. ‘We can be talking about gardeners, florists and carpenters – these guys do not get paid. We don’t think it’s fair, we don’t think it’s right and we don’t think it’s lawful.’
Aggrieved small businesses are not hard to find. The case of Portsmouth FC, which went into administration in February 2010, became a cause celebre for opponents of the scheme.The victims are still angry.
‘It cannot be right,’ said Terry Clark, managing director of TWC Joinery and Shopfitting of Portsmouth. His firm worked extensively for the football club, fitting out offices and refitting the dressing room.
When Pompey went into administration, Clark’s company was owed nearly £55,000. The administrators were finally able to recover just 20 per cent of the debt to small creditors, meaning that he will get less than £12,000 of what he is owed. The same applies to the Revenue, which was owed £37million by Portsmouth.
Thanks in part to the football creditor rule, almost £30 million of that will not be paid. Clark said: ‘Why should the League clubs get away with it? I feel sorry for other local traders. Take the paper shop – it may be owed only £100, but that is a lot to them.’
Another Portsmouth creditor is Andrew Warshaw, a freelance sports writer, who is owed a four-figure sum for articles written for the club’s match programmes.
‘It does seem to me that the system draws a distinction between the haves and have-nots,’ he said.
A repeated cause of embarrassment for the League has been debts owed to the St John Ambulance service, whose workers provide medical cover at matches. To lance this boil, the League has made a £40,000 payment covering all such debts to date.
The rule was designed to protect players’ earnings. Its defenders point out that while Premier League players are paid millions, players in teams lower down the leagues are not so well remunerated and a typical annual salary for a League player is still about £50,000.
It was designed also, says the League, to protect other clubs from being hit. A single club becoming insolvent would create a domino effect among clubs.
One League source said: ‘This is about encouraging in football the sort of rescue culture that everyone is so keen to see in all other businesses.’
The alternative would be to push insolvent clubs into liquidation. The clubs could not be allowed to stay in the League, having defaulted on debts such as transfer fees, and this, says the League, would be needlessly destructive.
Mr Justice Richards, who has been hearing the evidence, is now considering his verdict in the civil case and is expected to rule within days.
The League and its supporters will be hoping they are allowed to keep the rule. Without it, they argue, more clubs would be forced into liquidation and expelled from the League.
The sport could be devastated. Critics argue that, in a time when small businesses are being squeezed by the downturn and the Treasury is trying to repay Britain’s giant national debt, it’s time to show the football creditors rule the red card.
