EFL Statement: DERBY COUNTY
Further to a number of recent reports, social media comments, and fan communication in relation to ongoing matters at Derby County Football Club, the EFL wishes to clarify its position on several points, which are addressed by way of a series of Questions and Answers with the EFL Chief Executive Trevor Birch.
1. What information does the EFL believe is currently outstanding from the Administrators, and why is it needed?
The EFL is taking proactive steps to work with the Administrators to find sensible solutions that will see the Club secure a long-term future and meet the requirements as set out in EFL Regulations and the League’s Insolvency Policy.
In line with Article 4 of the Articles of Association, a Club is issued a Notice of Withdrawal when an insolvency event occurs, i.e., administration. The Article also grants the Board discretion as to whether to allow members to continue and if so on what basis.
Under administration, Clubs are given an opportunity to restructure their affairs and the EFL’s role is to preserve the integrity of the competition whilst also acknowledging the important roles Clubs play within their communities.
Where the Club is served with the Notice of Withdrawal part-way through a playing season, the Club is required to continue to abide by the EFL Regulations, honor all tickets purchased (including season tickets) relating to the remainder of the season, and provide confirmation of funding to indicate sufficient resources to ensure the Club can complete its fixtures for the remainder of the season.
On appointment, the Administrators were unable to provide the confirmation of funding, but the EFL allowed the Club to continue whilst they sought to finalize their plans. Their work has been funded in the interim through a combination of cost savings and external borrowing.
We have revisited the funding requirements with the Administrators on a number of occasions since their appointment, and last week the EFL asked the Administrators for updated details on how the Club plans to continue to trade whilst in administration, including a funding plan that will enable it to complete the current season and all remaining fixtures in the 2021/22 campaign.
The response was to highlight the specific figure Derby County needed in order to fulfill its fixture obligations for the remainder of 2021/22 and whilst potential funding options were tabled by the Administrators, they could not give the necessary assurances that the funding was guaranteed to enable the Club to finish the season.
As a consequence, the League made the decision that the Club should not be permitted to register any new players until the necessary funding was in place. The deadline for the provision of the funded plans was further extended to 1 February 2022.
2. Is there a deadline the Club and Administrators must work to?
The maximum period for any Club to remain in administration is 18 months and no Club is allowed to start more than one season in administration. As set out above, we have granted an additional extension for the provision of a funding plan until the end of the current Season. This provides the Club with a further opportunity to demonstrate the necessary funding, and it has a number of options available to it (as do all Clubs), for example from a preferred bidder, further cost savings, or player sales during the remainder of the January transfer window.
3. What is the Insolvency Policy?
No insolvent Club has an absolute right to continue in membership, and on entering insolvency a Club is served with a Notice of Withdrawal of the membership (currently suspended). The EFL’s Insolvency Policy provides guidance on how the EFL will address issues that might arise with a Club in administration. The aims of the Policy are to try and ensure a continuation of a football Club, the settlement of all football debts, and the satisfaction of creditors. If a buyer cannot be found who can meet the requirements for continued membership, then the Club may liquidate, and its membership withdrawn. The Policy provides discretion for the EFL Board as to how to deal with any particular Club and does not cover every eventuality.
This reserves the right to review and amend the procedures for each individual case in line with the League’s Articles of Association and Regulations.
Part of the League’s rationale for requiring the settlement of creditors is to preserve competition integrity. The Policy, and associated regulations, have been agreed by Clubs and seek to act as a disincentive to individuals from running Clubs in such a way that they gain a financial advantage over competitors and subsequently rely on insolvency legislation to compromise the unpaid debts incurred.
4. What is the preferred bidder status situation?
Throughout the administration process, the EFL has engaged with the Administrators as they seek to market the Club for sale and identify any potential bidders who wish to buy the Club.
Part of this process includes advising the Administrators in respect of the EFL’s requirements under the conditions of its Owners’ and Directors’ Test and the requirement for any potential owner to provide proof of future funding for two seasons.
The EFL has already met with two bidders alongside the Administrators but further notes their recent reference to a third bidder.
It is for the Administrators, and not the EFL, to determine which bidder they prefer to work with and seek to conclude an agreement with for the sale of the Club and who must then work to meet the EFL’s requirements under the Articles and Insolvency Policy.
The EFL has acted promptly and diligently throughout its dialogue with the Administrators but still awaits a further update from them as to the preferred bidder status. For confidentiality reasons, the League is unable to provide ongoing public comment on any potentially interested parties and/or the status of any bid.
5. Why has the EFL allowed Middlesbrough and Wycombe to threaten legal action against Derby County, and is this preventing the sale of the Club?
Middlesbrough FC commenced its claims against the Club over 12 months ago in arbitration proceedings, the framework for which is set out in EFL Regulations. The EFL is not a party to those proceedings and nor does it have a role in determining the outcome of them. As the arbitration proceedings are private and confidential, we are unable to provide any further detail.
The EFL is aware that the Administrators have also received notice of claims from Wycombe Wanderers FC of a similar nature to those of Middlesbrough FC, but the EFL has not received full details of them.
The current situation remains challenging as Middlesbrough and Wycombe Wanderers consider their claims should be protected under the terms of the Insolvency Policy. The Administrators disagree. Further, as those claims are not yet determined the Administrators and bidders have no clarity on the size of any (if any) liability. That has implications for exiting administration, and ultimately the Club being able to retain its membership status.
We are aware that Derby County considers the claims to be spurious, but despite this, the current bidders appear unwilling to assume the risk of defending them. In contrast, Middlesbrough FC and Wycombe Wanderers consider the claims to have merit, and that their rights will be adversely affected if Derby County can extinguish or compromise the claims using the insolvency process.
The EFL is keen to try and resolve the current impasse. The EFL invited each of the Administrators, Middlesbrough FC, and Wycombe Wanderers to make submissions on this point last week, and we are now in the process of reviewing those submissions with a view to identifying a route to resolve the conflict which exists between the respective positions of, on the one hand, Derby County, and on the other Middlesbrough and Wycombe Wanderers.
6. Why doesn’t the EFL take a definitive decision on the issue?
As outlined above this is a complicated set of circumstances that requires consideration of the EFL’s broader role as the body that oversees 72 member Clubs and not just those Clubs that may be affected at any one time. The potential impact of a claim or indeed claims against the EFL would not only have a direct effect on the League and the members involved but also the remainder of the membership given the way the EFL is constituted. To try and simplify what is a complex legal position is not simple or straightforward but we are committed to finding an appropriate solution and providing clarity on the issue as soon as possible.
7. Is the EFL acting unlawfully?
To be clear, the EFL is not and would not, attempt to overrule ‘statutory law’. There is a clear difference of opinion between competing parties as to the correct application of our Articles and Insolvency Policy and that needs resolving. The fact that this is open to some interpretation means this process remains challenging, but the EFL is working to achieve clarity as quickly as possible. For the avoidance of any doubt the League is not making any attempts to block any sale of Derby County but instead attempting to do the right thing by all parties.
8. Is there a conflict of interest at the EFL Board level? What involvement do all Board members have in decisions relating to Derby County?
Any EFL Board members conflicted on any matter do not take part in any discussion and are asked to leave the meeting. In addition, any Director who is conflicted does not receive any board papers in respect of the conflicted matter. The position on whether any director is conflicted is reviewed on a meeting-by-meeting basis. At present there are two Board Directors conflicted in respect of the matter with Derby County and as such do not participate or engage in any of the decisions.
9. Why is the Club unable to sign players in the transfer window?
Given the uncertainty around future funding, the League has advised that no extensions or new player registrations will be permitted, and this position had already been communicated to the Club prior to the Administrator’s latest statement on Friday 14 January. The EFL will continue to work with the Club as it updates its forecasts.
10. What is the EFL doing to support Derby County and its supporters through the current process?
Suggestions the EFL want Derby County relegated or expelled are completely fabricated and entirely false. The EFL continues to advise the Club and its Administrators in respect of all current requirements. This includes the Administrator’s obligations in respect of a funding plan and providing all necessary clarity on the credibility of any potential investors in the context of its regulations. The EFL understands it continues to be a challenging and worrying period for everybody associated with Derby County, especially the staff and supporters, and it is our intention to continue to work proactively with the Administrators and relevant stakeholders to find a process that will give clarity quickly.
11. Does the EFL have a vendetta against Derby County?
The EFL has no vendetta against any of its member clubs. The role of the League is to act in accordance with its rules and to seek to find solutions in respect of this regulatory framework. For example, The League is required to obtain the necessary information, specifically, that is outlined in its Insolvency Policy in respect of Derby County’s potential exit from administration, to ensure parity and a level playing field for all its members. It is understood that Derby County fans will be concerned at developments at their Club, but equally the League must consider the interests of all other Clubs. There is a balance between investment into our Clubs and not stifling ambition, but that cannot be at any cost. That is why financial rules are in place that all Clubs agree to, and the EFL are tasked with upholding and sanctioning any breaches. It is also worth clarifying that, regarding the sporting sanctions which were imposed this season, 12 points were deducted as a consequence of the Club itself appointing Administrators. A further 9 points were agreed with the Club, by way of an Agreed Decision which was ratified by an Independent Disciplinary Commission Chair as per the requirements of the EFL Regulations after the Club admitted to breaches of the EFL’s P&S rules.