On 1 July 2020 Wigan Athletic Football Club (Wigan) went into administration. It is a sorry fall from grace for a Club that was not long ago punching well above its weight in the Premier League and winning the FA Cup in 2013. Albeit their players are seemingly avoiding the off-field distractions as highlighted by their recent 8-0 win over Hull City.[1]

Since going into administration there have been some high profile comments, not least from Lisa Nandy (the MP for Wigan) (LN) who called it a “major global scandal” and has called for a full inquiry.[2] It is still very early days in the fall out from this incident but, there are some clear areas for concern.[3] As well as the comments raised by LN above, there is the issue of how Wigan went from being purchased to filing for administration in less than a month. It clearly raises questions surrounding the ‘Owners’ and Directors’ Test’ (the Test) which can be found at Appendix 3 of the English Football League (EFL) Regulations.[4]

This article highlights some of the key aspects of that, before raising some preliminary points that may well need to be addressed in the coming months as more information becomes available.  

Background

A high-level chronology of the ownership of the Club assists in understanding the dramatic nature of these recent events.

Local businessman and former professional footballer, Dave Whelan (‘DW’) owned the Club from 1995 until 2018. In November 2018 he sold the club to Hong Kong based International Entertainment Corporation. On 4 June 2020 Next Leader Fund L.P. headed by Au Yeung Wai Kay (AK) purchased majority shareholdings of Wigan Athletic.[5] On 1 July 2020, just 27 days later, administrators were brought in to take control of Wigan.

The Owners’ and Directors’ Test

The English Football League (‘EFL’) Test[6] can be found at Appendix 3 of the Regulations.

The intention is discussed at the start, namely to “…protect the image and integrity of The League and its competitions, the well-being of the Clubs, and the interests of all of the stakeholders in those Clubs, by preventing anyone who is subject to a ‘Disqualifying Condition’ being involved in or influencing the management or administration of a Club.

It then sets out 3 headline points:

  1. It prevents anyone who is subject to a Disqualifying Condition (‘DC’) from being a ‘Relevant Person’ (‘RP’) for any Club while that condition exists;
  2. Requires someone who was already a RP before the DC arose to cease being so for as long as that condition exists; and
  3. Requires each Club not to allow anyone who is subject to a DC to become a RP or, if already a RP prior to the DC arising, to continue to be a RP for the Club for as long as that condition exists.

The definition of a relevant person is broad. A RP includes “…directors (whether de facto or de jure directors) and, for example, the club secretary, chief executive officer, general manager, chief operating officer and certain authorised signatories. It also includes those who control a club, and their representatives at the club.[7]

A disqualifying condition means all or any of the following[8]:

  • Association between clubs;
  • Disciplinary matters;
  • Criminal matters;
  • Company disqualification matters;
  • Insolvency matters.”

It should be noted that given the international nature of purchasing clubs within the English Football League, reference is made to matters falling outside this jurisdiction throughout the 5 headings mentioned above. A notable example is found under the “Criminal matters” section in which it includes “…having an Unspent Conviction for a like offence to any of the above offences by a court of competent jurisdiction outside England and Wales.”

Section 2 of the Regulations address the “Reporting Requirements”. The section is lengthy. Of relevance for the purposes of this article are:

2.1 Clubs promoted into The League from the National League and those relegated into The League from the Premier League shall submit a duly completed Declaration in respect of each of its Relevant Persons to The League within 14 days of becoming a member of The League.  All other Clubs shall submit a duly completed Declaration in respect of each of its Relevant Persons to The League no later than 14 days before the commencement of each Season.  In all cases, the Declaration must be signed by both the Relevant Person and an Authorised Signatory (who must not be the same person).

….

2.3 If at any time after a Club makes the submission of Declarations referred to in Rule 2.1 another person proposes to become a Relevant Person of that Club (including for the avoidance of doubt by virtue of being a shadow director or acquiring Control of the Club):

  • the Club shall no later than 10 Normal Working Days prior to the date on which it is anticipated that such person shall become a Relevant Person submit to The League a duly completed Declaration in respect of that person, at which point that person shall be bound by and subject to the Regulations;
  • within 5 Normal Working Days of receipt thereof The League shall advise the Club of the time-frame within which The League, acting reasonably, expects to be able to finalise its enquiries in respect of that person; and
  • following completion of those enquiries, The League shall advise the Club in accordance with Rule 3.1 whether or not The League considers that the person is subject to a Disqualifying Condition.

Finally, in terms of application, Richard Barham[9] interestingly noted:

The application is made by the club itself rather than the individual director. This can impact on the timing of an acquisition of a club. On an acquisition, usually a club does not want to make an application for a new owner/director to be approved until such time as it is certain that the acquisition is to proceed. Sometimes the acquisition documentation is signed before the club makes the application, and completion of the deal is conditional on the application being approved by the relevant league, which can cause a slight delay in the deal completing.

In terms of timing on the appointment of a director or new owner, advanced notification is required, and the club needs to make the application at least 10 working days prior to the date on which the person is to become a director, and the league is required to respond within five working days of receipt of the application to confirm in the case of the EPL whether or not the person can become a director or is disqualified, and in the case of the EFL to advise on the expected timing to consider an application.

Comment

It is difficult in light of such an incident not to conclude that the Test is struggling to satisfy its stated intention of protecting “…the image and integrity of the League and its competitions, the well-being of the Clubs”. As already noted, Wigan have gone from being taken over to administration in about 4 weeks. Such an episode lends weight to the criticism of the Test highlighted by Tim Owen QC and Andrew Smith in their chapter on ‘Ownership Issues and the Fit and Proper Person test’ in Nick De Marco QC’s book ‘Football and the Law’.[10] They stated, “[a]t the heart of the criticism of the ODT[11] is that insofar as it excludes spent convictions, pending charges (as well as allegations under active investigation), basic financial competence and the substance of claims to significant financial means, it is too narrow, too objective and thus too weak, with insufficient allowance made for examining, on a more subjective basis, the true character, suitability and competence of would be owners, directors and officers of English football clubs.

No doubt this Test will be the centrepiece should any inquiry take place. In an interview with the BBC on the 8 July 2020,[12] Rick Parry, the current chairman of the EFL, reiterated that AK passed those tests. However, he went on to state, “[o]ur test, bluntly, is limited, it’s an objective test, there are limited grounds to turn down an owner. It is a test that, by definition, the more foreign owners you have the more difficult it is to apply because of the amount of information that is available.” When pressed by the reporter as to whether the EFL was lax in the application of the rules, he answered, “[n]o – he passed the test, albeit in self-certifications and he provided the assurances. What none of our rules can legislate for is an owner changing his mind.”

Considering this situation from an investigator’s standpoint (those experienced in Company Law and/or Bribery and Corruption fields may be particularly familiar with some of these observations) a number of questions/thoughts come to mind that should be addressed if LN’s proposed inquiry comes to fruition:[13]

  1. Rick Parry’s answers above appear to be a candid admission that the EFL struggles when it comes to assessing potential foreign owners and directors. This could simply be due to limited resources when it comes to EFL’s compliance set-up but questions will need answering on the back of this incident, such as is the size and capability of the EFL’s compliance team sufficient?
  2. Most would presume that some form of ‘know your client/customer’ checks (often referred to as ‘KYC’) would have taken place during the sale, though interestingly, Rick Parry implicitly noted the obvious limitations involved in a self-certification-based process. This too should be explored. What due diligence did the EFL independently undertake to verify the information provided, if any? What documentation/information was provided by AK and/or Wigan? What documentation, if any, was requested by the EFL?
  3. Publicly available information would appear to show that either AK or someone sharing the same name was involved in bankruptcy proceedings in Hong Kong in 2004.[14] If the EFL knew about this, what, if any, were the discussions and further checks that followed to clarify the position? It should be noted that it is not confirmed one way or the other whether this is actually AK or not but should an inquiry take place this will likely be explored.
  4. One headline grabbing issue relates to the so-called “…bet in the Philippines on them being relegated” which was referred to in LN’s letter from the 3 July 2020 to the Secretary of State for Digital, Culture, Media and Sport.[15] Where did these allegations arise from? It is not clear at the moment and remains to be seen whether this is true or not and this is something that may be established should there be an inquiry. The implications could be extremely serious.

Conclusion

The fallout from this incident has reminded us, if we needed reminding, that football is more than just a game. This is clearly emphasised in how seriously LN has taken the matter, and the recent news that Wigan Athletic Supporters Club has begun a petition, requesting the need for a statutory owners and directors test.[16]

Something has evidently gone wrong, and there are real curiosities about this case, as outlined above. Whilst at this stage it is premature to come to any firm conclusions, it is clear that the inquiries into this matter will be closely followed.

The Test is, and will continue to be, heavily scrutinised, and it is worth reflecting on what Rick Parry said in the interview with the BBC when he stated, “[t]he Championship is a financial nonsense. We’ve got clubs spending 107% of their income on wages, we’ve got the major distortion of parachute payments, we’ve got £400m of owner-funding required – £16m per Championship club. There are owners gambling on getting into the Premier League, it’s unsustainable.”Whilst it is evident that the Test has problems, it is unavoidable not to conclude that it is part of a wider set of issues facing the EFL, particularly in the light of the covid-19 crisis.

This article was written by members of Fulcrum Sport (the sports team at Fulcrum Chambers Ltd) and Edmund Gross of Furnival Chambers


[1]          https://www.bbc.co.uk/sport/football/53316000

[2]          https://www.bbc.co.uk/sport/football/53261368

[3]          On 4 July 2020 it was reported by Sky Sports News that the administrators had instructed their lawyers to begin an investigation into the events. https://www.skysports.com/football/news/11682/12020719/wigan-athletics-administration-will-be-investigated-by-lawyers

[4]          For a detailed analysis of these regulations then please see Richard Barham’s excellent piece for LawInSport back in October 2018.  Richard Barham, ‘A guide to the Owners’ and Directors’ Test in English Football’, lawinsport.com, 17 October 2018, last accessed 29 July 2020, https://www.lawinsport.com/topics/item/a-guide-to-the-owners-and-directors-test-in-english-football

[5]           https://wiganathletic.com/news/2020/june/Club-Statement-Next-Leader-Fund-L-P-Purchase-Majority-Shareholdings-of-Wigan-Athletic/ update from the 4th June 2020  

[6]          See footnote 4

[7]          See footnote 4

[8]          For the full list of examples that are included in the list please see the Regulations at https://www.efl.com/-more/governance/efl-rules–regulations/appendix-3—owners-and-directors-test/

[9]          See footnote 4

[10]         See Chapter 21 of Nick De Marco QC, ‘Football and the Law’ (2018)

[11]         The authors comments relate to all versions of the ODT, not just the EFL test.

[12]         https://www.bbc.co.uk/sport/football/53341269

[13]         The authors do not pretend to have covered everything

[14]         GLD govt website, references AK or someone sharing the same name being released as a trustee and references ‘Bankruptcy proceedings #7261 of 2004 < https://www.gld.gov.hk/egazette/pdf/20121632/s620121632p3-1.pdf>

[15]       https://twitter.com/lisanandy

[16]       https://petition.parliament.uk/petitions/331589


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