Fit and proper person test for football club owners simply not working

Posted by - September 15, 2010 - League Two, Portsmouth, Premier League, Ranting and Raving

Owners do not fit (and proper) the bill

It was at the start of the 2004/5 season that the Football League and Premier League that the Fit and Proper Test was introduced for football club ownership.

It was in response to instances of mismanagement and irregularities that had become more apparent. In 2000, Chesterfield FC were taken over by Darren Brown through an investment of £400,000. Within a year Chesterfield had been fined £20,000 and had had a nine-point deduction for financial irregularities, including deliberately misstating wage figures in order to reduce a transfer fee. It became clear that if checks had been carried out it would have been glaringly apparent that Brown had run several businesses with consistent losses, and had taken Sheffield Steelers ice hockey team to near insolvency. Similarly grave situations had occurred at Doncaster Rovers under Kenneth Richardson, and Hull City under Stephen Hinchcliffe.

The test acts as a safeguard for the stakeholders of football clubs that become powerless to stop a hostile takeover bid from being successful. The test means that anyone who is convicted of a range of offences, from fraudulent activity to corrupt financial reporting will be disqualified from being a director or owner. Their directorship will also be blocked if they have any conflicting interests (for example shareholding in another club), have been declared bankrupt previously, or has been the director of a club made insolvent on more than one occasion.

I will argue that it is woefully inadequate.

Only one person has ever been disqualified under the test: Rotherham United Chairman Denis Coleman. In 2008 Rotherham United were in desperate financial straits. They lay in administration for the second time in four years, with the Booth family, who after writing off the overdraft at the club and selling it for £1, required that the club paid them £200,000 per season in rent for the gorund, Millmoor. Five bids lay on the table, one of these by Coleman. His bid was blocked by the FA, because he was on the Rotherham bored under two previous administrations, ruling him out on a “two strikes and you’re out” rule. However, Coleman, a boyhood fan of the club, had helped eliminate 99% of the debt, saving the club when liquidation seemed inevitable.

So a man who seemingly cared about a club was banned under the rule, but in the summer of 2007 Thaksin Shinawatra started to build up his shareholding in Manchester City. By the beginning of September, he had gained the 75% required to gain control of the club. But Shinawatra, previously Prime Minister of Thailand, had showed a blatant disregard for Human Rights, and had £1.3billion worth of assets frozen pending a corruption trial. Finally, Shinawatra admitted to having little knowledge of English football.

Last season, a mockery was again made of these at Meadow Lane. In June 2009, it was announced that Notts County were in talks on a takeover by Munto Finance, a Middle Eastern corporation represented by Nathan and Peter Willett. The Supporters’ Trust, who owned 60% of the club, voted in favour of the takeover. On 20th October it was announced that they had passed the fit and proper person test because it had provided extensive disclosure to the Football League about their complicated structure.

However, after promising millions and luring Sven-Goran Eriksson and Sol Campbell to the club, the finance did not materialise. Two months after being declared fit and proper, Munto Finance sold the club to Ray Trew for £1. The club had massive debts after signing players on long-term deals and high wages. Mystery still surrounds exactly what Munto’s gameplan was, but it has become clear that in fact they took substantial amounts of money out of the club.

Is this really what the test should conclude? That a chairman that seemingly just wants what is best for his hometown club is rejected in favour of a foreign investor with a dubious human rights record and a Middle Eastern consortium that has no funds or means of generating any.

Tomorrow I will promote the reforms.