The Board of The Football League has agreed to make an offer of membership to the eventual purchaser of Portsmouth Football Club.
The offer is subject to the successful bidder accepting a number of conditions that seek to ensure the sporting integrity of league football and the financial viability of the Club going forward.
The Football League Board has absolute discretion as to whether to admit any new company as a member of The League. In doing so, it has to strike a balance between giving a club another chance and the effect this has on sporting competition between clubs. Through its Insolvency Policy, The League aims to secure the continuation of the club in its local community. In seeking to achieve this it requires that:
a) all football debts have been settled in full (although these may be compromised by mutual agreement).
b) creditors have been given the opportunity to indicate their satisfaction (or otherwise) at the proposed arrangements (normally through the acceptance of a Company Voluntary Arrangement (CVA)).
In Portsmouth's previous administration, a significant amount of unsecured debt was compromised in a CVA approved by creditors in June 2010, with an anticipated outcome of twenty pence in the pound. In the event, these creditors had not had their claims settled prior to the Club's further administration in February 2012.
Under the new CVA these claims would be further compromised to less than one penny in the pound without creditors having the opportunity to indicate whether they find this acceptable. This is because the claims rest in the liquidation of the previous company and the liquidator of that company has voted to accept the terms of the new CVA.
Therefore, the Board were faced with the prospect of numerous unsecured creditors receiving less than one penny in the pound, without having the opportunity to indicate their satisfaction (or otherwise) in the normal way. In the Board's view, these arrangements do not respect a key principle of The Football League's Insolvency Policy (as described above in b).
Therefore, as a condition of membership, any new company established to apply for ownership of Portsmouth Football Club's share in The Football League will be required to:
1. Accept a deduction of 10 points in the 2012/13 season;
2. Agree that only a limited proportion of the secured debt from the previous club can be carried forward into the new company as secured debt.
3. Pay all football creditors in full, unless mutually acceptable compromise agreements are put in place.
4. Agree to a range of other restrictions on playing budgets, future borrowing and loan repayments for the next 5 seasons.
It will now be for the administrator to seek to finalise arrangements for the sale of the club with interested parties. The Board will consider the application for transfer of membership once the administrator has selected the final purchaser.