Wigan Athletic Football Club had been purchased by an overseas investment company owned by Dr Choi in 2018, who in turn sold the Club to another overseas company in May 2020. At the time Mr Kay, who would become the Club Chairman, had bought shares from his business partner, Dr Choi, therefore effectively having 100% control of the company, and became sole owner of the Wigan Athletic (herein referred to as ‘the Club’) – although not in law as the company name was still classed as the owner. However, as Mr Kay was the majority shareholder it was practical to refer to him as the owner. During the time of this takeover, Mr Kay had already contacted an insolvency company to put the Club into administration, without the rest of the directors knowing. This administration, the first English professional football club to do so since the Covid-19 pandemic started, was confirmed on 1st July 2020 and that resulted in an automatic 12 points deduction.[1] The outcome of the appeal determined if the Club stayed in The Championship or were demoted to League 1.
The Independent Disciplinary Commission (herein referred to as ‘The Commission’) noted the only way an appeal would be successful and a point deduction overturned was ‘if the administration was the result of an unavoidable and unforeseeable failure by the owners to meet contractual obligations‘ rather than the result of what the English Football League (EFL) Regulations describe as ‘normal business risk’.[2]
The Commission dismissed the appeal for two reasons:
1) Insolvency arose because the Club’s Owner made a commercial decision to stop putting money into the Club and therefore was a normal business risk that an owner will lose interest or run out of money and not due to a Force Majeure event. This was described as ‘an event that, having regard to all of the circumstances, was caused by and resulted directly from circumstances, other than normal business risks, over which the Club and/or Group Undertaking (as the case may be) could not reasonably be expected to have control and its Officials had used all due diligence to avoid the happening of that event’.[3]
2) Accepted that the Club’s English board directors did exercise due diligence to avoid a Force Majeure event but the same cannot be said of the owner.
Evidence
The Commission highlighted that Mr Kay was not open with other club directors about putting the Club into administration. It is documented that Mr Kay even held a Board meeting the next day after takeover discussions, and didn’t mention anything about the possibility of administration of the Club to the other Directors. Mr Kay also gave assurances about future funding which were false or at least misleading.
The Commission rejected the EFL’s suggestion that the Club should have done more to prevent administration, but acknowledged that the Club did what was reasonably expected of them and were ultimately let down by the Club’s owner. Does this raise questions about the Owners’ and Directors’ Test?
The Regulations in dispute were in relation to 12.3 Sporting Sanctions.[4]
3 Keys issues:
What caused the insolvency event?
Mr Kay’s unwillingness to continue funding the Club was the effective cause of administration. The Commission strongly suggested that ‘so long as that support continued, the ship would have stayed afloat. It was only when the owner pulled the plug that it sank’.
Can that properly be characterised as a Force Majeure Event?
The Force Majeure provision is there to prevent clubs being sanctioned that are external to the ordinary funding of the Club. The Commission acknowledged that the Club could not have done anything more to prevent or secure funding within reasonable timescales.
Officials/Due Diligence
The Commission saw no basis that the English Directors could be criticised for preventing the process of administration. Nevertheless, The Commission made it clear that the new directors made no effort to resist the administration, and Mr Kay’s lack of due diligence is clear and everyone else at the Club just implemented his decisions.
Conclusion
The Commission dismissed the appeal for the aforementioned reasons. In the written decision, the Commission were sympathetic towards those who had loyally supported to the Club, but in a scathing statement, explained that they have been let down by ‘those who ‘see Club and English Football as an opportunity for investment, and decided to leave the Club to its fate when their interest changed’ as evidently the Club’s owner did not have the best intentions for the Club. Frankly, this administration occurred due to poor governance and lack of due diligence carried out on club finances before takeover by the owner.
[1] EFL Regulations Rule 12.3.1
[2] EFL Regulations Rule 12.3
[3] Section 12.3.11 of the EFL Regulations
[4] Section 3 of the EFL Regulations
A Sporting Insight 