The soon to be created independent football regulator must embark on closer scrutiny of ownership structures if the long-term futures of many English Premier League (EPL) football clubs are not to be put at risk, two leading experts on football governance have warned.
In an article published by Policy@Manchester, Dr Peter Duncan and Professor Nicholas Lord reveal the findings of new research from The University of Manchester which suggest that current regulation is “insufficient to protect clubs from financial misuse.”
By combining data from a variety of open access sources, the academics discovered a range of ownership structures in EPL clubs “from relatively simple and straightforward to seemingly unnecessarily complex and convoluted.”
Amongst several standout findings focusing on EPL clubs from the 2023-2024 season, they learnt that numerous clubs are owned by large networks of holding companies; more than half of EPL clubs have at least one holding company incorporated offshore; seven clubs make use of multiple overseas jurisdictions in the ownership chain; and 12 of the 20 clubs had at least 10% of their holdings which – due to secrecy provisions – could not be formally traced back to their beneficial owners.
Duncan and Lord contend that “whilst there may be legitimate and commercially plausible justifications for organising club ownership in this way, these structures make many clubs ideal vehicles for motivated actors to obscure the source of funds (which could be from illicit activities), the nature of particular transactions (which could involve violations), and/or the identities of investors or owners of clubs.”
They add: “Our evidence indicates that regulations need to better protect clubs from this kind of misuse because the exposure of such illicit financial flows could seriously jeopardise the future of clubs.”
The authors note that the EPL’s current ‘Owners’ and Directors’ Test’ “intends to prevent EPL clubs from falling into the ‘wrong’ hands, but its success in achieving this goal has been repeatedly challenged” partly because “it is possible to own up to a quarter of an EPL club without needing to pass any checks on source of funds or other propriety.”
They continue: “Our research supports the suggestion (made in a Department for Culture, Media and Sport statement) that a revised Owners’ and Directors’ Test should require that individuals taking the test undergo detailed due diligence relating to identity and source of funds checks, including: ‘a fitness and propriety test (owners and directors), enhanced due diligence of source of wealth (owners), and a requirement for robust financial plans (owners)’. These additional layers of scrutiny should be embedded into legislation as they would likely help to prevent problematic club ownership.”
To improve matters further, Duncan and Lord urge football regulators to launch a thorough review of current and proposed ownership structures “including overall complexity, as well as use of secrecy jurisdictions” which permit the hiding of beneficial ownership. They write: “Regulators should seek detailed justification where complex structures are proposed. Working in partnership with HMRC to consider the tax implications of various structures would also be recommended.”
The University of Manchester academics conclude: “Finally, government should require the new regulator to uphold the requirement that clubs publish the identities of beneficial owners, and this should be supported with official and publicly verifiable information. Enhanced regulation and transparency embedded into legislation will ultimately protect the future of our national sport.”
‘Protecting Premier League football clubs through tighter regulation’ by Dr Peter Duncan and Professor Nicholas Lord is available to read on the Policy@Manchester website.