COVID-19: Impact on the UK's sports sector - DLA Piper
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COVID-19:
Impact on the UK’s sports sector
COVID-19 ALERTSCOVID-19: IMPACT ON THE UK’S SPORTS SECTOR Table of contents Introduction........................................................................................................................... 3 Availability of financial support in the UK for businesses affected by COVID-19........................................................................................................... 4 State aid implications in the context of European sport regulations........................ 6 Competition law.................................................................................................................... 6 Directors’ duties and insolvency considerations............................................................ 7 Impact on sports................................................................................................................... 9 Football .................................................................................................................................10 Horse racing.........................................................................................................................11 Rugby union.........................................................................................................................12 Relief efforts by governing bodies..................................................................................13 How we can help: DLA Piper’s sports credentials........................................................14 Key contacts.........................................................................................................................16 Contributors.........................................................................................................................16 2 • 14 April 2020 WWW.DLAPIPER.COM
COVID-19: IMPACT ON THE UK’S SPORTS SECTOR Introduction Sporting events around the world are being postponed or cancelled by governing bodies in a bid to prevent the spread of coronavirus. A range of sports have taken action, with the Football Association suspending the 2019-2020 professional football season, UEFA delaying Euro 2020 until the summer of 2021 and Formula 1 postponing a number of races with a view to announcing new race dates later on in the 2020 season. Similarly, The Championships, Wimbledon was cancelled for the first time since 1945 and the International Olympics Committee has decided to postpone the Olympic Games Tokyo 2020 to the summer of 2021. This will have a profound impact on the governing bodies of the sports and their respective participants in particular as the measures remove matchday revenues (such as ticketing, food and beverage, car parking and VIP/corporate hospitality revenues) and adversely affect commercial and broadcasting revenues as some broadcasters elect not to pay their broadcasting rights instalments. There are some estimates that UEFA will suffer a loss of EUR 300 million as a result of postponing Euro 2020 meanwhile the Premier League recently warned that the league could lose as much as GBP 1 billion in revenue because of the indefinite postponement to the season. Similarly, the Rugby Football Union (“RFU”) is facing estimated revenue losses in the region of GBP 45-50 million as a result of the disruption from COVID-19 and losses in horseracing are estimated at GBP 50 million a month as a result of unexpected falls in the Levy – racing’s central funding system. The effects of COVID-19 is likely to have a more profound impact on sports clubs that are heavily reliant on matchday revenues as their main source of income. Unless those clubs use government support, employee wages will continue as a significant expenditure meanwhile losing their main source of income. It is therefore of critical importance for these clubs to understand how to act and the options that are available to them before encountering financial difficulties. This note sets out the position as at the date of publication and we continue to monitor the situation as it develops and the measures implemented by the Government, regulators of the sport and clubs which are evolving on a daily basis. 3 • 14 April 2020 WWW.DLAPIPER.COM
COVID-19: IMPACT ON THE UK’S SPORTS SECTOR
Availability of financial support in the UK
for businesses affected by COVID-19
By a series of recent announcements, the UK Government has confirmed that HM Treasury
will provide an unprecedented level of support for UK corporates in response to the economic
impact of COVID-19. The total value of the package initially made available was GBP 330 billion,
15% of UK GDP, however additional measures continue to be announced, such as the Coronavirus
Self-Employment Income Support scheme to assist the self-employed and the new Coronavirus
Large Business Interruption Loan Scheme, details of which were publicised on 3 April 2020.
The UK Government’s package now includes three principal • Coronavirus Large Business Interruption Loan Scheme
mechanisms for businesses to access finance. The two most (“CLBILS”) – to ensure that more firms are able to benefit
likely to be utilised by those in the sports sector are: from government-backed support during this difficult time,
the UK Government announced the CLBILS which will provide
• Coronavirus Business Interruption Loan Scheme a government guarantee of 80% to enable banks to make
(“CBILS”) – loans for smaller businesses (turnover below loans of up to GBP 25 million to firms with an annual turnover
GBP 45 million) have been made available through the CBILS of between GBP 45 million and GBP 500 million. The Treasury
which will be delivered by the British Business Bank (“BBB”) has stated that loans backed by a guarantee under CLBILS
(a government owned business development bank) from will be offered at commercial rates of interest. Lenders will
23 March 2020. The maximum facility amount is set at still be expected to conduct their usual credit risk checks.
GBP 5 million and may be in the form of a term facility, This scheme allows lenders to specifically support businesses
an overdraft, invoice finance facility or an asset finance that were viable before the COVID-19 outbreak but now face
facility. A term loan facility or an asset finance facility under significant cash flow difficulties that would otherwise make
the scheme will be for a maximum term of up to six years their business unviable in the short term. The new scheme
where as an overdraft or an invoice finance facility made is expected to support a wide range of businesses to access
available under this scheme will be for a maximum term of finance products including short term loans, overdrafts,
up to three years. The first twelve months of the facility will be invoice finance and asset finance. Businesses will remain
interest-free for borrowers as the UK Government will cover responsible for repaying any facility they may take out.
that first twelve months’ interest for them. It is expected that the scheme will be delivered through
commercial lenders. Following consultation with businesses,
further details of the scheme will be announced later this
month and it may be that some of its original features
(ie lending threshold) are revised.COVID-19: IMPACT ON THE UK’S SPORTS SECTOR
Eligibility criteria:
CBILS: CLBILS:
Broadly, in order to be eligible for the CBILS your To be eligible for the CLBILS, your business must:
business must:
• be UK based in its business activity;
• be UK based in its business activity;
• have an annual turnover of between GBP 45 million and
• have an annual turnover of no more than GBP 45 million; GBP 500 million;
• generate more than 50% of its turnover from • be unable to secure regular commercial financing;
trading activity;
• have a borrowing proposal which the lender:
• have a borrowing proposal which the lender would
• would consider viable, were it not for the
consider viable, were it not for the COVID-19 pandemic;
COVID-19 pandemic;
• self certify that it has been adversely impacted by
• believes will enable the business to trade out of any
COVID-19; and
short-term to medium-term difficulty; and
• not be a bank, building society, insurer, reinsurer or
• not be a bank, building society, insurer, reinsurer or
public sector organisation.
public sector organisation.
There are 40 accredited lenders able to offer the scheme,
The new scheme will launch later this month. We anticipate
including all major banks.
it will be available through a range of accredited lenders.
The UK Government package also includes business rates 2020 on any type of contract, including full-time and part-time
relief for retail, hospitality and leisure businesses and grants employees, employees on agency contracts and employees on
for small business and businesses in the retail, hospitality and flexible or zero-hour contracts. The scheme will cover employees
leisure sector. We would expect that rates relief is likely to be who have been made redundant since 28 February, provided
the most common and tangible relief for those businesses. they are re-hired and then furloughed. Certain football clubs and
Premiership rugby clubs have begun to take measures to reduce
The UK Government has also announced the Covid Corporate their employee liabilities by making pay reductions and placing
Financing Facility ("CCFF") for larger investment grade some of their playing and non-playing staff on furlough.
businesses pursuant to which the CCFF will purchase
commercial paper of up to one-year maturity, issued by firms Although the CBILS and CLBILS will provide welcome support
making a material contribution to the UK economy. It is likely to a large number of businesses, it is still the case that there
that only a handful of businesses operating in the sports is no meaningful equivalent financial support for lending to
sector will be eligible for the CCFF. businesses with turnover above GBP 500 million which are below
investment grade and unable to access the CCFF. It remains
In addition to these financing measures, the UK Government to be seen whether further measures will be introduced to
has devised the Coronavirus Job Retention Scheme ("CJRS"). help support these businesses. The Chancellor indicated that
Under the CJRS, UK employers with a PAYE payroll scheme as at he would take further action as the situation evolves and
28 February 2020 will be able to 'furlough' employees (i.e. place additional powers are intended to allow the UK Government
them on leave of absence) and claim from HMRC a grant of 80% to provide whatever further support for businesses it thinks is
of their monthly wage cost, up to a maximum of GBP 2,500, needed. Given the unprecedented scale of this pandemic and
plus the associated employer National Insurance Contributions the uncertainty that it brings, it may be that additional financial
and minimum automatic enrolment employer pension stimuli are introduced to help keep UK businesses alive.
contributions. The guidance states that the CJRS will cover
employees who have been on the payroll since 28 February
5 • 14 April 2020 WWW.DLAPIPER.COMCOVID-19: IMPACT ON THE UK’S SPORTS SECTOR
State aid implications in the context of
European sport regulations
Further support for clubs and leagues under financial pressure beneficiary in difficulty, provided that (among other things) the
beyond that generally available is likely to require State aid aid is kept to a minimum, restores long-term viability and avoids
notification and clearance by the European Commission under distortions of competition.
the terms of the UK’s Withdrawal Agreement, which continues
to apply to the State aid rules in the UK until the end of the Given that the disruption caused by COVID-19 is likely to apply
implementation period. equally to clubs in the same leagues, it is likely that if the
UK Government does wish to provide support, it will most likely
The Commission already has in place a tried and tested seek to create single schemes which apply across a league or
framework for State aid for the rescue and restructuring aid an entire sport, with little scope for tailoring the package for an
for businesses in difficulty. This has previously been applied individual club. This may prove problematic for certain clubs which
to bail-outs of sports teams in difficulty: for example, the were already in financial difficulty prior to the COVID-19 outbreak
2016 bail-outs of Dutch football clubs FC Den Bosch and NEC. and may require support above and beyond their contemporaries.
This framework allows for a one-off grant of State aid to a
Competition law
The competition rules prohibit anticompetitive agreements and Examples could include common rules for restricting spectator
abuses of dominance. In the current crisis, the UK Government numbers, or for the allocation of staff and players. Clubs may
has passed statutory instruments loosening the application of also wish to apply a common approach to sponsorship and/
competition law in certain key sectors (groceries, health services or season ticket issues arising from fewer games being
and Isle of Wight ferries) but not sport. However, there may be played during the current season. Care must be taken to
coordination between sports clubs acceptable in the present ensure that any communications between clubs adhere to the
circumstances which would not be permissible at other times. competition rules: a “crisis cartel” (i.e. one formed in response
to an existential threat to an industry) is a very common form
of enforcement case for competition authorities.
6 • 14 April 2020 WWW.DLAPIPER.COMCOVID-19: IMPACT ON THE UK’S SPORTS SECTOR
Directors’ duties and
insolvency considerations
Under solvent circumstances, directors are generally This is often a difficult decision to make at the best of times,
obliged to consider their duties by reference to the company’s but is likely to be particularly challenging during this period
shareholders. Once the directors know, or should know, that the given the uncertainty over market conditions and when the
company is or is likely to become insolvent, the interests of current restrictions on social contact will be relaxed or removed.
the company’s creditors need to be taken into account. In certain
circumstances, failure to do so can lead to personal liability Much of the UK regime revolves around directors acting
being imposed upon the directors to reflect the loss caused “reasonably”. What may or may not be considered “reasonable”
to creditors by such failure – most often via a wrongful trading will in any case be considered by reference to the prevailing
action. The weight that must be given to such interests is difficult circumstances. In the current extraordinary climate, directors
to pinpoint – prudent directors will err on the side of caution. may ultimately be afforded more latitude given the uncertainties
that businesses face. We note that certain overseas jurisdictions
It is often challenging for directors to determine precisely when have relaxed their insolvency regimes in response to the current
they must switch their focus to the interests of creditors, and the crisis and on 28 March 2019 the UK Government announced
weight that must be given to such interests at a particular point that it was “suspending” the law on wrongful trading for a period
in time. This task will be made more difficult given the rapidly of three months, with retrospective effect from 1 March 2020.
evolving nature of the COVID-19 crisis. Given that a failure to The Business Secretary says that legislation will be brought
protect creditors could result in directors facing personal liability, forward at the earliest opportunity. Until then, there is limited
it is important that the directors seek professional advice as soon visibility on the precise scope of the “suspension”. The Business
as there is any concern regarding the solvency of the company. Secretary, Alok Sharma, said “the measures taken will … [give]
bosses much needed breathing space to keep their workers
Directors need to carefully consider how to address the risks employed and their companies going.” This doesn’t, however,
of the COVID-19 outbreak within their business, given its change the steps that a director should take when assessing
unexpected impact on the global economy. As many companies the financial position of the company and considering the
now face significant, and increasing, cashflow pressure, steps needed to continue trading. Directors’ actions will remain
directors should carefully consider their actions in the subject to scrutiny and the risk of personal liability remains,
context of the legal framework. As stated above, current public most notably under the directors’ disqualification regime
policy seems designed to inject liquidity into the economy, and laws on misfeasance and fraudulent trading. As such,
but directors should be mindful of the implications of taking decisions to trade on must be carefully justified and require
on additional credit and whether adding additional burden careful navigation with the aid of expert advice from lawyers
to the balance sheet will ultimately benefit its stakeholders: and insolvency practitioners.
• Do they have a realistic expectation that the business can In any case, directors should still carefully consider whether
recover once the crisis is over? the actions that they are taking are in the best interests of
their stakeholders.
• Failing that, does their strategy ultimately minimise loss
to creditors?
7 • 14 April 2020 WWW.DLAPIPER.COMCOVID-19: IMPACT ON THE UK’S SPORTS SECTOR
We strongly recommend that directors take practical steps to protect their business
as follows:
Governance Operations
Hold regular board meetings with the benefit Analyse the basis on which business can continue to
of professional and legal advice to consider the operate. Is workforce size sustainable?
company’s financial position and directors’ duties.
Ensure comprehensive minutes are taken. Customers/suppliers
Trading partners are to be faced with their own challenges.
Consider viable alternatives Take into account the likely size of future orders and
Directors should ensure they have considered robustness of supply chain.
all available options and carefully analyse their
respective merits and cost. Seek professional advice
From your lawyers, your accountants and potentially
Liquidity and creditors from a licensed insolvency practitioner; and
Prepare up to date cash flow statements, management
accounts and projections, consider availability of Plan
existing facilities; consider alternative means of support Early indications are that key creditors (including lenders,
(e.g. stakeholders, government backed facilities, HMRC and landlords) are demonstrating a willingness to
disposals of assets – though keep in mind the relevant grant “breathing space” to companies facing a liquidity
regulatory structure, touched on below; and consider squeeze due to the current crisis. Directors will be
whether outflow of cash to creditors can be managed best placed to take advantage of this assistance if they
or delayed). can present a clear plan as to how their business will
weather the storm.
Experience demonstrates that a proactive and consensual
approach, with early engagement, presents the best prospect
of a successful resolution, protecting directors and
preserving value for stakeholders.COVID-19: IMPACT ON THE UK’S SPORTS SECTOR
Impact on sports
The primary distinguishing feature of financial distress in the sports industry is the influence of,
and impact on, a number of non-financial stakeholders in the process.
Key stakeholders include: • owners;
• media and broadcasters;
• regulators and governing bodies;
• politics;
• players/athletes (often as both the club's biggest
assets and largest liability); • HMRC; and
• fans/supporters trusts; • sponsors.
The sports sector has seen a number of high profile insolvencies The governing bodies of various sports have taken steps to
in recent times, most notably Portsmouth Football Club in protect the integrity of the competitions they oversee and
2010 and 2012 and Bury Football Club and Bolton Football to protect fans and the communities in which those clubs are
Club in 2019. 2010 also saw three rugby union clubs enter embedded. In the football sector in particular, the English
administration, Bradford Bulls was liquidated in 2017, Premier League ("Premier League") and the English Football
and the Caterham and Marussia Formula 1 teams both League ("EFL") have introduced rules relating to the insolvencies
entered administration in 2014. of clubs. Similarly, in rugby, the RFU has detailed provisions,
including a requirement for clubs to submit financial information
to the governing body each year.COVID-19: IMPACT ON THE UK’S SPORTS SECTOR
Football
There are a number of regulatory considerations for English creditors to be paid before any suspension of the club’s playing
football clubs experiencing financial difficulties arising from licence may be lifted. The respective provisions are set out in
the impact of COVID-19. For football clubs that end up in the Premier League Handbook 2019/2020 (the “PL Rules”)
an insolvency process, consideration should be given to and the English Football League Rules (the “EFL Rules”) and
the football creditors’ rule. essentially seek to provide protection for the football creditors
of a club following an “Event of Insolvency” (for the PL Rules)
The football creditors’ rule is specific to insolvency events or “Insolvency Event” (for the EFL Rules). The football creditors
affecting a football club (or its parent undertaking) which is consist of (without limitation) the Football Association and any
a member of the Premier League or a football club (or its of its member clubs, the English Premier League, the Football
parent undertaking or subsidiary of its parent undertaking) League and other professional football leagues in the UK,
which is a member of the EFL. The football creditors’ rule any employee or former employee of the relevant football club
effectively prioritises payments to certain football related and any pension scheme related to the relevant club.
creditors ahead of other creditors by requiring these football
An "Event of Insolvency" or "Insolvency Event" includes: a winding up order is made against it; it ceases to carry on
a company voluntary arrangement; lodging notice of an its business; it enters into any insolvency regime outside
intention to appoint an administrator; appointment of an of England and Wales analogous to any of the foregoing;
administrative receiver; passing a resolution to voluntarily and/or (for the EFL Rules only) any proceeding, step taken
wind up a company; meeting of the company's creditors is or court order is made in any jurisdiction which has a
passed under sections 95 or 98 of the Insolvency Act 1986; substantially similar effect to any of the foregoing.
The consequences for a club (or its parent undertaking (or a under the "Force Majeure" category and includes (1) where a
subsidiary of its parent undertaking for EFL clubs)) suffering club suffers material adverse effects upon the loss of anticipated
an Event of Insolvency or an Insolvency Event are different. income streams which mean that it is unable to meet its liabilities
Following an Event of Insolvency, the Premier League may when they fall due and (2) where its insolvency event is caused
suspend the club's licence to play in the Premier League. by the default of another football club. The loss of income as a
Following a suspension a club may not acquire any players or result of the impact of COVID-19 would appear to fall within this
play any league games. In addition, while the suspension is provided that the club's officials have taken all possible measures
in effect, the Premier League may use the club's share of the to avoid such a scenario.
Premier League's media revenue (comprising UK and overseas
broadcasting monies, commercial contract monies and radio Football clubs may also be contemplating whether to obtain
contract monies) to pay the club's football creditors. Once the shareholder funding to make up the loss of income streams
club has settled its liabilities to its football creditors then the as a result of COVD-19. Football clubs should consider the
Premier League may decide to lift the suspension on the club. regulations relating to financial fair play in the applicable
PL Rules, EFL Rules and/or UEFA – Club Licensing and Financial
Following an Insolvency Event, the EFL has the power to impose Fair Play Regulations 2018. Each of the aforementioned rules
upon the club a 12 point deduction. However, an element which provide for varying restrictions on the aggregate amount
is particularly relevant to the circumstances relating to the of losses a participating club is permitted to make over a
impact of COVID-19 is that a club may appeal a points deduction prescribed period of time. Under those rules, clubs are required
on the ground the relevant Insolvency Event arose as a result to demonstrate they have satisfactory shareholder funding
of a "Force Majeure" event. A "Force Majeure" event shall be an in place to cover the losses in the event they reach a certain
event that, having regard to all of the circumstances, was caused threshold. Both the PL Rules and EFL Rules prescribe how the
by and resulted directly from circumstances, other than normal shareholder funding should be structured for it to be able to
business risks, over which the club and/or parent undertaking qualify to cover the losses of the relevant club. Penalties for
and/or subsidiary of the parent undertaking (as the case may be) non compliance include, among other things and as applicable,
could not reasonably be expected to have control and its officials exclusion from UEFA competitions, suspension from playing
had used all due diligence to avoid the happening of that event. league matches and points deductions.
The EFL Rules identify certain circumstances which would fall
10 • 14 April 2020 WWW.DLAPIPER.COMCOVID-19: IMPACT ON THE UK’S SPORTS SECTOR
Horse racing
On 17 March 2020, the British Horseracing Authority (the “BHA”) The plan makes reference to the fact that about 20,000 people
announced that all British racing would be suspended until the are directly employed in racing and that every pound spent in
end of April 2020 (including the Grand National which was due the industry, two more are generated in the wider economy,
to take place on 4 April but was replaced with a virtual race) making racing worth an estimated GBP 4.1 billion to the UK
to “protect essential emergency services and the health and economy. The plan details the value to the taxpayer and UK PLC
welfare of staff working in the racing industry.” of a resumption of economic activity. Racing proposes to work
with the UK Government to develop creative solutions to resume
On 30 March 2020, the BHA published its plan for the racing when that is possible. The plan also makes reference to the fact
industry’s response to the COVID-19 pandemic (an iterative that responding to the crisis will use resources which will include
document which will be updated as the response progresses) funds which can be made available from the Racing Foundation.
which currently anticipates a resumption of racing from 1 May The Horserace Betting Levy Board also holds reserves and the
(as referenced in a letter by Brant Dunshea (BHA’s chief regulatory plan makes reference to the fact that discussions are underway
officer) to racing industry stakeholders). The plan includes about how these should best be used.
provision for the cutting of costs to the racing industry by up
to GBP 1 million a month whilst the COVID-19 crisis persists. The main priority of the plan is to assess and focus on the
Under the plan, agreed by the BHA Board, nearly 80% of BHA’s staff conditions which will be required to ensure resumption of
(including race day officials) will be stood down from work using racing at the earliest opportunity.
the CJRS. In addition, the BHA announced that entry fees have been
refunded and other fees to participants dropped where possible.
The plan sets out the following priorities: • to liaise with the betting industry and ensure they are
engaged around the revised fixture programme and
• to develop a resumption plan that appropriately integrated into planning for the resumption of racing;
reflects government advice in place at the time,
• to ensure that the needs of broadcasters are recognised
including the pressures on the health service and
at an industry level and can be factored into the redesign
public services generally, offering a range of options
of the racing programme;
that can be adapted as required;
• to ensure racing's administrative systems and processes
• to coordinate detailed operational planning for
are able to resume racing at the earliest possible
a return to racing;
opportunity; and
• to maintain the resilience of regulatory services –
• to engage the HBLB around the fixture programme,
stewarding, veterinary and integrity, to prepare
to identify prize money requirements; and coordinate
for resumption;
these in concert with the money workstream above.
• to ensure that an appropriate fixture and race
programme is in place for racing's resumption;
Brant Dunshea, Chief Regulatory Officer of the BHA, anticipates and pressures on medical services, will also happen progressively.
that the initial return to racing is likely to be phased and "almost With that in mind, we also expect any return to racing to begin,
certainly behind closed doors…this reflects the likelihood that any at least initially, with Flat racing, principally for reasons of safety
easing of the COVID-19 situation, and any associated restrictions and to minimise demands on emergency services."
11 • 14 April 2020 WWW.DLAPIPER.COMCOVID-19: IMPACT ON THE UK’S SPORTS SECTOR
Rugby union
Similar to the English Football Leagues, there are regulatory Under the Handbook, if a club suffers an “Insolvency Event”
matters set out in the RFU Handbook 2019- 2020 it must immediately notify the RFU in writing.
(the “Handbook”) for the RFU clubs to consider
if they were to experience financial difficulties.
An insolvency Event means in relation to a club a liquidator, provisional liquidator, receiver, administrator,
(and including a holding company, parent undertaking, administrative receiver, compulsory manager or other
subsidiary undertaking, subsidiary or associate of the similar officer in respect of the club or any of its assets;
club or an entity which in the RFU's opinion is connected (iv) enforcement of any security over any assets of any
or associated with the club in such a way that is seen member of the group of companies which the club falls
to be party of the Club): (i) the suspension of payments, within; (v) any analogous event in any jurisdiction, or in
a moratorium of indebtedness, winding-up, dissolution, relation to a club that is unincorporated, an event that
administration or reorganisation (by way of voluntary is considered by the RFU, in its absolute discretion to be
arrangement, scheme of arrangement or otherwise) of similar to one of the events above in relation to the club's
the club; (ii) a composition, compromise, assignment or owner or owners, member or members, sole trader or
arrangement with its creditors; (iii) the appointment of partners of the club.
If an Insolvency Event occurs in relation to a club during the There will be no points deductions applied if: (i) the club's
season, the club will receive a points deduction equal to 20% creditors are fully paid; or (ii) the club exits administration
(for a Premiership club) or 25% (for clubs at Level 2 or below) within six weeks of the Insolvency Event occurring. The points
of the total number of available points (including bonus points) deduction will apply to any new club that is established to take
to a club in the league in which that club plays. Further points over the assets of an insolvent club.
deductions may also apply for the following season depending
on the league position of the club at the end of that season. Other relevant provisions in the Handbook include the power
If a club not playing in a league or in the Premiership suffers of the RFU to publish the name(s) of directors (or other persons
an Insolvency Event during the course of a season, it will be concerned with the management) of the club for a period of
subject to whatever penalty the RFU deems appropriate. If the up to 12 months immediately preceding the occurrence of the
Insolvency Event occurs outside the season, the relevant points Insolvency Event. Those individuals will not be permitted to be
deduction will apply either to the previous season or the next concerned with the management of a club for three years from
season at the RFU's discretion. If the Insolvency Event occurs the date of the Insolvency Event unless the RFU are convinced
before the fixture list for the next season is published, that they are fit to do so.
the deduction will typically be from the previous season.
In response to the global disruption caused by COVID-19, the RFU
In any event, clubs that suffer an Insolvency Event will also has ended its season for all levels below the Premiership,
not be eligible for promotion either following the season just including the Premier 15s top division of Women's Rugby in
commenced or in the next season. Various financial thresholds England. The long term financial implications of this development
will also be imposed in relation to the payment of players. are stark, a sentiment echoed by RFU Chief Executive Bill
Sweeney, who said this year will be a "loss making year" for the
RFU. It may be some time before the full extent of the financial
impact of COVID-19 on the RFU and its clubs will be known.
12 • 14 April 2020 WWW.DLAPIPER.COMCOVID-19: IMPACT ON THE UK’S SPORTS SECTOR Relief efforts by governing bodies With revenue streams disrupted by the suspension or The RFU has also announced a GBP 7 million loan package for cancellation of matches and competitions, many governing community clubs to help them through the financial difficulties bodies are continuing to monitor developments to see whether that will come due to the outbreak of COVID-19. Additionally, they can provide support. The RFU, for example, is investigating for any club with outstanding debt, quarterly loan repayments options to provide support to clubs and are in close contact of GBP 335,000 have been suspended until August. Similarly, with the UK Government to obtain further details on how recent the England and Wales Cricket Board recently announced a measures might benefit rugby clubs. Other governing bodies GBP 61 million package to help cricket (from elite to grassroots) have taken quicker action. The EFL are putting measures in place with the financial impact of COVID-19. It remains to be seen to immediately assist clubs with cashflow problems by setting how effective these measures will be in relieving the financial up a GBP 50 million short term relief package. The fund consists impact of COVID-19 and governing bodies continue to monitor of the remaining Basic Award payments being advanced to developments and their relief efforts as the situation develops. clubs immediately with the remainder made through interest free loan facilities available to clubs.
COVID-19: IMPACT ON THE UK’S SPORTS SECTOR
How we can help: DLA Piper’s
sports credentials
The situation surrounding COVID-19 and its impact on the sports by a bankrupt Lithuanian entity and release of security held by
sector continues to develop at a fast pace. As such, it is critical a different Lithuanian entity as well as complex issues under
now to understand your business’ financial position, the relevant the Takeover Code Complex Ownership Arrangements with
sporting and regulatory rules in place and your rights and the Supports Trust. The Institute for Turnaround honoured us
obligations under key contracts and financing agreements to in 2014 by awarding us with the accolade of Listed Turnaround
prepare your business as robustly as possible for developments of the Year (IFT Award Turnaround of the Year 2014);
over the next few months and thereafter.
• advising the administrators of Crystal Palace FC resulting
in a successful exit via a CVA in accordance with the
DLA Piper has a wide range of experience of advising lenders,
requirements of the Football League and sale of the
sports clubs and key stakeholders in financing, regulatory and
club’s business and assets to new management;
insolvency related work, both nationally and with our global
network internationally. Our experience includes: • advising Barclays Bank Plc and Mark Fry and David Hudson
as administrators of Southampton Lei sure Holdings plc.
• advising ASR Media and Sponsorship S.p.A. in connection with This was a high profile matter which required an imaginative
its issuance of EUR 275 million 5.125% senior secured notes approach to secure the football club’s survival under
due 2024 relating to AS Roma’s media rights; extremely challenging conditions;
• advising the initial purchasers in connection with its issuance • advising the FA Premier League in relation to security and
of EUR 300 million 4.875% senior secured notes due 2022 financing arrangements in respect of broadcast rights granted
relating to Inter Milan’s media rights; to Setanta and in particular the rights of the licensor in the
event of Setanta’s breach and subsequent insolvency;
• acting for Goldman Sachs Bank USA, HSBC Bank plc and
Bank of America Merrill Lynch International Limited on their • acting for the administrators of Leicester City FC and
GBP 425 million financing of Tottenham Hotspur’s new, advising the administrators on the successful administration,
multi purpose, 61,500 seat stadium; CVA restructuring, disposal to New Fox and the sale and
leaseback of the Walkers Stadium to a US entity with a
• advising AS Roma and its affiliates in connection with all
complex put and call option purchase arrangements to
aspects (including real estate, finance and construction) of
enable New Fox to meet its playing fixtures and acquire
the new “Stadio della Roma” project, located at the Tor di Valle
the stadium in due course;
site in Rome, Italy;
• advising Leeds United on a GBP 120 million debt
• advising a top tier European football club on the receivables
restructuring, multiple player transfer arrangements and the
financing of various player transfers;
club business reorganisation;
• advising the British Horseracing Association on the
• advising a league body in issues arising out of the
UK Government’s State aid notification and clearance of
administration of one its members, including on
the Horserace Betting Levy, an GBP 840 million State aid
the interpretation of the league’s insolvency policy
scheme supporting British horseracing through a levy
and approach to sporting sanctions;
on gambling and betting activities;
• acting for the administrators of Ipswich Town FC;
• advising Football Dataco, a business owned by the FA Premier
League and English Football League, on its licensing of the • advising Europe’s largest golf retailer operating from
right to collect in stadia live league match data used for in 132 stores in the UK and Ireland. Accelerated M&A process
play betting, including on a claim in the Competition Appeal followed by a pre packaged administration sale to a private
Tribunal brought by Sportradar for alleged breaches of equity investor resulted in 112 of American Golf’s stores
competition law resulting from these licensing arrangements; continuing to trade, saving over 900 jobs;
• acting for Edinburgh businesswoman Ann Budge on her • acting for a bank in respect of a financial restructuring of a
takeover of Hearts of Midlothian plc, thereby saving it from motorsports supplier, advising the bank on a number of
liquidation and expulsion from the Scottish Football League. successful financial restructurings, group re-organisations
The deal involved the acquisition of the 79% shareholding held and taking new security;
14 • 14 April 2020 WWW.DLAPIPER.COMCOVID-19: IMPACT ON THE UK’S SPORTS SECTOR
• acting for Portsmouth City Council in dealings with the • advising The Football Association Premier League Limited
administrators of the football club, and particularly on investigations into the transfer of young players
in the Council’s funding assistance to the supporter’s between academies;
trust who ultimately purchased the club in the biggest
• representing Abu Dhabi United Group and Manchester City FC
community football club purchase to date;
in connection with the acquisition, together with the New York
• advising Sheffield United FC on restructuring and Yankees, of rights to a new soccer team, New York City Football
merger options; Club, MLS’ 20th expansion club;
• advising Bradford City AFC on CVA; • advising on the sale of its 25% interest in Leeds United
FC to Eleonora Sport Limited (the investment vehicle of
• representing Abengoa SA in connection with their Chapter
majority owner Massimo Cellino). The deal also involved the
15 filing and its indirect subsidiaries Abengoa Bioenergy
restructuring of GFH Capital’s debt and the implementation
US Holding LLC and Abeinsa Holding Inc. in their Chapter
of an Islamic compliant Murabaha facility;
11 filings in the US Bankruptcy Courts. A high profile,
cross border restructuring one of the most complex multi • representing Mr Dejphon Chansiri, whose family owns
jurisdictional restructurings (Spain, UK and US) in recent years; John West and Chicken of the Sea company Thai Union
Group in Sheffield and in London, in the acquisition of
• representing the administrators of Lehman Brothers
Sheffield Wednesday Football Club, from Milan Mandaric;
in a four day hearing at the Supreme Court in the Waterfall I
(W1) litigation. LBL is one of the three Lehman appellants • advising the Mike Burton Group on its joint venture with
in the W1 application, which commenced in 2013 and Sodexo in relation to the official corporate hospitality and
is primarily concerned with the question of how an travel programmes for Rugby World Cups 2015 and 2019;
approximately GBP 7-8 billion surplus in Lehman Brothers
• advising the RFU on the sale of its domestic and international
International (Europe) (in Administration) (LBIE) should be
live audio visual rights (and associated commercial
distributed amongst its creditors;
partnership rights) to Sky for 2015-2020 in relation to
• advising Philip Duffy and Ben Wiles of Duff & Phelps as the QBE Internationals, World Cup warm up matches and other
administrators of the BHS Group of companies, DLA Piper RFU controlled properties and on the tender process and
deployed the full strength of its UK and international subsequent award to the BBC of highlights and radio rights
Restructuring practice to support the Administrators in to QBE Internationals and World Cup warm up matches for
dealing with the largest and most high profile high street 2015-2020;
insolvencies for many years;
• advising The Football Association Premier League Limited on
• advising beverage group Conviviality on the sale of its retail all aspects of its domestic and international audiovisual rights
business, which includes the Bargain Booze and Wine Rack sales strategy;
brands, to the grocery wholesaler Bestway. The transaction
• advising the England & Wales Cricket Board on the sale and
saved approximately 1,700 jobs. We also advised on the sale
distribution of international media rights;
of Conviviality’s wholesale business to the C&C Group, a deal
that saved nearly 2,000 jobs; • advising Rakuten on its shirt sponsorship arrangements
with Barcelona FC;
• advising on the sale and restructure of Homeform Group
Limited (turnover GBP 150 million) trading under the • advising the English Football League on its sponsorship
Moben Kitchens, Dolphin Bathrooms, Sharps Bedrooms and by Skybet;
Kitchens Direct brands;
• advising Manchester City and Roma on sponsorship
• advising JJB Sports PLC, JD Sports and Manchester United on arrangements, including MCFC’s arrangements with Nike; and
all aspects of the OFT’s high profile investigation into price
• advising the Football Association Premier League on
fixing of replica football shirts;
arrangements for the supply of technology to facilitate the
• advising the England and Wales Cricket Board Limited in operation of Hawkeye and other player tracking services.
relation to its recent tender process and appointment of
major match venues;
• advising a governing body of an Olympic Sport with an
investigation of alleged ethics violations by directors of
a national governing body;
15 • 14 April 2020 WWW.DLAPIPER.COMCOVID-19: IMPACT ON THE UK’S SPORTS SECTOR
Key contacts
Paul Gray Nick Fitzpatrick
Partner Partner
paul.gray@dlapiper.com nick.fitzpatrick@dlapiper.com
Robert Russell Peter White
Partner Partner
robert.russell@dlapiper.com peter.white@dlapiper.com
Contributors
Sam Szlezinger Lewis Gaut
Partner Senior Associate
sam.szlezinger@dlapiper.com lewis.gaut@dlapiper.com
Samuel Churney Richard Jenkinson
Senior Associate Senior Associate
sam.churney@dlapiper.com richard.jenkinson@dlapiper.com
Joe Riches Rob Lyons
Associate Associate
joe.riches@dlapiper.com rob.lyons@dlapiper.com
Alasdair Muller
Associate
alasdair.muller@dlapiper.com
DLA Piper is a global law firm operating through various separate and distinct legal entities. Further details of these entities can be found at www.dlapiper.com.
This publication is intended as a general overview and discussion of the subjects dealt with, and does not create a lawyer-client relationship. It is not intended to be,
and should not be used as, a substitute for taking legal advice in any specific situation. DLA Piper will accept no responsibility for any actions taken or not taken on
the basis of this publication. This may qualify as “Lawyer Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.
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