The following is an excerpt from the independent report conducted by Jonathan Taylor QC on the circumstances leading to the expulsion of Bury FC from the EFL, which was published last month. It is the section where Taylor examines the procedures surrounding a change of ownership of a club. We hope that it serves to clarify a little the relevant EFL regulations with regard to the provision of financial information when the control of a club changes hands. A separate article summarising the whole report will appear soon.

Jonathan Taylor QC writes (pages 7-8):

"Where there is a proposed change in control of a Club the Club must submit up to date Future Financial Information (meaning projected profit and loss accounts, cash flow data, balance sheets, and relevant explanatory notes) for the period covering the current season (or what remains of it) and all the following season, that takes into account the consequences of the change of control of the Club's future financial position. The EFL's practice is also to require sight of the Club's up to date management accounts, commencing from the date of the last set of audited accounts.

Following receipt of the Future Financial Information the EFL may require the person who proposes to take over or has taken control of the Club to provide evidence of the source and sufficiency of funds that the person plans to invest in or otherwise make available to the Club (reg 16.21.2). In short, the new owner must prove that he or she has access to sufficient cash to fund the operations of the Club in accordance with a disclosed business plan for the current and following season. As a starting point the EFL looks for unrestricted funds in a UK bank account or a solicitors' account. Where the funds are held elsewhere, the EFL may ask for a "letter of support" that commits the owner to provide the funding to the club as and when required, and confirms that the funding is not repayable by the Club.

Critically, however, the Future Financial Information must be provided "as far in advance of the change of control as reasonably possible or, if such submission is not reasonably practical prior to the change of control, no later than ten normal working days thereafter" (reg 16.2.1). In other words, the EFL regulations do not prevent a person acquiring control of a club before he or she has provided the Future Financial Information or proof of access to sufficient cash to finance the Club's operations.

If not satisfied with the evidence provided as to proof of funds, the EFL may take one or more of the following steps (reg 16.22):

• require the Club to submit, agree and adhere to a budget
• require the club to provide such further information as the EFL determines
• bar the club from signing new players or renewing contracts with existing players, where the EFL deems this necessary to ensure that the Club (a) pays its football creditors (b) fulfils its obligations to play fixtures and /or (c) provides the rights, facilities and services the EFL requires to fulfil its commercial and broadcasting contracts and/ or
• impose other such conditions as in each case it may determine are necessary to ensure compliance with specified EFL regulations.

In May 2018, during the EFL Owner Conduct Review, the EFL noted :

"where the circumstances merit it, the EFL has begun utilising consent agreements which set out conditions imposed by the EFL following a takeover, and requiring the ultimate owners to be a party to those agreements. Those agreements would give the EFL power to take further action should default occur."

The EFL's power to "impose such other conditions as in each case it may determine" is broadly worded and could also be read to include, for example,:

• requiring a new owner to post a cash bond covering the amounts required to underwrite the business plan for the current and following season and /or
• withholding central distributions until the required information is provided and /or
• (in case of persistent failure to provide the information) charging the Club with misconduct and asking the Disciplinary Commission to suspend fixtures, or deduct points, or recommend expulsion."

Taylor was not asked to make recommendations for changes if he identified shortcomings in the EFL regulations because the EFL board and the member Clubs are carrying out their own review, but he understands that his findings will be taken into account by this review. He ends this section of his report by observing:

"What is clear, however, is that it would be much easier to impose and enforce effective conditions if they are preconditions to approval of change of control."