The Scottish Premier League’s member clubs are to consider a raft of proposed rule changes, which include a clear pathway for a team to form a newco, transfer its league share and walk away from its debt.
In total, there are eight resolutions which representatives will vote upon to add to the SPL’s rules and articles. Here’s a look at what each proposal means.
Resolution 1 proposes an increase in the sporting sanction (points deduction) on any club which suffers or is subject to an "Insolvency Event". This increase from the current penalty of ten points to either 15 points OR 1/3 of the club’s SPL points in the preceding season - whichever is greater.
At present, clubs are automatically deducted ten points when they suffer an Insolvency Event, for example going into administration. If a club remains in administration going into a new season, they are forced to begin the campaign on minus ten points.
Under the new proposals, a club would either lose 15 points or a figure comparative to a third of their tally from their previous season.
Assuming the new rules were in place at the start of the current campaign, Rangers would have been deducted 31 points for going into administration. This is because their points tally in 2010/11 was 93.
A club which finished on 45 points or fewer in the previous season which then goes into administration would lose 15 points.
If a club remains in administration going into a new season, they will only be forced to start on minus ten points. No greater sanction will apply unless they are subject to a new Insolvency Event.
Resolution One requires the approval of eight of the 12 member clubs.
Resolution 2A proposes further sporting sanctions in the event that any club undergoes an "Insolvency Transfer Event". This is transferring its share in the SPL to a new company where this occurs because of the insolvency of the transferrer. The penalty incurred would be ten points in each of two consecutive seasons following the Insolvency Transfer Event.
Although the term Insolvency Transfer Event is new, there is already provision in the current SPL articles for a club to transfer its member share in the league to a new company.
The league is owned wholly by the 12 clubs, who each have one share, meaning they all own an equal 8.33% of the SPL.
If a club is unable to exit administration with the agreement of its creditors (what is known as a CVA), they can make an application to the SPL board to transfer their share to a new company, widely referred to as a "newco".
At present, there is provision in the Articles of Association for a share transfer to take place at the discretion of the SPL board. Under the new proposal, this would not change.
Crucially, their previous position set out no clear penalty for this. Instead it would be at the discretion of the SPL board to impose any sanction it saw fit, such as a points deduction.
The SPL board consists of six members: Ralph Topping (SPL chairman), Neil Doncaster (SPL chief executive), Eric Riley (Celtic), Stephen Thompson (Dundee United), Derek Weir (Motherwell) and Steven Brown (St Johnstone).
A majority vote of four to two is required for a motion to carry. In the event of a tie, the chairman has the casting vote.
Under the new proposals, if a club is relegated at the end of the first season it is in newco form, the points deduction is not suspended awaiting their return to the SPL. Any promotion back to the top flight would see them start with a clean slate.
Similarly, any newco points penalty would not be picked up and imposed by the Scottish Football League.
It is also important to note that, in the SPL’s eyes, "a club" would not cease to exist if a share is transferred. If Rangers’ share is transferred from oldco to newco, they would not be required to have a new club name, new badge or new colours and their SPL record would be preserved.
A club must already be subject to an Insolvency Event in order to make a request to transfer its share. It is not possible for a club to avoid debts by asking for a share transfer without having first been subject to an insolvency process, and to the league’s points penalty.
Resolution 2A requires the approval of eight of the 12 member clubs.
Resolution 2B proposes revisions to the fee payment arrangements ie SPL fees to any club which has undergone an Insolvency Transfer Event will be reduced by 75% in each of three consecutive seasons from the Insolvency Transfer Event.
This resolution proposes a further punishment to any club which uses the newco route.
Put simply, 75% of all money the SPL pays to a club in any given season would not be received. This includes all commercial revenues, including TV money.
All of the money generated by the SPL through TV and commercial contracts is divided between clubs, after running costs and parachute payments are deducted from the total.
All teams receive a standard 4% of that pot. The rest is then divided up based on league position, ranging from 13% and 11% for first and second place, down to 1% for 11th and 0.5% for 12th.
It is clear then that the SPL is providing two clear options to clubs looking to exit administration. Either they successfully come out of the process via a CVA, or they ask for a share transfer having failed to secure agreement with their creditors.
The SPL believe both resolution 2A and 2B combined not only bring clarity to the situation where a club is looking to go down the newco route, but also make it significantly more desirable for clubs to attempt to agree a CVA.
Clubs which successfully come out of administration via a CVA are not hit with any further sanctions, both under the current and new proposed rules.
Resolution 2B requires the approval of 11 of the 12 member clubs.
Resolution 3 proposes extending sporting sanctions where an Insolvency Event is suffered by a Group Undertaking of a Member Club of the SPL (Group Undertaking is defined in Section 1161(5) of the Companies Act 2006).
If a club is owned by another company, at present there is no provision for a club being punished if the parent company goes into administration.
The new proposal opens up the possibility of imposing sanctions in such an eventuality, even if the club itself isn’t subject to an Insolvency Event.
There has been precedent in England for such an occurrence. Southampton were docked ten points by the Football League when their parent company went into administration in 2009, despite the club itself continuing to trade as normal.
In that case, it was argued by the league that the parent company and the club were "inextricably linked as one economic entity". A points penalty was subsequently applied.
Resolution Three requires the approval of eight of the 12 member clubs.
Resolution 4 proposes updates and extensions to the definition of Insolvency Event in the SPL Rules.
This will see the wording of what an Insolvency Event is in the regulations brought into line with modifications to its definition in insolvency law.
Resolution Four requires the approval of eight of the 12 member clubs.
Resolution 5 proposes updates and extensions to the definition of Insolvency Event in the SPL Articles and clarifies the process in the event that a Member which is the subject of an Insolvency Event is required to transfer its share in the Company.
The first part of this resolution again simply sees a tightening up in the wording of what constitutes an Insolvency Event under SPL rules.
The second part is designed to bring absolute clarity to what is required for a share transfer to take place.
Resolution Five requires the approval of 11 of the 12 member clubs.
Resolution 6 proposes a specific requirement in the SPL Rules that Clubs must pay their Players in terms of their Contracts of Service on due dates and places a duty on any Club to report any failure to pay its Players in a timely manner to the SPL. Failure to pay Players and / or to notify such failure to the SPL would be a breach of SPL Rules.
This season, Hearts have repeatedly failed to pay their players on time, eventually leading to an SPL investigation but only after the squad made a formal complaint.
Under the proposed rule, the league would have the power to act if a club fails to meet its obligations.
Resolution Six requires the approval of eight of the 12 member clubs.
Resolution 7 proposes a requirement in the SPL Rules that Clubs report to the SPL any failure to make payments to HMRC in respect of PAYE and NIC (a Default Event). Any Club suffering such a Default Event will be subject to a Player Registration Embargo. Any failure to report a Default Event shall be a breach of the SPL Rules.
Rangers went into administration having deducted PAYE and National Insurance contributions from their employees, but subsequently failed to pay it to HM Revenue and Customs since May 2011.
There is currently no provision in the SPL rules to ensure clubs meet their tax obligations. The proposal then would see clubs prevented from signing players if they fail to pay tax.
There are punishments in place beyond the SPL at present for failing to pay tax, namely the possibility of failing to be granted approval by the Scottish FA to gain a UEFA licence to play European football.
Resolution Seven requires the approval of eight of the 12 member clubs.
When will the new rules be voted upon and, if successful, be implemented?
Clubs will consider the proposals at their general meeting on April 30. Any proposals approved will then be added to the SPL’s regulations and articles as of May 14.