Bolton and Bury FC insolvency: Why Bolton won and survived

Bolton and Bury FC insolvency: Why Bolton won and survived - Crowe Ireland

On the 27 August 2019, Bury FC (“Bury”) were expelled from the English Football League (“EFL”) after 125 years of membership, the first football club expelled from the EFL since Maidstone United in 1992. They were expelled from the EFL as a result of the insolvent position of the company that owns and runs the club, despite numerous takeover attempts.

The following day, another financially embattled football club, Bolton Wanderers FC (“Bolton”), avoided expulsion from the EFL following a successful takeover of the company which runs the club.

So what was the reason for Bolton avoiding the chop and Bury being expelled? The simple answer is the appropriate use of insolvency procedures. While the insolvency landscape in the UK is slightly different to what we have in Ireland, we can generally look at this in the context of Irish companies.

Both clubs had run into financial difficulty over the last number of years. In Bolton’s case this stemmed back to the team’s relegation from the Premier League in 2012 and the financial body blow that resulted. They struggled through the intervening years with a change of ownership avoiding numerous winding up orders from HMRC. However, the financial position continued to worsened into 2019 and HMRC issued another winding up order in February 2019 on foot of tax liabilities of £1.2m.

Following the adjournment of this petition, another creditor of the club (who was a previous owner of the club and who was still owed money from a takeover in 2016) used their position as a creditor to appoint an Administrator to the club. The appointment of an Administrator in the UK is similar to the appointment of an Examiner here in Ireland. With this appointment a professional insolvency practitioner was now in charge of the company and was tasked with finding a buyer for the club.

While Bolton’s recent history included a number of years playing in the Premier League, Bury on the other hand have been playing in the lower leagues of English football for the last 95 years and have not played in the top division since 1924. Over this period, they have had a well-documented history of financial difficulties, including entering and successfully exiting administration in 2002. These difficulties have continued since then and in December 2018 the club was bought by businessman Steve Dale for £1. Mr Dale made a payment to HMRC in February 2019 to avoid a winding up petition but it appears things worsened after that with a former coach seeking to wind up the club for monies owed and the HMRC liability increased again to £227k.

In April 2019, Mr Dale advised that £1.8m was required to pay current debts to the end of May, but only £180k of income was expected over the same period. In July 2019, Mr Dale proposed a Company Voluntary Arrangement (“CVA”) with the club’s creditors. This is similar to a Scheme of Arrangement in Ireland under Sections 449 – 455 of the Companies Act 2014. The CVA was ultimately approved by the club’s creditors with a dividend of 25% due to the clubs unsecured creditors.

Following the approval of the CVA, questions began to arise as to how Bury and Mr Dale were going to fund the payment of the 25% dividend under the CVA. At the start of August Mr Dale advised that he would sell the club in order to ensure the club’s survival. Following a number of bids for the club, which were all rejected by Mr Dale, the club was eventually expelled from the EFL on 27 August 2019. It must be noted that the company which runs the club has not yet been wound up, however it remains to be seen what the future of this company will be.

The major difference in outcomes between Bolton and Bury lies in Bolton appointing an Administrator. While both clubs faced expulsion from the EFL at the same time, the EFL gave them the chance to obtain new buyers. Because Bolton’s sale process was being run by a professional insolvency practitioner, a commercial perspective was brought to decision-making and proper due diligence was carried out. Ultimately this culminated in a takeover and club’s future was secured.

In the case of Bury, the process was managed by the club’s owner, Mr Dale. While Mr Dale is an experienced businessman, it appears he was not able to objectively analyse the offers being made and was not in a position to oversee the due diligence required to sell the club before the deadline imposed by the EFL.

On the back of the survival of Bolton and demise of Bury, here in Ireland, Limerick FC have recently petitioned the courts for the appointment of an Examiner. In essence, the owners of Limerick FC have taken the approach of Bolton and sought the help of an insolvency practitioner and protection from its creditors (afforded to companies in Examinership under Irish corporate law) in order to save their football club and the company which operates it. This process is ongoing with the Examiner currently seeking investment in the club. By seeking the appointment of an Examiner they have however given the club its best chance of survival.

The learnings from the history and fate of these three football clubs can easily be mirrored in any business and, as with Bolton and Limerick FC, seeking and engaging professional help from an experience insolvency practitioner in times of financial difficulties can often be the key to survival.

If you or your company has been effected by the liquidation, are having cash flow issues or wish to speak to someone about restructuring your business, please do not hesitate to contact our restructuring and insolvency team for a confidential consultation.

Read other related articles from our corporate recovery team:

Crowe calls for reintroduction of Exchequer support for redundancy costs

Lessons to be learned from the Carillion UK collapse

Rightsizing your business ahead of uncertain times

Phoenix companies and insolvency