All eyes on regulatory reform: How will they impact clubs?

The theme of independent regulation has been a hot topic within football for a number of years now, with a diverse range of views as to not only what form regulation would take, but whether independent regulation is necessary at all. Following the publication in February 2023 by the Department for Culture, Media & Sport of a white paper entitled, “A sustainable future – reforming club football governance”  (the White Paper), we now have a clearer indication that independent regulation of the football industry is a question of when, not if. 

The White Paper is unequivocal in expressing the government’s view that reform is required across football and the result is a clear recommendation for the establishment of an independent regulator (the Regulator) tasked with providing a long-term supervisory solution across key areas, with sustainability (i.e. in terms of durability) and resilience (particularly from a financial standpoint) being primary focuses. The Regulator would also be tasked with protecting the cultural heritage of football clubs, in recognition of the community impact and history associated with the clubs. There are also secondary objectives on creating an appropriate competitive environment domestically and supporting investment in the game, and interestingly, there is an international competitiveness objective: ensuring that the UK is attractive for investment and access to talent. We have recently seen a similar objective be added to the statutory objectives of the UK’s financial services regulators.

The structure of the Regulator remains uncertain at this time. The government is essentially considering three primary options: (i) establish the Regulator as a standalone body; (ii) house the Regulator in an existing arms-length body or ALB; (iii) make the Regulator a subsidiary of an existing ALB. We strongly suspect that the Regulator will be constituted under statute and will derive its powers from statute, and we would expect that further secondary rules and guidance published by the Regulator will be required to further clarify the scope of its expectations of football clubs, the obligations of those clubs, what powers the Regulator has and how it will enforce those powers.

In terms of regulatory initiatives, there are some key takeaways from the White Paper. The first is that a licensing and authorisation regime will apply to all football clubs with associated threshold conditions that must be satisfied on an ongoing basis. Without an appropriate licence or with a licence subject to conditions, the ability of clubs to compete in existing leagues may be threatened. Additionally, the Regulator will implement a formal change in control regime that will assess proposed new owners of football clubs, including reaching determinations on their fitness and propriety. Another key focus will be on governance and culture, with clubs expected to implement a culture of accountability, a “tone from the top” and more formal arrangements regarding board and executive management responsibilities across organisations.

Whilst the exact powers of the Regulator will need to be defined further, it is expected that it will have the core powers that you would expect for a regulator of this nature, including the granting of licences; ability to impose licence conditions; ongoing oversight and monitoring of licensed clubs and their compliance with conditions and broader rules and requirements; ability to gather information and other investigatory powers; various approval and consent requirements (including those relating to owners and sales of stadia); and finally, penalties and sanctions. On sanctions and penalties, there is fairly broad latitude for the Regulator to take actions, including public censure and other reputational sanctions, fines and other financial penalties, disqualification orders relating to controlling individuals and the ultimate sanction being withdrawal of licences, which would then likely limit the club from partaking in competition. It is important to note that the Regulator is not intended to have any powers to impact on-field matters – therefore it is not expected that it could impose such penalties as points deductions or transfers bans. But, importantly, the Regulator can recommend to the relevant leagues that sporting sanctions may be appropriate.

What then for the future? This White Paper represents the first formal step in the process to establish the Regulator. We expect there to be continued engagement with government on this by key stakeholders to try and reach a formal landing point. Whilst the White Paper is detailed, it is only the start, and in due course we will need to see the exact shape of the formal rules and understand in greater detail key points, such as how the original licensing process for all clubs is going to work. Right now, many across the industry will be watching this closely, trying to shape the ultimate outcome and beginning to conduct impact assessments to determine how these new regulatory obligations would affect them and what they would need to do to stand up to compliance arrangements.