FOOTBALL CLUBS INSOLVENCY

Football Clubs Insolvency



Football Clubs Insolvency

Introduction

Football is a game of emotions, generating myriads amount of revenues, but those teams let their emotions run wild and aren't wining anything, will soon be facing relegation and finished. The revenues from the football world cups and matches are continuing to grow rapidly but the main drawback is that the football clubs spend more than they earn, if this situation does not change, the teams will soon not be able to participate in the world cup tournaments and face losses and bankruptcy. Liverpool and Portsmouth are the examples of such football clubs. Today the football clubs are facing financial crises despite of the fact that the football game is generating huge amount of revenues, these crisis are due to many reasons.

Liverpool is the most successful football club in England is the only English club to achieve victory in the League (Cup) Champions 5 times. The club was founded March 15, 1892 by John Houldingom owned stadium Anfield. Portsmouth football became the first Premier League team that had stated as financial insolvent club. The statistics revealed that in 2008 clubs English football clubs between the seasons of 2001/2002 and 2005/6 had faced losses and these losses are approximately more than £1 billion. In the beginning 2010 the two football clubs named as Liverpool and Manchester United had an expected collective net debt of almost £1 billion.

Football Clubs Insolvency

Bankruptcy is the inability of companies to repay debt. In this case, ownership of company assets transferred from the owners to the holders of debt obligations. Formally, the bankruptcy occurs after the adjudication of the debtor's inability to meet its financial obligations. Judicial decision is made either at the request of the company i.e. voluntary liquidation or at the request of its creditors i.e. compulsory liquidation. The debt and insolvency issues are increasing more than last couple of years. When clubs unable to meet their financial commitments for example taxes which are unpaid etc then these clubs have to face administration. (Dalglish 2009, 16)

Basically administration is the spirit of saving businesses from becoming insolvent, this proactive way out is considered to keep the business still in operation. Now the question is that why the football clubs are facing so much financial crisis when the football game itself is generating myriads amount of revenues, actually the clubs are generating revenues through sales of tickets, sales of jerseys, merchandising, league funds and TV rights and some win certain competitions even outside their national leagues which adds up to their purse, all these running into millions and millions of pounds but due to many reasons they are facing such crises.

In the insolvency case of Liverpool the club chairman Martin Broughton played remarkable role as well as several executives (the CEO and the club's commercial director) calling and closing the sale of equipment apart from its owners. This decision will involve millions in losses in excess of 140 million pounds; the decision was widely ...