This is something that businesses are allowed to apply for to protect them from being liquidated and having all their assets sold to pay their debts.
I am sure there are very good examples of this working in the best interests of all parties (well at least some of them) so that the business is given time to get itself sorted and refinance.
When it comes to football clubs it is becoming difficult to justify the administration for anything other than allowing the football club to blackmail those that lent it money in good faith to accept a fraction of what they are due.
I have written about this before (when Portsmouth were last in administration). Nothing in the world of football seems to have changed since then.
This time Portsmouth are, apparently, unable to fund the rest of their season. No doubt a solution to that will be found and in due course they will agree new terms for them to continue trading, all be it in a division lower than they are in now. I wonder how much difference the Premier League parachute payments will make in the third division, and what the other teams in that division will think of the club with millions of pounds of TV money to play with.
I can't help but wonder if there was ever any real expectation on behalf of the previous administrators at Portsmouth to, actually, pay back the £30m that they agreed not to knock of the £150m they overspent. It does look now like they offered the minimum they needed to get out of trouble to, literally, buy themselves time to find another solution. That club have been looking for a new owner for years and all they want is a super rich man to come in and pay for all the success that his predecessor enjoyed - oh and maybe fund another decade of decadence.
Glasgow Rangers are another example completely. They seem to be safe from any real chance of liquidation on the basis that without them Scottish football dies, apparently.
Don't get me wrong I am self employed and I have an accountant that advises me on how to reduce my tax bill, but I don't hold HMRC to ransom and tell them that they will have to knock a huge chunk of what I owe them or I'll pay none of it.
Maybe these trusts that Rangers had were thought to be ok, but from what I read about them I would have guessed that they would have been liable to tax, and it would seem, shock horror, that they are!
I don't know where we go from here. Sky Sports News had a thirty minute special investigation program about this last week. Interestingly they had Peter Storrie and David Gold on it. Guess what, they both believed that there was no foul play by the clubs. David Gold even blamed the HMRC for not protecting Rangers from running up such a debt. You couldn't make it up!
The High Court is going to make a decision on the football creditors rule in a week or so. This will be interesting as it will make some changes. Neither Gold nor Storrie mentioned the one thing that I think needs to be addressed and quickly - players wages. From what I read (and it could well be wrong) Portsmouth still have players on salaries in excess of £1m a year that they signed when they were in the Premier League - they can't move them on. Administration should allow the clubs to take these players contracts, roll them up and pay them off with the same percentage that the other creditors get.
I know this would seem unfair as there are probably players that signed their contracts in good faith, and might have been able to get the same deal elsewhere, but it just does't seem right for the British tax payer to accept 20p in the £ and a footballer to continue to collect all of his £1m a year for a further three years.
The alternative is that this will keep happening. As time goes on the world will stop lending money to football clubs. Banks have, already, amended their position on football debt and local businesses will start to ask for more money on account or they will not carry out the work that the club wants.
The only institution that will continue to suffer is HMRC. All Income Tax and National Insurance is paid in arrears. In my business I pay staff and withhold their tax and NI and then once a quarter I pay it on their behalf. My staff earnings are inconsequential compared to footballers that can earn close to £100,000 a month. If you have a squad of ten players earning that (or 20 earning £50k a month) then the total earnings are £3m a quarter. If you assume, for ease of calculation, that the tax and NI bill is half then the football club can owe £1.5m before an invoice is even raised. Allow this to drag on for two quarters and then another to get it to court and the bill is £4.5m Suddenly it's understandable why HMRC are taking so many clubs to court for winding up orders.
I believe that an example needs to be made of a football club that will ensure that the others manage their finances in a better fashion. If anyone can think of a better club to make an example of than Rangers or Portsmouth then please comment below.
I know it would be heart breaking for the fans of the club in question, and I would hate for it to be us (even though to avoid administration we took decisions that got us relegated at least once), but a club has to go. It has to be liquidated. It has to be held up as an example of what happens if debt is run up that cannot be repaid, or at least serviced.
It won't happen of course and no doubt in two years time I'll be writing something similar to this post about another club that has effectively been bailed out by the tax payer.