Clubs have until close of business on Thursday to send information to the Premier League which could shape the drafting of new financial rules in the wake of Manchester City’s legal challenge.
A dispute over an arbitration panel judgement centred on the league’s associated party transaction (APT) rules is still rumbling on, with City having accused the league of misleading the other 19 clubs about what the judgement means.
The APT rules seek to ensure that commercial deals between clubs and entities linked to their ownership are done at fair market value (FMV), to avoid such deals being artificially inflated to boost revenue.
City argue the APT rules are all void because the judgement, published on Monday, found certain aspects of them to be in breach of competition law, whereas the Premier League’s position is that the judgement was on the whole an endorsement of the APT rules and the principles behind it, and therefore only those aspects found in breach need revising.
Club statement
— Manchester City (@ManCity) October 7, 2024
The PA news agency understands the league has sought further clarification from the arbitration tribunal on the judgement’s implications, but in the meantime is working with clubs to update the sections of the rulebook found to be unlawful.
The biggest change would be the inclusion of shareholder loans as a transaction to be assessed for FMV. Clubs have been asked to supply information to the league by the close of business on Thursday about the mix of shareholder loans and loans converted to equity they currently have, and have had in the last three years.
This information will help the league draft recommendations that will be put before the league’s Financial Controls Advisory Group (FCAG) and its Legal Advisory Group (LAG) on Tuesday before a wider discussion among all clubs next Thursday morning.
Clubs are not expected to vote on any rule changes at that meeting, however.
The understanding among clubs is that only new shareholder loans could be assessed for FMV, rather than existing ones. An FMV assessment might look at what rate of interest would be charged on such a loan in the open market, which could vary from club to club depending on their credit score.
Crucially, this interest cost would then need to be included within a club’s calculation under the profitability and sustainability rules (PSR) and potentially put more clubs at risk of breaching those rules.
This would no longer be an issue though if clubs choose to replace PSR at the end of the season with new rules, which will fix squad costs at 85 per cent of a club’s revenue and not look at borrowing costs.
The squad cost rules (SCR) are being trialled in shadow form this season with a view to them coming into force next season.
