25 March 2024

What England's football regulator means for GRC

The long-awaited Football Governance Bill, a historic piece of legislation aimed at reforming the governance of men’s elite football in England, has been introduced to the UK Parliament.

The bill comes at a critical juncture for the sport, following a series of high-profile cases of clubs being financially mismanaged or collapsing entirely and the attempted breakaway European Super League.

The legislation seeks to establish an independent regulator, promote financial sustainability, and safeguard the heritage of English football while putting fans back at the heart of the game.

Here’s what it will look like when the bill becomes law.

The Independent Football Regulator (IFR):

The cornerstone of the Football Governance Bill is the creation of the Independent Football Regulator (IFR), a standalone body independent of both the government and football authorities.

The IFR will be equipped with robust powers to improve the financial sustainability of clubs, ensure financial resilience across the leagues, and protect the heritage of English football.

The regulator will operate a licensing system covering clubs in the top five tiers of men’s English football and will have the authority to monitor and enforce requirements related to financial regulation, club ownership, fan engagement, and the protection of club heritage.

Strengthened Owners’ and Directors’ Tests:

Under the new legislation, prospective owners and directors will face more stringent tests to ensure that clubs stay in the right hands. The tests will consist of three key elements:

  • A fitness test for owners and directors
  • A source of wealth test for owners
  • A requirement for financial plans and resources

The IFR will have the power to test and remove incumbent owners and directors should they be found unsuitable, allowing the regulator to tackle concerns about irresponsible owners responsible for club financial mismanagement.

Enhanced Financial Regulation:

The IFR will have the authority to oversee financial plans and intervene where it has concerns, aiming to improve the economic resilience of clubs across the football pyramid.

Clubs must demonstrate sound financial practices, have appropriate financial resources to meet cash flows, and protect core assets such as stadiums.

The regulator can place bespoke conditions on clubs to mitigate financial risks at both the club and systemic levels.

Fan Engagement and Heritage Protection:

The Football Governance Bill strongly emphasizes fan engagement, requiring clubs to have a framework in place to regularly meet with a representative group of fans to discuss key strategic matters and issues of interest to supporters, including club heritage.

Regulated clubs must establish majority fan support for any proposed material changes to club crests, home shirt colors, and club names. Additionally, clubs will be required to seek approval for the sale or relocation of their home grounds, with the IFR determining approval based on financial considerations and the potential impact on club heritage.

Preventing Breakaway Leagues and Revenue Distribution:

The new legislation will prevent English clubs from joining breakaway or unlicensed leagues, ensuring that fans no longer face the prospect of their clubs participating in damaging competitions such as the proposed European Super League.

Furthermore, the IFR will have a backstop power to intervene in the distribution of broadcast revenue where necessary, subject to certain thresholds being met. While the government prefers an industry-led solution, the regulator will have targeted powers to intervene if football fails to reach an agreement on revenue distribution.

What role could GRC professionals have?

The introduction of the Football Governance Bill presents a unique opportunity for governance, risk, and compliance (GRC) professionals to play a crucial role in helping football clubs navigate the new regulatory landscape.

1. Regulatory Compliance:

GRC professionals can assist football clubs in understanding and adhering to the new regulations. They can help clubs develop and implement policies, procedures, and controls to ensure compliance with the IFR’s licensing system, financial reporting requirements, and corporate governance standards. By staying abreast of regulatory updates and best practices, GRC professionals can guide clubs in maintaining ongoing compliance and avoiding potential penalties or sanctions.

2. Risk Management:

With the IFR’s focus on financial sustainability and risk mitigation, GRC professionals can play a vital role in helping clubs identify, assess, and manage financial and operational risks. They can assist in developing risk management frameworks, conducting risk assessments, and implementing risk mitigation strategies. By closely monitoring financial plans, cash flows, and core asset protection, GRC professionals can help clubs make informed decisions and ensure they have appropriate financial resources to weather potential challenges.

3. Corporate Governance:

The Football Governance Bill introduces a “Football Club Corporate Governance Code,” requiring clubs to report on their governance practices. GRC professionals can support clubs in designing and implementing robust corporate governance structures, policies, and procedures aligned with the new code. They can help clubs establish effective board oversight, internal controls, and reporting mechanisms to enhance transparency and accountability. GRC professionals can also assist in preparing corporate governance reports and ensuring compliance with the IFR’s reporting requirements.

4. Ownership and Management Suitability:

GRC professionals can play a critical role in assisting clubs with the strengthened owners’ and directors’ tests introduced by the bill. They can help clubs conduct thorough due diligence on prospective owners and directors, assessing their fitness, source of wealth, and financial resources. GRC professionals can also support clubs in ongoing monitoring and reporting of ownership and management structures to the IFR, ensuring continued compliance with the regulatory requirements.

5. Fan Engagement and Heritage Protection:

As the bill emphasizes fan engagement and heritage protection, GRC professionals can help clubs develop and implement effective fan engagement strategies. They can assist in establishing frameworks for regular communication and consultation with representative fan groups, ensuring that fans’ voices are heard on critical strategic matters and heritage-related issues. GRC professionals can also support clubs in seeking approval for any proposed changes to club heritage elements, such as crests, colors, or stadium relocations, ensuring compliance with the IFR’s requirements.

6. Training and Awareness:

GRC professionals can play a vital role in educating and training club officials, employees, and stakeholders on the new regulatory requirements and best practices. They can develop and deliver training programs to raise awareness of the IFR’s objectives, licensing system, financial regulations, and corporate governance standards. By fostering a culture of compliance and ethical behavior, GRC professionals can help clubs navigate the complexities of the new regulatory environment and mitigate the risk of non-compliance.

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