saints in crisis

Southampton relegated by insolvency ruling

April 23, 2009
By Soccernet staff

Southampton were effectively relegated from the Championship on Thursday when the Football League docked the club 10 points for breaking their insolvency rules.

St Mary's Stadium
Empics / DanielHamburySouthampton's fate has now been sealed

Should Saints finish outside the bottom three they will have the points deducted this season, which will place them back inside the relegation zone and thus consign them to League One next season.

However, if they are relegated conventionally at the end of the season the 10 points will be taken off at the start of next season with the former Premier League outfit in the third tier of English football for the first time in 50 years.

They are currently four points adrift of safety with a poor goal difference and just two games left, meaning it is most likely they will begin 2009-10 on minus 10.

The club's parent company, Southampton Leisure Holdings plc, went into administration a few weeks ago but it was felt a penalty could be avoided as Football League rules apply to clubs rather than their associated companies.

However, the Football League were concerned at the link between Southampton Leisure Holdings and Southampton Football club and ordered a financial review before deciding whether to impose a 10-point penalty.

The review concluded that the entirety of the income streams for the holding company came directly from the Football Club, and as such there could be no doubt that the two are "inextricably linked as one economic entity'', and that the 10-point deduction should be applied.

The 1976 FA Cup winners dropped out of the Premier League in 2005 after a 27-year stay in the top flight.

The Football League said on it's website: "The report, by Grant Thornton, set out in detail the various inter-relationships between the four different group companies at Southampton Leisure Holdings Plc (the Holding Company).

"The conclusions were based both on the content of the annual accounts published by the Holding Company, which include the Club, and other information made available to Grant Thornton as part of their enquiries. The Board noted that Grant Thornton reported that toward the end of their enquiries co-operation with them was withdrawn.

"The report concluded, among other things, that: 1.The Holding Company has no income of its own; all revenue and expenditure is derived from the operation of Southampton Football Club Limited (SFC) and the associated stadium company.

"2.The Holding company is solvent in its own right. It only becomes insolvent when account is taken of the position of SFC and the other group companies.

"3.The three entities (the Holding Company, SFC and the stadium company) comprise the football club and they are inextricably linked as one economic entity.

"In light of all this advice, the Board concluded that an administrator had been appointed in respect of the Club or part of its undertaking or assets. Accordingly, it was left with no alternative other than to invoke its 'Sporting Sanctions' regulations and apply a 10 point penalty to the Club. The other provisions of The League's insolvency policy also become effective.

"As the insolvency event occurred after The Football League's deadline of the fourth Thursday in March, the points deduction will take effect either: 1.In the current season, if Southampton avoid relegation to League 1; 2.next season, if the club does not avoid relegation."

Southampton are likely to appeal against the decision, meaning further uncertainty towards the end of a turbulent season for the club both on and off the field.

A statement from the club read: ''The administrators and the club were informed of the League's intention to issue a release on the findings of the independent forensic report five minutes before its publication, leaving no time for consultation and to inform fans, players and staff.

''We are of the opinion that an incorrect conclusion has been reached. The football regulations do not apply to the circumstances surrounding Southampton Football Club.''

Saints also refuted the Football League's claim they withdrew their co-operation towards the investigation.

The statement concluded: ''Both the club and the administrators are now considering their positions and expect to launch an appeal.''

Football League chairman Lord Mawhinney acknowledged the club do have the right to appeal.

Speaking on Sky Sports News, he said: ''There is an appeal mechanism and it's up to Southampton to decide whether they want to appeal and on what basis.''

He added: ''(The decision) wasn't inevitable, we commissioned forensic accountants to look at the situation. They gave us their report, they drew our attention to the holding company's annual report and we got external legal advice.

''The weight of all three of those made it clear that the club's affairs were inextricably linked to the holding company and, as a consequence, we took the view that an administrator had been appointed relating to the club and therefore we had no choice under our regulations but to apply the sporting sanctions.

''I have sympathy for the fans but the fans know as well as the rest of us that this has not been a shining example of football management. We have had changes and tension at board level and so the fans have had a difficult time.

''I can't imagine there is a Southampton fan in the world who welcomes this decision but the job of the Football League Board is to protect the integrity of the competition and that is what we have done.''