Exeter City are trying to get to grips with their financial crisis, with potentially serious effects for all Conference clubs and football rules, as Howard Pattison writes
Watching Exeter play football may be unrewarding, but the club’s adventures off the pitch are rich with incident, controversy and intrigue. Having seemingly headed off their most pressing financial worries by entering into a corporate voluntary arrangement (CVA) with their creditors, whereby they agreed to pay just ten per cent of their debts, they were immediately served notice of a 12-point penalty, the punishment set by the Conference at the beginning of the season.
Of course they fully expected this and duly lodged an appeal without so much as blinking. What they weren’t expecting was the court action taken by one of their creditors, the Inland Revenue, who not unreasonably took exception to the fact that so-called “football creditors” enjoyed protection within the CVA and could look forward to receiving their full due while Her Majesty’s tax collector could go whistle for it.
If Exeter were caught unawares by this, the Conference were caught fast asleep when the club followed suit and took out an action against the league for “unfairly prejudicial” treatment, one of the prejudices presumably being their change of heart over an intention to comply with the Football League’s less severe and, more importantly, deferred points deduction.
The Conference promptly went to see a judge to argue that it should all be sorted out by arbitration. Unhappily for them, the judge decided that there was a case to answer and that they would all be back in court in March. “What worries me about arbitration,” said Judge Weeks, “is that it is not going to give Stevenage, Hereford or anybody else a voice. But they will have a voice in court.” Very noble and proper, but now the Conference potentially faces huge costs and these will have to be shared equally among all the member clubs. Freedom of speech may be a hot topic at the moment, but Stevenage, Hereford or anybody else may consider that the right to keep quiet is a whole lot cheaper.
Already clubs have been making noises about being “tipped over the edge” and pointing the finger accusingly at Exeter. Yet Exeter seem to have anticipated the censure; indeed, they give the unusual impression of having done their homework thoroughly. After their appeal to the Football Association in December, which they won (the FA postponed the points deduction on the grounds that the Conference hadn’t followed the proper procedures), Exeter talked of “having got their tactics right”. They genuinely believe they’re in the right, even going so far as to discuss lofty legal ambitions, claiming that their interests are the same as the Inland Revenue’s: the resolution of the whole cloudy issue of football insolvency.
Exeter’s case is simply put: they are being punished for following orders. Paying the football creditors in full is demanded by the game’s authorities. In entering the CVA in the first place, they were simply following the advice of experts who told them that the Companies Act required them to safeguard their creditors’ interests. They found themselves being squeezed by the Inland Revenue on one side and the Conference on the other.
What happens next is anyone’s guess. The FA, doubtless dismayed at the unfolding events, and perhaps even the Conference’s handling of them, would probably like it all resolved out of court. If it does go to court and Exeter win, the points deduction will be withdrawn and the Inland Revenue’s gaze may fall elsewhere, seemingly determined to have its way sooner rather than later.
If Exeter lose their case, the points deduction will be upheld and the Revenue’s case will probably be won in April, which means that Exeter will be taken out of their CVA, which in turn means they could be owed 12 points from the Conference just two days before the end of the season. Not quite so absurd are the notions that Exeter will be back on the brink of liquidation and football creditors will no longer have any preferential treatment when it comes to debt claims. And what chance players seeing their deferred wages then?
From WSC 205 March 2004. What was happening this month