If changes to the top-flight sponsorship regulations are approved today, Manchester City and the Premier League may get into a new legal dispute.
After they contested the restrictions on associated party transactions (APTs) on the grounds of competition law, the city issued a warning last week not to rush through amendments.
An arbitration panel declared last month that certain parts of the rules were illegal. City contends that changing the rules before the panel has provided additional direction exposes them to more challenges.
After more than a month of deliberation, Premier League executives are reportedly certain that the adjustments are legal and, more importantly, that most teams will accept them.
According to the PA news agency, Wolves will be present at the league’s shareholders meeting in central London on Friday.
This runs counter to earlier this week’s claims that they were among the six clubs that could support City and keep the league from obtaining a 14-club majority in Friday’s crucial vote.
Given that they backed the Premier League when the four-time winners first filed their legal challenge against the APT regulations earlier this year, sources close to the Black Country club were taken aback to see them mentioned as a possible supporter of City.
According to reports, Everton is also getting ready to vote with the Premier League. According to people close to the Merseyside club, the team supports anything that preserves the league’s integrity, but they did not explicitly tell PA which way they would vote.
Aston Villa’s public support for City’s vote for a postponement is undeniable, and PA is aware that Nottingham Forest will follow suit.
One of Villa’s arguments for a postponement was the possibility of further legal fees for the league, which informed clubs in September that more than £45 million had been spent on enforcing its regulations the previous season.
According to reports, teams have been contacted this week by the Premier League and City to enquire about their voting preferences.
Even if Chelsea, Leicester, and Newcastle backed City, the champions would still be barely short of forming a large enough bloc to thwart the Premier League’s ambitions.
Earlier this year, the Times revealed that City’s initial legal challenge to the APT regulations made reference to the league’s voting system, characterising it as a “tyranny of the majority.”
Since an arbitration panel ruled that parts of the APT rules were illegal after City’s complaint, the Premier League has been consulting its teams on the modifications for more than a month.
The Premier League promised to act “quickly and effectively” to address the illegal components, but City claimed that all of the regulations should be deemed “void” and accused the league of “misleading” teams in its interpretation of the tribunal’s conclusions.
The fair market value (FMV) of business transactions between clubs and companies associated with their ownership is evaluated by the APT regulations.
If the modifications are approved, shareholder loans will now be included in the guidelines since the tribunal determined that it was illegal to leave them out.
Depending on a number of variables, including a club’s credit score, the effective rate of interest charged on current and future shareholder loans will be evaluated for FMV.
Clubs will have fifty days to convert these loans to equity if they so choose.
To reverse the modifications to the APTs that were implemented in February, more revisions will be made. The first is changing the phrasing of what FMV is in the rules from “would” to “could,” which should give teams more leeway.
If the revisions are accepted, clubs will also have access to the Premier League’s databank, which is used to calculate FMV, prior to a decision being made.
