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Old Company V New Company

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Saturday, 16 June 2012

Old Company v New Company in Football: Much Ado About Nothing

There has been an enormous degree of analysis, in the last few days, in relation to the creation of a football company, as a new and separate legal entity. I received a lot of requests for clarification and I would do my best to assist. As always, this is not legal advice, which in practical terms, may be different to the general principles we are discussing here.

The first point people need to remember relates to the constant and perennial collision between the law of the land and the principle of self-regulation in sport. The latter has the advantage of the 'sporting exception', which, under certain circumstances, may offer sport a questionable immunity towards self-regulation. This is true in several cases; however, we must always remember that the application of the 'sporting exception' principle is not absolute and it depends on the individual facts of each case. In other words, it has to be considered on a case to case basis.

In terms of the creation of a new company, the law of the land is clear. One of the most fundamental principles of commonwealth company law is the principle of the separate corporate personality. Such principle distinguishes companies from human entities. Similarly, each company has its own separate legal personality. Although the notion of a company gives rise to an artificial entity, the law considers such entity valid, once the formalities and the legal requirements have been dealt with appropriately. When a new company is registered, it automatically receives its own separate legal personality.

Things cannot be different in football. The same principle applies and every time a new football club is registered as a company, it receives a new and separate legal personality. Although there may be traces of association with a previous old company in terms of fan base, stadia, support and personnel, legally speaking, the new company is distinct and it does not relate to the previous old company who happened to have a similar name, the same fans or even the same employees. What is important here, relates to the legal qualification of the new company to be able to trade. This qualification, therefore, needs to be satisfied by 1) The company's registration and 2) The acquisition of a VAT number, which of course would be different to the VAT number the previous old company had. In other words, the new company has no legal relationship, whatsoever, with the old company and similarly, the new company would not be responsible for the debts and liabilities of the old company. This is clear and it accepts no arguments.

At this juncture, we have to consider the self regulation argument and, perhaps, the application of the 'sporting exception' principle, if any. If the new company wishes to join an association of clubs, then it must follow specific rules and regulations that the relevant association may impose. If the rules of the association provide for the admission of a new club-company into a league, then the company needs to apply and follow the rules of the association. Such admission may be conditional upon acceptance by the other clubs and at this point there is no collision between the law of the land and the principle of self-regulation. Such collision would only occur, in the event the new company attempts to bring into the equation a legal association with the old [and non-existent] company. As explained above, such association is not possible, as the new company, in the eyes of the law [and not in the eyes of the beholder] has its own separate and distinct corporate personality. With completion of the liquidating event, the old company comes to an end and along with it all of its rights and obligations. The history, of course, remains, but only in the books and it plays no important role in the practicalities of the sporting competition. In addition, the old company, cannot, of course, play any role in the proceedings of the admission, into a league, of the new company.

Similarly, any attempt by the association of clubs and/or the regulator to impose sporting sanctions on the new company, for 'sins' committed by the old company, may bring forward several legal arguments that cannot be ignored. The 'sporting exception' principle may be used by the regulator of the competition towards a justification for the protection of the sporting integrity; however, such application may be the subject of lengthy legal submissions. I had the opportunity to produce such submissions before the Court of Arbitration for Sport in 2010 and 2011. Such submissions focused on the attempt of regulators to by-pass legality and the proper and purposeful application of the rules. The 4 Appeals submitted by my client Iraklis FC against the Hellenic Football Federation, focused on allegations of malpractice and erroneous applications of the rules. Before my resignation from these Appeals, I had the opportunity to comprehend and appreciate that the application of the 'sporting exception', although useful, may be a 'dangerous' weapon in the hands of the pedantic regulator.

It follows, therefore, that the legal regulation of football activities may have to touch upon further analysis regarding the boundaries of self regulation. Although the regulator has an important role to play, towards ensuring the protection of the integrity of the competition, it also has an equally important role of safeguarding the rights of all members of the association. Equal treatment and purposeful application of the rules, are the ingredients that would guarantee the sporting integrity of the competition and ensure that legal challenges remain outside the sporting arena.

Dr. Gregory Ioannidis ( I know, but who else could I use)

16 June 2012

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But it's not the company we're being punished for. We're a newco yes, but the club is still the same and its prior "sins" are being punished. It's this same logic that can be used to prove that our history as a club is still intact.

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Not sure if this bit has been covered but i had a thought last night around players and fee's. I'm assuming the money owed to Hearts for Lee Wallace is null and void if we no longer exist as our Old Co who he signed for and who Hearts would've had an outstanding fee with but the other flip side of that is we're owed money by Everton for Jelavic over the next 2 years so does that just vanish as well ? Swings and roundabouts but to gain L Wallace for the mini fee wee paid and lose Jelavic for 1 installment is no the best !!! if that is the case Everton have won a watch........ this is the same player we supposedly knocked back 9 mill for !!! We're so in need of a strong head figure, a strong voice on all fronts and a business person to ensure this never ever happens again.

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But it's not the company we're being punished for. We're a newco yes, but the club is still the same and its prior "sins" are being punished. It's this same logic that can be used to prove that our history as a club is still intact.

Nope, the company used the EBT's, the company was responsible for the liabilities which came as a result of their use. As for the history, the corporate history of the old company stayed with the old company, the sporting history of the club stays with the club.

Scottish football authorities seem again to be assuming that they can circumvent the law, hopefully we disabuse them of that notion in a court once more.

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