2019 Moment #2 – The Demise of Bury Football Club

The Demise of Bury Football Club

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Bury Football Club were expelled from the English Football League (“EFL”) on 27 August 2019 as a result of financial problems, brought on through a number of failings by a range of parties.  The owner and previous owner of the club have been forced to shoulder a lot of the blame, but the EFL must also acknowledge and remedy their own failures.

Bury FC were established 125 years ago and their expulsion from the EFL is a tragedy for the town and local community.  Bury were in financial difficulties for a number of years, rescued from bankruptcy by Stewart Day and subsequently sold to Steve Dale in late 2018 for £1.

As a result of its increasing level of debt, the club were faced with a winding up petition, eventually dismissed by the High Court in July 2019.  However, as a result of a Company Voluntary Arrangement (“CVA“) agreed with the creditors of the club, the EFL – per their regulations – deducted 12 points from the club and served notice that their membership of the EFL was at risk of termination.

On 27 August 2019, after the collapse of a rescue bid, Bury were expelled from the EFL.

A confluence of factors and events led Bury to this point, particularly poor governance on behalf of both the owners and the EFL.  The above-mentioned Stewart Day funded the purchase and salaries of players via loans from his other business interests.  These loans were then converted into shares in the club.  Unfortunately for all concerned, this method of operating meant that when Day’s other interests collapsed, Bury were unable to pay its employees.  Perhaps his biggest mis-step, were his actions in respect of Bury’s stadium, Gigg Lane.  Day mortgaged the stadium and at the time of the failed last-minute sale, the lender was owed £3.7 million and with interest accruing daily, this proved to be a non-starter for potential buyers of the club.

The EFL has been accused of failures on a number of counts, particularly as many are of the opinion that the club, and by extension the fans, have been punished for the actions of the owner.  There are rules in place, enacted by the EFL, intended to ensure clubs do not spend beyond their means.  This was easily circumvented by Day converting his loans into shares.  The EFL has further been accused of approving the takeover of the club by Steve Dale without ascertaining whether he actually had the funds required to rescue the club.

Since the expulsion of Bury, the EFL has committed to an overhaul of its regulations in order to ensure a similar fate does not befall other clubs.  An independent review has been commissioned and will be led by Jonathan Taylor QC.  One key task of this review will be an examination of the suitability and application of the EFL’s heavily criticised ‘Owners and Directors Test’.

The events led to Damien Collins MP, chairman of the Digital, Culture, Media and Sport select committee calling for urgent action to prevent such a scenario happening to other clubs and urging the EFL to share the blame for the demise of Bury.  Following a select committee hearing, Collins described the failings within the EFL regulations as ‘systematic and structural’ and concluded that they were avoidable.  The committee, among other recommendations, called for an EFL apology to Bury staff and fans.

The demise of a football club is something that should concern all football fans.  The money which has flown into the upper echelons of the game has created a huge disparity between the haves and have nots.  While FIFA mechanisms such as training compensation and the solidarity mechanism already in place are designed to ensure money flows to lower levels of the game, it is heartening to see initiatives being developed such as the FIFA Clearing House to strengthen these other provisions.  Financial Fair Play receives a lot of coverage but at present UEFA enforces this only for clubs who have qualified for UEFA club competitions.  It is incumbent on the national associations and football leagues to transpose these principles into their own guidelines.  Perhaps in years to come Bury will be regarded as a much-needed wake-up call, but it is unfortunate that the catalyst for change is often a tragic event such as the demise of this historic club.

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