Football League clubs which fall into insolvency and then fail to exit via a Company Voluntary Arrangement (CVA) can now expect to be deducted 25 points in total, following the upholding last week of a similar sanction imposed on Leeds United. Clubs are expected to encounter this problem increasingly because Her Majesty's Revenue & Customs, always a substantial creditor where football clubs go into administration, is routinely voting against CVAs.

The Football League requires clubs coming out of insolvency to agree a CVA, a settlement which requires acceptance by 75% of creditors. HMRC has long refused to agree to be paid only a proportion of the tax and VAT it is owed while under the League's "football creditors' rule" players' wages, and any money owed to other clubs, are being paid in full.

Leeds incurred the automatic 10-point penalty when the club went into administration last May, then accepted a further 15-point deduction in League One when they failed to achieve a CVA. Having promised in writing not to take legal action, Leeds then initiated proceedings in the high court, seeking to have the 15 points reinstated, and the action was referred to arbitration.

Last week a three-man arbitration panel upheld the 15-point penalty as "reasonable and proportionate" in the circumstances, because Leeds had been seeking to join League One without complying with the rule that they had to achieve a CVA after going into administration.

Lord Mawhinney, the Football League's chairman, said of the ruling that he was very satisfied that the League's authority and rules had been upheld, and that the insolvency policy would continue to apply to the League's clubs.

Mawhinney added that while the League did not want to be bound strictly by the precedent of 25 points having been deducted from Leeds, that sanction is now "an established fact".

Each case will be judged on its merits, but Leeds' 15-point deduction on top the automatic 10-point penalty sets the bar for clubs which go into insolvency and fail to agree a CVA.


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