SKY BLUES fans could be forgiven for thinking it's the beginning of the end if the club goes into administration.

But other clubs - notably including Leicester City - have survived it.

With debts of £38 million, very few assets apart from players and on-going losses, Coventry City Football Club are in a difficult position.

If they can find an investor who'll put in enough to get them into the Premiership, they'll get an automatic payment of £30 million and brighter prospects.

Going into administration could rid them of their debts - but it will also lose them points in the Championship, under the Football League's rules.

Political editor Fiona Scott tries to unravel the rules which could be as important to Sky Blues fans as an under-standing of the off-side rule.


So what does administration mean?
When a company is failing, its directors or lenders can call in an "insolvency practitioner" to run the firm.


He or she will look at ways of making the business profitable and will negotiate with creditors about the debts.


The aim is to reach a legal agreement called a "Company Voluntary Agreement" about how debts will be paid.


Are there any exceptions?


Yes. If a company in trouble has borrowed money from a lender (usually a bank) before September 2003 and given that lender security by way of a "fixed or floating charge", that lender can block the appointment of an insolvency practitioner.


This appears to apply in the case of Coventry City Football Club.


What if the creditors and insolvency practitioner can't agree?


The insolvency practitioner will then look at "administrative receivership" - essentially trying to find a buyer for the business.


The proceeds of the sale will then go to pay off the creditors.


Will creditors get all their money back?


It depends on how much the business is sold for, and the status of the creditor.


They'll all have the chance to attend a special meeting with the insolvency practitioners.


Do some creditors get preference?


Yes. Bank debts secured against assets and preferential creditors such as the Inland Revenue, get paid back first.


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