Company closure advice for sports clubs

To safeguard your sports club business from increasing expenses and industry-specific difficulties, it’s important to grasp formal insolvency processes. 

These procedures can aid in preserving or winding up your sports club, including options like a Company Voluntary Arrangement (CVA), Company Administration, or Creditors’ Voluntary Liquidation (CVL).”

Unlocking Rescue, Recovery, and Closure Options for Your Sports Clubs

Elite teams in the nation’s higher playing tiers benefit from profitable broadcasting and sponsorship agreements, along with support from affluent owners. 

However, the situation differs for amateur and semi-professional sports teams competing in lower leagues, which are often owned entirely by fans. These clubs heavily rely on matchday revenue, which includes ticket sales and sales of items like programmes, food, and drinks, as their primary income source. If these revenue streams diminish, problems can swiftly escalate.

How can you close your sports club through the liquidation process?

If your sports club is relying more on its cash reserves and struggling to generate income, you might be exploring future options. In times of financial distress, various solutions are available, depending on the company’s financial status, its potential for future success, and the willingness of shareholders or members to keep the club running.

If your sports club is insolvent, one option you might contemplate is placing it into a liquidation process. Liquidation is a formal insolvency procedure that ultimately brings about the end of a company.

It’s a significant decision to make, and in most instances, it’s irreversible. Before finalising any decision, it’s crucial to prioritise seeking the services of a licensed insolvency practitioner. They can guide you through the entire process and explain its implications for everyone involved with the club. Additionally, they can discuss potential alternatives to liquidation if you’re determined to keep operating despite existing challenges.

The liquidation of an insolvent company is carried out through a Creditors’ Voluntary Liquidation (CVL), a process that must be initiated under the supervision of a licensed insolvency practitioner. In a CVL, all assets owned by the sports club are identified, independently valued, and then sold.

The proceeds from the sale are then distributed among the club’s outstanding creditors based on a predetermined hierarchy of priority. Once this is done, the company is wound down and removed from the register maintained at Companies House.

A CVL is a corporate insolvency process applicable only to limited companies. If your sports club is not registered as a limited company but you still wish to close it down, you will need to pursue a process suitable for the club’s structure.

Our team of licensed insolvency practitioners is available to guide you, whether your sports club is incorporated or unincorporated, or even if it operates as a Community Amateur Sports Club (CASC) or holds Charitable Status.

How can I rescue my sports club? 

If your sports club is currently facing financial challenges, there is still hope. Many clubs are in similar situations, and the good news is that there are several avenues to rescue your sports club, especially if it’s incorporated as a limited company.

An insolvency practitioner can provide an impartial assessment of your club and discuss appropriate options for saving the business. 

This includes examining the club’s financials and understanding the factors that led to its current position. An evaluation will be conducted to assess the club’s future viability and its potential for a successful turnaround.

If the club has previously been financially stable, there’s a chance that a plan can be devised to help you navigate through the difficulties and ensure the club is well-positioned to recover once restrictions are eased, both on and off the field.

Cash flow is vital for any business, and when it starts to dwindle, problems can escalate rapidly. Significant and unexpected hits to revenue, along with the drying up of guaranteed income streams, can immediately impact cash flow.

Opting for commercial finance could aid in replenishing a company’s cash reserves and meeting outgoing expenses. This option might be viable if you’re optimistic about your club’s ability to recover once restrictions ease.

Alternatively, if the income gap has led to arrears with your obligations to trade creditors, your bank, your landlord, or HMRC, engaging in a negotiation process could be the most appropriate option.

Tax arrears could be settled through an agreed set of instalments rather than a lump sum payment by arranging a Time to Pay (TTP) agreement directly with HMRC. You can engage in these negotiations independently, or we can communicate with HMRC on your behalf.

We’ve facilitated numerous TTP agreements for a wide range of companies, and we understand how to present your case optimally, enhancing your likelihood of success.

For sporting clubs with debts owed to various creditors, a Company Voluntary Arrangement (CVA) might be more appropriate. A CVA is a formal insolvency process initiated by a financially troubled company and its creditors, overseen by a licensed insolvency practitioner.

A typical CVA usually lasts between 3-5 years, depending on the agreement, and is legally binding for all parties involved. It enables the indebted company to make reduced monthly repayments, subject to creditors’ agreement to the reduction.

For the CVA to become legally binding, a minimum of 75% (by value) of voting creditors must agree to the proposal presented. The proposal is compiled by the company’s insolvency practitioner, and the payment terms offered are determined by the amount owed by your club and its ability to repay.

For clubs confronted with legal action from creditors, placing the club into administration can offer immediate relief from litigation threats. It also allows valuable time for the development of a robust plan.

This could entail selling all or part of the club, initiating a restructuring process to divest unprofitable areas, or opting for an alternative process such as a CVA or liquidation through a CVL.