DCFC Supporters’ Groups Meet EFL

Minutes from meeting between Derby County supporters’ groups and the EFL on 17th February 2022

Attendees: Trevor Birch, Mark Rowan, Nick Craig & Jon Nagle (EFL), Jim Wheeler, Pete Drew, Kevin Hepworth (RamsTrust), Nigel Owen, Pat Hilton (Black & White Together), Jas (Punjabi Rams), Ashley Brown (Football Supporters’ Association)

Please can you update Derby County supporters on progress since Mel Morris offered to take on the claims from Middlesbrough & Wycombe last week? It has been reported that the Middlesbrough claim has now been resolved – can you confirm this has satisfied the EFL concerns? Can you give any update on the Wycombe claim – given that a compensation claim has not yet been lodged, does this still stop progress with the takeover?

* Since our last mtg in January, the EFL has had multiple meetings, particularly with MPs, Team Derby & Quantuma. The EFL issued a decision to the Administrators on the status of the outstanding compensation claims which has not yet been challenged by Quantuma. Mel Morris issued a statement and subsequently Middlesbrough and Derby both released statements saying they had reached an accord. The EFL has not yet received confirmation from Middlesbrough or Derby to confirm matters are finalised, but the indication is that the claim has been resolved. The EFL understand the Wycombe claim is still ongoing.

* Wycombe’s letter before action has not been shared with the EFL, so they cannot judge its merits.

* As well as confirming the position on those claims, the administrators also need to present a plan which covers the outstanding issues including debt to MSD, ongoing use of Pride Park Stadium, repayment to HMRC and all Football & unsecured creditors in line with the EFL insolvency Policy.

* The EFL are cautious about the announcement that a preferred bidder would result in the wholesale release of conditions on the club until they see the details of the proposal to cover the above matters. Previous club administrators have presented bidders who did not fulfil EFL criteria to come out of insolvency under their rules.

* They have had initial discussions with the prospective bidders but are yet to receive full details. They are not aware of any issues at present but need to work through the process with the Administrators. This includes receiving full details of all proposed Directors & beneficial shareholders – who all need to pass the Owners’ & Directors’ Test. They also need to see and assess the source and sufficiency of funding necessary to acquire and operate the Club which includes funds to complete the current season and for the next 2 years alongside understanding how they are going to meet the terms of the League’s Insolvency Policy.

Can you confirm the status of the outstanding accounts which were due to be filed on 31st January? The administrators told us you had agreed to an extension – can you confirm the new date? Could any further charges be brought based on the submission of those accounts?

* They are working with the Administrators and are not concerned over the submission of the accounts.

* They have indicative figures which were the basis for the agreed penalties which were applied to DCFC. The administrators have assured them the figures in the restated accounts are consistent and these are now being reviewed. If this is the case, there will be no further penalties.

Should a preferred bidder be announced who agrees to fund the club to the end of the season, what would the status of the embargo be?

* The EFL said the Administrators have advised them they had funding until the beginning of March.

* The EFL would need to see the details. They would then review the embargo situation accordingly. For the remainder of this season and for the next 2 seasons, the club will need to work within an agreed Business Plan – which includes the EFL approving all player registrations during that period. If the preferred bidder proposal is 35p in £1 to creditors over a 3 year period (rather than 25p in the £1 to unsecured creditors now), the Business Plan and EFL monitoring will cover the next 3 seasons.

Does the EFL feel it is proportionate that the current embargo prevents DCFC from offering professional terms to academy ‘products’? Even ignoring the business plan we have a fanbase likely to generate £10m p.a.+ in ticket sales each season and as such a ‘first professional contract’ wage would sit comfortably within any playing budget.

* The Club has not yet proven funding to the end of the current season, and consequently the EFL cannot allow any contracts to be negotiated and signed which the club cannot prove it can meet.

* The League will review the situation as and when circumstances change.

Will the EFL allow Derby County to assemble a first-team squad and U23 squad for the 2022-23 season? There are currently 8 players contracted beyond this season, plus a club option on Buchanan, and the U18 first-year scholars. Once funding has been proven for the remainder of the season (once a preferred bidder is presented), will the EFL allow new contracts to be signed? Wayne Rooney estimates we need to sign 40 players ready for next season.

* This will be reviewed based on the proposal. Current players contracts can be renewed any time up to the 3rd Saturday in May, though a player could invoke the 6-month rule if they are moving to a foreign team.

* The consequences of a Club going into administration is twofold.  First, the 12-point deduction is applied.  Second, the terms of the Insolvency Policy then apply – which includes adherence to an agreed business plan that places restrictions on future player signings.  This is to ensure that the Club is operating in accordance with an agreed business plan on exit.

* This is to avoid clubs gaining a competitive advantage by going to into administration, wiping out debts and harming the integrity of the competition.

* They will work with the club on the business plan but cannot commit to carte blanche on free agent signings and contract renewals.

* The Club remains under an embargo. The circumstances will be reviewed at the appropriate time and the embargo is dependent on a number of factors including meeting the terms of the Insolvency Policy.

Your previous statement appears to confirm that, going forward, when any clubs break EFL rules (e.g. Profit & Sustainability) all other clubs in their division (or potentially in other divisions if they have competed for a player etc.) can claim against the club – and the EFL will back them? This seems a very dangerous precedent given the financial situation of many clubs at present.

* The EFL stands by the ruling that agreement must be made with all creditors and that football debts must be met. Clubs need to decide whether they should allow claims to be made against each other and the League has engaged in discussions with all Clubs on potential rule changes.

The EFL ruling announced today regarding straight-line amortisation appears to indicate that Derby did not previously break this rule (as it was not stated).

* The League refer back to the judgment from July 2021 and Agreed Decision from November 2021– which was that DCFC did not adhere to FRS102 accounting policy and subsequently the Club agreed to P&S breaches. Today’s rule announcement is in order to clarify this going forward to avoid confusion.

According to EFL Rules on Governance:-

3.5 – No Club, either by itself, its servants or agents, shall by any means whatsoever unfairly criticise, disparage, belittle or discredit any other Club or The League in either case of its directors, officers, employees or agents.

4.4 – Each Club shall, at all times and in all matters within the scope of these Rules, behave with the utmost good faith both towards The League and the other Clubs (provided always that only The League shall have the right to bring any action whatsoever for any alleged breach of this requirement). Without prejudice to the generality of the foregoing, Clubs shall not manage their affairs or submit information which is intended to seek or to take any unfair advantage in relation to the assessment of fulfilment (or non-fulfilment) of the requirements of the Rules.

Does the League believe these Rules have been adhered to in all claims and subsequent communications against Derby County?

* The EFL has received no complaints from DCFC, but just because there is no complaint it does not mean the EFL would not look at the matter.

* The EFL would need to consider whether, by DCFC agreeing and accepting there has been a breach and non-compliance of the rules, the public statements to that effect break those rules.  That would seem to be the relevant issue.

How much of our TV money is currently being held by the EFL? Is this money taken into account in calculations of our ‘proof of funding’ until the end of the season?

* The EFL couldn’t go into detail on figures but the money is held by the EFL primarily against debts DCFC has with the EFL. The EFL has made a proposal to release some surplus funds to the club which is being considered by Quantuma. However, this is a relatively small amount and not sufficient to resolve monthly funding requirements for the club to complete the season.

What are the EFL’s biggest concerns on Derby exiting administration?

* The amount of money required is very significant – over the last 10 years the maximum deal done for any EFL Club is in the region of £30-35 million.

* This figure would not cover the outstanding debt to MSD & HMRC, never mind Football Debts, unsecured creditors and potential stadium costs (including unpaid rent to the stadium company).

* If they cannot exit according to the Insolvency policy there is the potential for a further 15 point penalty to be applied.

Would Mel Morris pass the Owners’ & Directors’ Test?

* Yes – he has only been involved in 1 football club insolvency. The ruling is 2 failures to fail the test.