Everton reality now clear after Man City case and £450m concern over Premier League rule changes
Everton shouldn’t be unduly concerned about potential changes to Premier League rules around shareholder loans. On Monday, the issue came to the fore following a tribunal decision in relation to Manchester City’s challenge of Premier League legislation.
The current champions had gone toe-to-toe with the league over its Associated Party Transaction (APT) rules after they were blocked from securing major deals with Etihad and Abu Dhabi First Bank as a result of ‘fair market value’ rules that exist as part of the regulations.
Of the 25 legal challenges City made, 23 were rejected, although of the matters where the tribunal sided with the Premier League, it was the issue of interest-free shareholder loans being currently excluded from its Profit and Sustainability ules (PSR) calculations that generated much interest.
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With many Premier League clubs relying on the favourable terms of shareholder loans, with some carrying no interest or having a fixed maturity date, and with several clubs, including Everton, having hundreds of millions of such loans on the balance sheet, there was some initial concern as to what it might mean for top-flight outfits.
The Blues' most recent set of accounts showed that the balance of interest-free shareholder loans from owner Farhad Moshiri stood at almost £451m. With Moshiri in the process of selling the club to The Friedkin Group, much of, if not all, of those shareholder loans will be written off completely.
But while the issue around what happens if clubs have to pay interest at the market rate on those loans rumbled on for a couple of days, the reality is that it likely won’t be as impactful as first feared for clubs, with it highly unlikely that retrospective action could, or would, be taken given the potential it could have to spark more costly legal battles across the league.
According to figures presented by football finance expert and author of the Price of Football, Kieran Maguire, had an 8% interest rate been applied to loans to the club then the losses between 2021 and 2023 would have jumped from £254m to £362m.
But, according to one football finance expert, retrospective action against clubs is highly unlikely, although we could see a change in the way the league’s rules look in the future.
“I think it's unlikely we see any retrospective punishment that is linked to PSR,” explained Dr Dan Plumley, principal lecturer in Sport Finance at Sheffield Hallam University, when speaking to the ECHO via Instant Casino.
“It will be a case of not trying to charge clubs against any of those loans. I think what probably happens next is dependent on how quickly the league can get those changes through, and of course, that's up in the air at the minute.
“I think what we'll probably see is a change in those rules, and then what that will mean for the clubs. Some of those clubs with shareholder loans might then choose to refinance in certain ways. They can convert those shareholder loans to equity at no cost. We might see clubs go down that road and again, that would mean ultimately that there are no real consequences for the clubs themselves or certainly for PSR.
“But it'll be a reshuffling of how that is financed internally, which will impact the owners and the kind of equity play of the organisation. But it's unlikely you would see clubs charge retrospectively for this. I think it's going to be a tightening up of those rules and change moving forward.
“It might have implications for what those rules themselves become in the future and maybe under a different version of FFP, certainly linked to this squad cost ratio rule that UEFA have got now. But I think that's the way it will go. I don't think it will be too big of a shift for the clubs to adapt to, and I don’t think it is probably as significant as it's been made out to be.”
Everton, whose relationship with the Premier League has been strained at best in recent times due to the club being hit with two points deductions in one season last year for two separate PSR breaches, were one of three clubs to give evidence in support of Man City at the tribunal over APT rules.
The other two were Chelsea and Newcastle United, while Aston Villa and Nottingham Forest were understood to be more sympathetic to the views of City than many of the other Premier League sides outside of those who gave evidence.
But whether that position changes for Everton in terms of supporting City over pushing for greater change around APT and other associated regulations remains to be seen when the club comes under new ownership, with The Friedkin Group potentially completing their takeover before the end of the year.
Dr Plumley said: “It's often something that's overlooked. We know how the league is structured, we know it's a majority member vote, 14 is the majority, but we don't often consider the changes in ownership that happen within that dynamic and how that might impact things.
“You could find in the future that, and we may not see a comparable case, clubs will look to say differently depending on if there is a change in ownership.
“We've seen clubs behave differently depending on the ownership structure at the time, and I think that's part and parcel of that.
“We have to accept that owners will have different motives, different desires, and objectives, and that will determine the way they vote. It is definitely a factor when a change in ownership happens.”