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Appendix 5 - Financial Fair Play Regulations

Appendix 5 - Financial Fair Play Regulations

PART 1 – CHAMPIONSHIP FAIR PLAY RULES

Notes: Capitalised Terms have the meanings ascribed to them in Regulation 1 or 16 of the Regulations of The League unless otherwise indicated. The following Rules are supplemental to the Regulations.

This Part consists of the Championship Fair Play Rules which continue to apply for the purposes of reporting in respect of Season 2015/16, and the consequences arising from those reports. Part 2 contains the Profitability and Sustainability Rules which are applicable for Season 2016/17 onwards.

1 Fair Play Requirement

1.1 All Championship Clubs are required to meet the Fair Play Requirement (as defined in Rule 1.2) for each Reporting Period (as defined in Rule 1.4) following the commencement of these Rules. The first Reporting Period for the purposes of these Rules will cover the 2011/12 Season but the consequences of failing to fulfil the Fair Play Requirement will not be effective until 1st December 2014 (see Rule 6 below).

1.2 The Fair Play Requirement is a measure whereby a Championship Club’s Fair Play Result must be:

1.2.1 an amount equal to £nil or greater; or 1.2.2 an amount less than the aggregate of the Permitted Allowances (defined in Rule 5) in relation to the relevant Reporting Period.

1.3 The Fair Play Result is an amount equal to a Championship Club’s profit / loss before tax, after adjustment in accordance with the provisions of Rule 4.2.

1.4 A Reporting Period is the period over which a Championship Club is assessed for the purpose of the Fair Play Requirement. For each Season the Reporting Period is (subject to Rule 2.2 or Rule 2.3) the immediately preceding 12 month period recorded in the Championship Club’s Annual Accounts. For example, for those Championship Clubs with a financial year ending in the period May, June or July the Reporting Period for the 2014/15 Season is the 12 month period ending May, June or July 2014.

2 Variations From ‘Standard’ Reporting Periods

2.1 Championship Clubs may not adjust Reporting Periods for subsequent Seasons without the prior written consent of The League, such consent not to be unreasonably withheld.

2.2 If:

2.2.1 the Annual Accounts for any Championship Club are for a period other than the 12 months described by Rule 1.4, then that Championship Club must prepare 12 Month Accounts (as defined in Rule 2.3); or

2.2.2 any Championship Club has a financial year ending other than during the period May, June or July, then that Championship Club must prepare Additional Accounts (as defined in Rule 2.3).

2.3 The 12 Month Accounts and the Additional Accounts (as applicable) must be an additional set of full accounts (in the same manner and with the same degree of verified detail as if the Championship Club was obliged to lodge those additional accounts at Companies House) reviewed by the Championship Club’s auditor for a 12 month period ending during May, June or July so as to provide The League with a set of accounts aligned to the Reporting Period as defined in Rule 1.4.

3 Submission of Fair Play Information

3.1 By the 1st December in each Season a Championship Club must submit its:

3.1.1 Annual Accounts;

3.1.2 12 Month Accounts; or

3.1.3 Additional Accounts,

for the immediately preceding Reporting Period together with a Fair Play Calculation (in the form prescribed by The League from time-to-time, and which as at the date of the implementation of these Rules is as set out in Part 1 of Appendix G) for the same Reporting Period (together the Fair Play Information).

3.2 References in these Rules to “Accounts” shall mean the Annual Accounts, 12 Month Accounts or Additional Accounts as applicable to that Championship Club.

3.3 By way of example, by 1st December 2012 each Championship Club must submit it’s Fair Play Information for the financial year ending May, June or July 2012 (exactly which date will be determined by the year end date of the Accounts).

3.4 For the avoidance of doubt the Fair Play Information must be supplied notwithstanding the fact that for the Season covered by the Reporting Period the Championship Club was either a Premier League Club relegated into the Championship (Former Premier League Club) or a League One Club which was then promoted into the Championship (Promoted League One Club).

3.5 The Fair Play Information must: 3.5.1 relate to the Championship Club or if applicable (as detailed in Regulation 16.4) the Group of which the Championship Club is a member;

3.5.2 be approved by management, as evidenced by way of a brief statement (Board Statement) confirming the completeness and accuracy of the information (in the format required by The League from time to time and which as at the date of these Rules is as set out in Part 2 of Appendix G), and signature on behalf of the board of directors of the Championship Club; and

3.5.3 be accompanied by a statement confirming the completeness and accuracy of the information (in the format required by The League from time to time and which as at the date of these Rules is as set out in Appendix H) by the auditor of the Accounts.

3.6 The League may require a Championship Club to provide such further information as it deems necessary (acting reasonably) for the purposes of enabling The League to assess whether a Championship Club has fulfilled (or not) the Fair Play Requirement.

3.7 Any such request shall be made in writing (including by email to the Club Secretary) and shall be responded to in full within 10 Normal Working Days of any such request being made.

3.8 Each Championship 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 Championship 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, Championship Clubs shall not manage their affairs or submit Fair Play Information which is intended to seek to or does take any unfair advantage in relation to the assessment of fulfilment (or non-fulfilment) of the Fair Play Requirement.

4 Fair Play Result

4.1 A Championship Club’s Fair Play Result will be calculated in accordance with these Rules by reference to its Fair Play Information together with any additional information lodged in accordance with Regulation 16.5 and / or Rule 3.6.

4.2 The Fair Play Result is calculated as profit / loss before tax (as identified by the Accounts), adjusted to take into account:

4.2.1 profit / loss on disposal of tangible fixed assets;

4.2.2 depreciation / impairment of tangible fixed assets (net of any capital grants);

4.2.3 amortisation / impairment of intangible fixed assets (other than player registrations);

4.2.4 the element of any transaction(s) with Related Party(ies) (as defined in Appendix A), above or below fair value;

4.2.5 net expenditure on Youth Development Activities (as defined in Appendix B);

4.2.6 financial support for the Championship Club’s Charitable Community Scheme (as defined in Appendix C);

4.2.7 Permitted Exceptional Items (as defined in Appendix D); and

4.2.8 in the case of Promoted League One Clubs or Promoted Championship Clubs (as defined in Rule 8.1) only, Promotion Related Payments (as defined in Appendix E).

4.3 Each of the items listed in paragraphs 4.2.1 to 4.2.3 are as set out in the Accounts, and each of the items listed in paragraphs 4.2.4 to 4.2.8 shall be calculated in accordance with the Appendices A to E to these Rules.

4.4 If the Fair Play Result is £nil or above in any particular Reporting Period, the Championship Club has met the Fair Play Requirement for that Reporting Period.

4.5 Where a Championship Club’s Fair Play Result shows a loss (Fair Play Deficit) then the Fair Play Calculation must also set out the Permitted Allowances (as defined in Rule 5), if any, utilised by the Championship Club during the Reporting Period to meet (if it can) the Fair Play Requirement.

4.6 If the amount of the Fair Play Deficit is equal to or less than the maximum amount of Permitted Allowances available and utilised in respect of the relevant Reporting Period then the Club has met the Fair Play Requirement.

4.7 If the Fair Play Deficit exceeds the maximum amount of Permitted Allowances available and utilised in respect of the relevant Reporting Period then the Club has failed to fulfil the Fair Play Requirement and the provisions of Rule 6 shall apply.

5 Permitted Allowances

5.1 Permitted Allowances means the aggregate of: - 5.1.1 Acceptable Deviation (as defined in Rule 5.2); and

5.1.2 Contributions from Equity Participants and / or Related Party(ies) (as defined in Appendix F).

5.2 The maximum amount of Acceptable Deviation for each Season is as follows:

Reporting Period Acceptable Deviation

2011/12 £4 million

2012/13 £4 million

2013/14 £3 million

2014/15 £3 million

2015/16 £5 million

5.3 The maximum amount of Contributions from Equity Participants and / or Related Party(ies) is as follows:

Reporting Period Equity Contributions

2011/12 £8 million

2012/13 £6 million

2013/14 £5 million

2014/15 £3 million

2015/16 £8 million

5.4 Any amounts claimed to be included within Contributions from Equity Participants and / or Related Party(ies) must have been invested during the relevant Reporting Period or by 1st December immediately following the end of that relevant Reporting Period.

5.5 Further detail regarding Contributions from Equity Participants and / or Related Party(ies) is set out in Appendix F.

6 Consequences of non-fulfilment of the Fair Play Requirement of these Rules (effective 1st December 2014)

6.1 A Championship Club which fails to fulfil the Fair Play Requirement in accordance with these Rules (or is in default of any obligation to provide information in accordance with these Rules) shall be subject to a registration embargo (the “Embargo”) such that The League shall refuse any application by that Championship Club to register any Player with that Championship Club save where the Championship Club:

6.1.1 wishes to offer terms of re-engagement to any Contract Player, Academy Player or Scholar (but always excluding any extension of a Temporary Loan Transfer, as described to in Regulation 52.1); 6.1.2 notwithstanding the exclusion in Rule 6.1.1 regarding Temporary Loan Transfers, obtains permission to register a Goalkeeper in accordance with Regulation 55;

6.1.3 has less than 24 Established Players, but these will only be allowed where the annual Employee Cost of the Player coming in is no more than £600,000 per annum (or pro-rata for shorter contract lengths);

6.1.4 has 24 Established Players, but these will only be allowed where the annual Employee Cost of the Player coming in is no more than:

(a) 75% of the annual equivalent Employee Cost of the Player going out (calculated as an average over the term of the remaining period of both Players’ contracts); or

(b) £600,000 per annum (or pro-rata for shorter contract lengths),

whichever is the lower;

6.1.5 wishes to apply for a non-first team registration for a Player who is as at the proposed date of registration, under the age of 21. For the purposes of these Rules, a non-first team registration is the registration of a Player in accordance with the requirements of the Regulations but whose registration shall, during the period in which the Club is subject to the Embargo, be restricted to the extent that the Player shall not be eligible to:

(a) participate in any first team matches on behalf of that Club; and

(b) may not be the subject of a temporary transfer to any other Club (or club).

The annual Employee Cost of the Player registered on any non-first team registration shall be no more than £60,000 per annum (or pro-rata for shorter contract lengths).

6.2 A Championship Club subject to an Embargo shall not be permitted to:

6.2.1 pay or commit to pay any Transfer Fee, Compensation Fee, Loan Fee or any other form of payment including without limitation sell on and/or contingent payments, in respect of the registration of Players permitted by Rule 6.1; or

6.2.2 make or commit to any payments to Agents in respect of the registration of Players permitted by Rule 6.1, other than by way of payments: (a) in respect of any Player registered in accordance with Rules 6.1.1 and 6.1.2; (b) in respect of any Player registered in accordance with Rules 6.1.3 and 6.1.4 where the payment is:

(i) a benefit in kind and which is required to be disclosed on the Player’s P11D (or equivalent); or

(ii) a deduction from net wages, and payments made in accordance with this Rule 6.2.2(b) shall be referred to as Permitted Agent Payments. 6.3 For the purposes of Rules 6.1.3 and 6.1.5 only, Employee Cost means the payment to or benefits paid in cash or in kind on behalf of a Player including, by way of example and without limitation:

6.3.1 gross basic salary;

6.3.2 signing on fees;

6.3.3 loyalty bonuses;

6.3.4 pension payments;

6.3.5 Permitted Agent Payments;

6.3.6 Image Contract Payment; and/or

6.3.7 (where applicable), employer’s National Insurance Contributions;

for the respective Players.

6.4 An Established Player is:

6.4.1 any Player registered with the Championship Club at the time of the imposition of the Embargo, who:

(a) was 21 years of age or older as at the 30th June immediately prior to the commencement of the Season in which the Club is subject to the Embargo; and

(b) has been named in the starting eleven on the Team Sheet (and started the game) at least five times in:

(i) League Matches;

(ii) matches in the EFL Cup, EFL Trophy; and/or

(iii) matches in the Football Association Challenge Cup,

for that Championship Club (at any time); or

any Player registered with the Club whilst subject to the Embargo (excluding Academy Players, Players registered pursuant to Rule 6.1.5, Scholars and any Emergency Goalkeeper Loan) pursuant to this Rule 6.

6.5 The Embargo will be effective:

in the case of a Championship Club which is in default of any obligation to provide information in accordance with these Rules, from the date of default until such time as the default is remedied to the reasonable satisfaction of The League; and

in the case of a Championship Club which fails to fulfil the Fair Play Requirement, from 1st January in the relevant Season and will apply until such time as the Club meets the Fair Play Requirement in any subsequent Reporting Period (in accordance with these Rules) or The League grants any application lodged in accordance with Rule 6.6.

Guidance

By way of example only, a Championship Club which fails to fulfil the Fair Play Requirement for the Reporting Period 2014/15, or fails to provide Fair Play Information by 1st December 2015 as required by these Rules, shall with effect from 1st January 2016 be subject to an Embargo until such time as that Championship Club lodges Fair Play Information that, when interpreted in accordance with these Rules, confirms that the Championship Club has met the Fair Play Requirement.

6.6 Any Championship Club which is subject to an Embargo under these Rules may, at the same time as lodging its interim accounts and Future Financial Information (each in accordance with the requirements of Regulation 16) (Interim Information) submit an application to have the Embargo lifted where that Championship Club can demonstrate to the Fair Play Panel that, having regard to the detail set out in the Interim Information the Club will, in respect of the Reporting Period to which the Interim Information relates, fulfil the Fair Play Requirement for that Reporting Period. Where any application is approved the Embargo will only be lifted with effect from the opening of the Transfer Window (as determined in accordance with the Regulations) next following the filing of the Interim Information, or the date of the determination of the application (if later).

Guidance

By way of example only, a Championship Club which is subject to an Embargo from 1st January 2016 may apply for that Embargo to be lifted when it lodges Interim Information in March 2016 provided that the Interim Information demonstrates that the Club will by 1st December 2016 lodge Fair Play Information which demonstrates that the Club will fulfil the Fair Play Requirement for the 2015/16 Reporting Period. The Embargo will be lifted on 2nd May 2016 (last day of the Season), or the date of the determination of the application (if later).

6.7 Any Championship Club which has its Embargo removed but which subsequently fails to fulfil the Fair Play Requirement (or is in default of any obligation to provide information in accordance with these Rules) in respect of the period during which the Embargo was lifted shall be treated as being in breach of these Rules and accordingly the Board shall refer the breach to a Disciplinary Commission.

7 Clubs Relegated Out of the Championship

7.1 If a Championship Club is relegated to League One (a Relegated Club) the Relegated Club shall, notwithstanding relegation, remain bound by these Rules following relegation as if it were still a Championship Club until such time as it has complied with all of its obligations in respect of the Reporting Period covering its last Season as a Championship Club. Until such time as the Relegated Club has so complied, each of these Rules shall be deemed to apply to that Relegated Club, other than Rule 6.

7.2 By way of example only:

7.2.1 a Championship Club which becomes a Relegated Club in May 2014 must still submit its Fair Play Information in accordance with Rule 3 for the Reporting Period ending May, June or July 2014 by 1st December 2014 notwithstanding the fact that it is no longer a Championship Club in Season 2014/15; and

7.2.2 if that Relegated Club fails to fulfil the Fair Play Requirement for the Reporting Period 2013/14, or fails to provide Fair Play Information by 1st December 2014 as required by these Rules, it shall not be entitled to a share in the Distribution (if any) (as defined in Rule 10.4) but will not be subject to an Embargo whilst in League One.

8 Clubs Promoted Out of the Championship

8.1 If a Championship Club is promoted to the Premier League (a Promoted Championship Club) the Promoted Championship Club shall, notwithstanding promotion, remain bound by these Rules following promotion as if it were still a Championship Club, until such time as it has complied with all of its obligations in respect of the Reporting Period covering its last Season as a Championship Club. Until such time as the Promoted Championship Club has so complied, each of these Rules shall be deemed to apply to that Promoted Championship Club (other than Rule 6).

8.2 By way of example, a Championship Club promoted in May 2014 shall by 1st December 2014 submit its Fair Play Information in accordance with Rule 3 notwithstanding the fact that it is no longer a member of The League. 8.3 Failure to comply with Rule 8.1 will result in that Promoted Championship Club not being entitled to share in the Distribution (if any) (as defined in Rule 10.4). Further, the Annual Accounts next filed for that Promoted Championship Club shall be utilised by The League for determining whether the Promoted Championship Club has fulfilled the Fair Play Requirement or not (“Accounts Based Assessment”). The Accounts Based Assessment shall (absent manifest error) be final and binding for the purposes of calculating the Fine (if any) payable in accordance with Rule 10.

9 Clubs Relegated Into the Championship

9.1 Former Premier League Club means a Championship Club which was relegated into the Championship at the end of the immediately preceding Season.

9.2 A Former Premier League Club that, during its final Season as a Premier League Club, fully complied with the obligations imposed by Section E of the Rules of the Premier League (and any modification thereof) shall during its first Season as a Championship Club not be subject to the provisions of: 9.2.1 Rule 6 (save where it fails to comply with the obligation imposed at Rule 3.4, in which case this exemption shall not apply); and 9.2.2 Rule 10.

9.3 Should that Championship Club become a Promoted Championship Club at the end of its first Season in the Championship then the Fair Play Information relating to the Reporting Period covering that first Season as a Championship Club will be assessed in accordance with Rule 8.1 and Rule 10.

9.4 Should that Championship Club not become a Promoted Championship Club at the end of its first Season in the Championship then the Fair Play Information relating to the Reporting Period covering that first Season as a Championship Club will be assessed in accordance with all provisions of these Rules, with no exceptions.

9.5 By way of example:

9.5.1 a Former Premier League Club relegated at the end of Season 2013/14 which had fully complied with the obligations imposed under Premier League Rules in the 2013/14 Season will, on 1st December 2014, be required to submit Fair Play Information relating to the Reporting Period ending in May, June or July 2014. That Club will not be subject to an Embargo or fine even if that Fair Play Information demonstrates that the Fair Play Requirement has not been fulfilled in respect of that Reporting Period.

9.5.2 Further if that Club:

(a) secures promotion in May 2015, and if the Fair Play Information lodged in December 2015 demonstrates that the Fair Play Requirement was not fulfilled in respect of the 2014/15 Reporting Period, the Club will be fined in accordance with Rule 10; or

(b) fails to secure promotion in May 2015, and the Fair Play Information relating to the Reporting Period ending in May, June or July 2015 demonstrates that the Fair Play Requirement was not fulfilled in respect of that Reporting Period, that Club will be subject to an Embargo with effect from 1st January 2016.

10 Financial Penalties

10.1 If non-fulfilment of the Fair Play Requirement is reported by a Promoted Championship Club for the Reporting Period covering the Season in which promotion was achieved (commencing with the 2013/14 Reporting Period (a Defaulting Club) then that Defaulting Club shall be subject to an automatic financial penalty (“Fine”) calculated on the basis of the amount by which the Championship Club failed to fulfil the Fair Play Requirement (“Excess”):

10.1.1 1% of the Excess between £1 and £100,000;

10.1.2 20% of the Excess between £100,001 and £500,000;

10.1.3 40% of the Excess between £500,001 and £1,000,000;

10.1.4 60% of the Excess between £1,000,001 and £5,000,000;

10.1.5 80% of the Excess between £5,000,001 and £10,000,000; and

10.1.6 100% of the Excess over £10,000,000.

10.2 By way of example, if a Defaulting Club had exceeded the Fair Play Requirement by £300,000 then that Defaulting Club would be fined:

10.2.1 1% of the first £100,000 (i.e. £1,000); and

10.2.2 20% of the next £200,000 (i.e. £40,000),

giving a total Fine of £41,000.

10.3 Any Fine shall be payable by a Defaulting Club within 14 days of receipt by the Defaulting Club of a notice from The League setting out the basis of calculation of the Fine or within 7 days of the determination of any appeal, if later. In the event that payment is not made by a Promoted Championship Club in accordance with this timescale, that Championship Club will be deemed to have explicitly authorised The League to notify the Premier League of such non-payment and to register the same as a debt due to The League for the purposes of Premier League Rule E.25 (or any replacement or modified rule) and will be deemed to have irrevocably waived the right to raise any objection to that action. 10.4 Fines collected in accordance with Rule 10.1 shall not be paid into the Pool Account but shall instead be paid into a Championship Financial Fair Play Account.

Guidance

The use of any Fine is dealt with in accordance with the Solidarity arrangements with the Premier League.

11 Fair Play Panel

11.1 The League shall create a Fair Play Panel to:

11.1.1 consider any challenge by a Championship Club, Promoted Championship Club or Relegated Club to a decision of The League in respect of the determination of its Fair Play Result and the consequences thereof, including (by way of example and without limitation):

(a) assessment of transactions with Related Party(ies) above or below fair value;

(b) the imposition of an Embargo in accordance with the provisions of Rule 6;

(c) refusal of permission to register a Player; and

11.1.2 consider any application for Permitted Exceptional Items to be considered in calculating the Fair Play Result.

11.2 The Fair Play Panel shall be made up of any two of the independent directors of the Board of The League (excluding the Chief Executive).

11.3 The Fair Play Panel shall, in assessing any application, at all times bear in mind:

11.3.1 the overall objective of seeking to prevent any attempt to circumvent the Financial Fair Play Objectives as defined in Regulation 18.1 of the Regulations of The League;

11.3.2 the substance of any proposed transaction or relationship, and not merely the legal form;

11.3.3 the need to maintain the integrity of competition within the Championship; and

11.3.4 the need for equal treatment of all Championship Clubs wherever possible. 11.4 When determining any application in accordance with Rule 11.1.1 and / or 11.1.2 the Fair Play Panel may, notwithstanding Rule 12 below, choose to publish reasons for any decision where it considers that to do so would assist Championship Clubs generally in complying with these Rules. However, wherever possible the Fair Play Panel shall seek to ensure any such reasons that are published are generic and do not disclose confidential information relating to any particular Club.

11.5 The League and the Chairman of the Board shall consider decisions of the Fair Play Panel in any review of the operation of these Rules in conjunction with the Championship Division.

11.6 The decisions of the Fair Play Panel shall be final and binding on all Championship Clubs.

12 Confidentiality

12.1 Information provided by a Championship Club to The League and/or the Fair Play Panel in accordance with these Rules shall only be made available to such members of the Executive as are required to know such information in order to fulfil their duties to The League (and who are bound by obligations of confidentiality as part of their contract of employment) and the members of the Fair Play Panel and shall not be disclosed to the Board generally, provided always that The League shall be entitled to publish reports of any decision of the Fair Play Panel in accordance with Rule 11.4 and details of any fines imposed in accordance with Rule 10.1.

APPENDIX A - TRANSACTIONS WITH RELATED PARTY(IES)

1 Introduction

1.1 Having set a limit on the amount of Contributions from Equity Participants and / or Related Party(ies) it is important that the principle is not undermined by other arrangements with Related Party(ies) which are other than for fair value.

2 Disclosure

2.1 If there have been transactions between Related Parties during a Reporting Period, the Championship Club must disclose the nature of the relationship with the Related Party(ies), as well as information about those transactions and outstanding balances, including commitments, necessary for an understanding of the potential effect of the relationship on the Accounts.

2.2 If under FRS 8, the Championship Club is not required to disclose such transactions with Related Party(ies) within the notes to the Accounts, the transactions should be detailed in a separate schedule attached to the Fair Play Calculation as described in Appendix G Part 1.

2.3 Items of a similar nature may be disclosed in aggregate except when separate disclosure is necessary for an understanding of the effects of Related Party Transactions on the Accounts.

3 Principle of Adjustment

3.1 Where any element of profit / loss before tax relates to any transaction(s) with Related Party(ies) above or below fair value then, for the purpose of the Fair Play Result, the Championship Club must determine the fair value of any Related Party Transaction(s). If the estimated fair value is different to the recorded value then an appropriate adjustment must be made in calculating the Fair Play Result, bearing in mind, however, that:

3.1.1 no upward adjustments can be made to income; and

3.1.2 no downward adjustments can be made to costs / expenses.

4 Examples of Related Party Transactions

4.1 Examples of Related Party Transactions that require a Championship Club to demonstrate the estimated fair value of the transaction include, but are not limited to:

4.1.1 sale of sponsorship rights by a Championship Club to a Related Party;

4.1.2 sale of corporate hospitality tickets and / or sale of the right to use of an executive box, by a Championship Club to a Related Party; and

4.1.3 any transaction with a Related Party whereby goods or services are provided to a Championship Club.

4.2 Examples of Related Party Transactions that must always be excluded from income are:

4.2.1 monies received by a Championship Club from a Related Party as a donation; and

4.2.2 settlement of liabilities on behalf of the Championship Club by a Related Party.

4.3 In effect, contributions from / savings in relation to a Related Party will be treated as Contributions from Equity Participants / Related Party(ies) as further described in Appendix F.

5 Related Party, Related Party Transactions and Fair Value of Related Party Transactions

5.1 A Related Party is a person or entity (or any Associate of that person or entity) that is Interested in the Championship Club (or any member of the Group that is included within the Accounts lodged in accordance with these Rules). 5.2 Interested and Associate shall have the meanings as ascribed to them in Regulations 101.2 to 101.4 inclusive and 102.1 of the Regulations. Regulation 101.5 (holdings of 10% or less held for investment purposes only to be disregarded) shall not apply for the purposes of these Rules.

5.3 In considering each possible relationship, attention is directed to the substance of the relationship and not merely the legal form.

5.4 A Related Party Transaction is a transfer of resources, services or obligations between Related Party(ies), regardless of whether a price has been charged.

5.5 A Related Party Transaction may, or may not, have taken place at fair value. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction. An arrangement or a transaction is deemed to be ‘not transacted on an arm’s length basis’ if it has been entered into on terms more favourable to either party to the arrangement than would have been obtained if there had been no Related Party relationship.

APPENDIX B – NET EXPENDITURE ON YOUTH DEVELOPMENT ACTIVITIES

1 Introduction

1.1 The Fair Play Requirement allows a Championship Club to exclude expenditure on Youth Development Activities from expenses in arriving at the Fair Play Result because the aim is to encourage investment and expenditure on facilities and activities for the long-term benefit of the Championship Club.

1.2 Appropriate adjustment may be made such that Expenditure on Youth Development (as defined at Paragraph 2 below), is excluded from the calculation of the Fair Play Result to the extent (if any) that Expenditure on Youth Development exceeds any grant income received by the Championship Club from any of the football governing bodies and is charged in the Accounts being assessed under Rule 3.1.

1.3 In practice it is envisaged this figure will be derived from the returns submitted by the Championship Club to the Football League Trust Limited (or any replacement body) as part of the on-going financial monitoring of the operation of the Championship Club’s Academy or Centre of Excellence, subject to any adjustments pursuant to Paragraph 5 below. However, The League reserves the right to require such further information as it determines to enable it to verify compliance with the Rules.

2 Expenditure on Youth Development

2.1 Expenditure on Youth Development means expenditure by a Championship Club that is Directly Attributable (i.e. would have been avoided if the Championship Club did not undertake Youth Development Activities) to activities to train, educate and develop the Championship Club’s Youth Players.

3 Youth Development Activities

3.1 Activities that are considered as Youth Development Activities include, but are not limited to:

3.1.1 organisation of a youth programme;

3.1.2 youth teams taking part in official competitions or programmes played at national, regional or local level and recognised by the member association;

3.1.3 football education programme for different age groups (e.g. playing skills, technical, tactical and physical);

3.1.4 education programme on the Laws of the Game;

3.1.5 medical support for youth players; and

3.1.6 non-football education arrangements.

4 Directly Attributable Expenses

4.1 Directly Attributable Expenses include, but are not limited to costs of:

4.1.1 materials and services used or consumed in undertaking the Youth Development Activities, such as accommodation costs, medical fees, educational fees, travel and subsistence, kit and clothing, facility hire;

4.1.2 employee benefits for employees wholly involved in Youth Development Activities (other than players), including the Academy Manager and Assistant Academy manager referred to in Regulation 16.15.1(f), if their employment by the Championship Club is wholly for the Youth Development Activities; and

4.1.3 employee salary and any other benefits for Youth Players and Scholars of the Championship Club.

5 Excluded Items

5.1 If a Championship Club cannot separately identify expenditure on Youth Development Activities from other expenditure, then such expenditure will not be treated as expenditure on Youth Development Activities. 5.2 Subject to Paragraph 5.3, the following are not part of expenditure on Youth Development Activities for the purpose of this requirement:

5.2.1 player scouting costs;

5.2.2 fees to obtain the registration of a Youth Player, such as any fees paid to an agent or to another Championship Club;

5.2.3 selling, administrative and other general overhead expenditure unless this expenditure can be directly attributed to the Youth Development Activities;

5.2.4 costs of employee benefits for employees only partly involved in Youth Development Activities (for example, a coach having part-time involvement in Youth Development Activities and otherwise working for the Championship Club); and

5.2.5 the cost of property, stadium and equipment and / or depreciation thereof (the depreciation of tangible fixed assets including, but not limited to, any such assets relating to Youth Development Activities is already capable of being added back under Rule 4.2.2).

5.3 In the event that EPPP allows any of the above excluded items to count towards the calculation of a Championship Club’s grant funding then, to that extent, such costs will be allowable under these Rules.

APPENDIX C – FINANCIAL SUPPORT FOR A CLUB’S CHARITABLE COMMUNITY SCHEME

1 Introduction

1.1 The Fair Play Requirement allows a Championship Club to exclude the net amount of any financial support it provides to its own Charitable Community Scheme (one only) because the aim is to encourage investment in the scheme for the long-term benefit of the Championship Club’s local community.

1.2 Appropriate adjustment may be made such that Net Financial Support for the Charitable Community Scheme is excluded from the calculation of the Fair Play Result.

2 Charitable Community Scheme

2.1 The Charitable Community Scheme means the one charitable body established by the Club and which is recognised by Football League (Community) Limited as that Championship Club’s community scheme.

3 Net Financial Support

3.1 Net Financial Support means any amounts paid by the Championship Club to the Charitable Community Scheme net of any amounts paid by the Charitable Community Scheme to the Championship Club.

3.2 Non cash transactions are to be disregarded for the purposes of this assessment.

APPENDIX D – PERMITTED EXCEPTIONAL ITEMS

1 Introduction

1.1 This Appendix sets out further details as to what may (or may not) be regarded as a Permitted Exceptional Item within the Fair Play Calculation.

2 Permitted Exceptional Items

2.1 Championship Clubs can apply to the Fair Play Panel at any time for permission for any item to be included as a Permitted Exceptional Item adjustment (in accordance with Rule 4.2.7) in calculating their Fair Play Result.

2.2 The Fair Play Panel shall, subject always to Rule 11.3, have absolute discretion when determining any application made under paragraph 2.

2.3 Applications under paragraph 2.1 must be made in writing together with copies of all documents in support of such application, to The League which will then (absent any prior decision of the Fair Play Panel on the same subject matter) refer the matter to the Fair Play Panel for determination. The decision of the Fair Play Panel shall be provided to the Club not later than 28 days after the date of receipt of the application. For the avoidance of doubt, the last date for filing any application for a given Reporting Period is 1st October immediately preceding the date for filing Fair Pay Information for that Reporting Period in accordance with the provisions of Rule 3.1.

2.4 The following items may be the subject of an application for treatment as a Permitted Exceptional Item under these Rules by a Championship Club:

2.4.1 The timing of transfer fund receipts and their subsequent use in financing replacement players (for example where a Championship Club recognises a transfer receipt in one Reporting Period but then utilises those funds for player purchases in a subsequent Reporting Period);

2.4.2 Post year end player sales proceeds which can be demonstrated to have been used to fund previous losses;

2.4.3 Costs (net of any insurance proceeds) associated with a career ending injury;

2.4.4 Exceptional litigation and associated professional fees;

2.4.5 Exceptional bad debts; and

2.4.6 Stadium revaluation losses or reversal of losses including depreciation adjustments to the extent that these are recognised in the profit and loss account in line with FRS 15 or equivalent International Accounting Standard.

2.5 By way of further illustration in the event a Championship Club suffers a material loss through, say, its major contracted sponsor being unable to fulfil its financial obligations under that contract or where a material bad debt arises through the liquidation of another football club both these items would be covered by 2.4.5 above.

2.6 The League may from time to time add to the list of Permitted Exceptional Items set out in paragraph 2.4 without requiring an amendment to these Rules.

2.7 The following items cannot be the subject of an application for treatment as a Permitted Exceptional Item under these Rules by a Championship Club:

2.7.1 profit / loss on the disposal of player registrations; 2.7.2 amortisation / impairment of player registrations (subject to 2.4.3 above); and

2.7.3 any costs associated with a change in team management including, by way of example and without limitation, termination payments to former managers, or compensation fees to former clubs.

APPENDIX E – PROMOTION RELATED PAYMENTS

1 Introduction

1.1 The Fair Play Requirement is intended to address expenditure incurred in the relevant Reporting Period and recognises that a Club securing promotion would ordinarily be obliged to account for Promotion Related Payments within that Reporting Period even though they only arise once promotion has been secured.

1.2 Appropriate adjustment may be made such that the total amount of any Promotion Related Payments is excluded from the calculation of the Fair Play Result.

2 Promotion Related Payments

2.1 Promotion Related Payments include:

2.1.1 any payments paid (or accruing due to be paid) to any employee(s) under the terms of a contract of employment entered into between the Promoted Championship Club or Promoted League One Club (as applicable) and the employee(s);

2.1.2 amortisation costs of any contingent amounts of any Compensation Fee, Transfer Fee or Loan Fee paid (or accruing due to be paid) to any other Club (or club) or any Agent’s Fee which have been capitalised as intangible assets by the Championship Club; and 2.1.3 amounts required to be paid pursuant to Regulation 10.

in each case in the Reporting Period relating to the Season in which promotion was achieved, to the extent that amounts deriving from such payments are reflected in the Reporting Period’s Accounts and only where such sums are as a direct consequence of the Promoted Championship Club or Promoted League One Club (as applicable) securing promotion.

2.2 Promotion Related Payments do not include:

2.2.1 “win”, “position” or other types of bonuses ordinarily payable during the course of a Season to any employee as distinguished from payments only payable in the event of promotion;

2.2.2 salary increases awarded to employees under any contract following promotion to apply in the first Season following such promotion (so-called divisional related pay); and

2.2.3 any reclassification of amounts paid (or already accrued due to be paid) as Promotion Related Payments.

APPENDIX F - CONTRIBUTIONS FROM EQUITY PARTICIPANTS / RELATED PARTY(IES)

1 Introduction

1.1 This Appendix sets out further details as to what will (or will not) be regarded as a Contribution from an Equity Participant and / or Related Party.

2 Contributions

2.1 Contributions from Equity Participants are to be classified in accordance with FRS 25 or equivalent International Accounting Standard. The classification of a financial instrument between liabilities and equity is based on the substance of the contractual arrangement. (FRS 25 Para 15).

2.2 Contributions from a Related Party include:

2.2.1 capital contributions being a contribution by a Related Party that is an unconditional gift made to the Championship Club by a Related Party which increases the Championship Club’s equity without any obligation for repayment or to do anything in consideration for receiving them. This is an increase in equity and typically, such amounts are recorded in a separate reserve, often known as the ‘capital reserve’. For example, a permanent and unconditional waiver of inter-company or Related Party debt must be treated as a capital contribution, as it results in an increase in equity; and / or

2.2.2 the difference between the actual income / expenditure in a Reporting Period and the fair value of the transaction(s) in a Reporting Period (as determined in accordance with Appendix A) actually received / saved during the Reporting Period.

2.3 The following types of transaction are not Contributions from Equity Participants and / or Related Party(ies):

2.3.1 positive movement in net assets / liabilities arising from a revaluation;

2.3.2 creation, or increase in the balance, of other reserves where there is no contribution from equity participants;

2.3.3 a transaction whereby the Championship Club has a liability in that the entity has a present obligation to act or perform in a certain way;

2.3.4 contributions from owners in respect of instruments classified as liabilities; and

2.3.5 the write off of any historical interest accrued on debts due to or from Equity Participants and / or Related Party(ies) or members of the Group of the Championship Club.

2.4 The onus is on the Championship Club to demonstrate the substance of the transaction, which must have been completed in all respects and without any condition attached. An intention or commitment from owners to make a contribution is not sufficient for such a contribution to be taken into consideration.

2.5 For the avoidance of doubt to the extent that Contributions from Equity Participants and / or Related Party(ies) made after the end of the Reporting Period but prior to 1st December immediately following the end of that Reporting Period are utilised in accordance with Rule 4.5 in respect of the earlier Reporting Period they cannot also be utilised again during the subsequent Reporting Period notwithstanding the fact that the relevant transaction was completed during that subsequent Reporting Period.

APPENDIX G: FAIR PLAY CALCULATION AND BOARD STATEMENT

Part 1 – Fair Play Calculation

Part 2 – Board Statement

In accordance with the requirements of the Championship Financial Fair Play Rules of The League, we, the Directors of XYZ Football Club Limited (the Club), hereby report in respect of the [Club’s] OR [the Group’s (of which the Club is a member)] accounting period of ♦ months ended on ♦ 20♦ (the Reporting Period) that [with the exception(s) noted below]:

(1) the [Club / Group] has operated internal financial control policies and procedures which are designed to meet the Championship Financial Fair Play rules of The League (the Rules);

(2) the Fair Play Calculation of the directors of the [Club / Group] (the Calculation) as set out above has been prepared in accordance with the Rules;

(3) the other Fair Play Information has been prepared in accordance with the Rules.

[The exception(s) referred to above is/are as follows:

• …..]

For and on behalf of the Board of XYZ Football Club Limited:

[Signature of Director and date of signing]

APPENDIX H: INDEPENDENT AUDITOR’S STATEMENT

The Directors

[XYZ Football Club Limited]

Dear Sirs

Report of [firm] to [Football Club Limited] ("the Company") on agreed procedures in relation to the Championship Financial Fair Play Rules of The League (“the Rules”)

In accordance with the terms of our engagement letter dated [date], we have completed those procedures which we have agreed with the Directors of the Company and set out below relating to the attached Fair Play Calculation of the directors of the Club (“the Calculation”) [including the summary of Related Party Transactions and the summary of Promotion Related Payments] for the accounting period of [ ] months ending [date] (“Schedule A”), which has been prepared by, and is the sole responsibility of, the Directors of the Company. Our engagement was undertaken in accordance with International Standard on Related Services 4400 Engagements to Perform Agreed-upon Procedures Regarding Financial Information.

Our report has been prepared for the Company solely in connection with the Championship Financial Fair Play Rules of The League. It has been released to the Company on the basis that our report shall not be copied, referred to or disclosed, in whole (save for the Company's own internal purposes and submission to The League) or in part, without our prior written consent.

Our report was designed to meet the agreed requirements of the Company determined by the Company's needs at the time. Our report should not therefore be regarded as suitable to be used or relied on by any party wishing to acquire rights against us other than the Company for any purpose or in any context. Any party other than the Company who obtains access to our report or a copy and chooses to rely on our report (or any part of it) will do so at its own risk. To the fullest extent permitted by law, [firm] will accept no responsibility or liability in respect of our report to any other party.

As the agreed procedures do not constitute either an audit or a review in accordance with International Standards on Auditing (UK and Ireland) or International Standards on Review Engagements (UK and Ireland), we do not express any assurance on the Calculation. Had we been engaged to perform and had performed additional procedures, an audit or a review in accordance with International Standards on Auditing (UK and Ireland) or International Standards on Review Engagements (UK and Ireland), other matters might have come to light that would have been reported to you.

This report relates only to the financial information specified and does not extend to any financial statements of the Company taken as a whole.

The agreed procedures that we have performed were as follows:

1) Obtain a copy of the Company’s Fair Play Calculation (“Schedule A”) and check it for arithmetical accuracy with reference to the Rules;

2) Check the extraction of the figures detailed in the Fair Play Calculation shown in Schedule A from the underlying financial records, being the nominal ledger and year-end financial statements;

3) Obtain from the Company a breakdown of all of the Company’s Related Party Transactions (as defined in Paragraph 5 of Appendix A of the Rules) during the Reporting Period. Where any transaction is both in excess of £100,000 and also would have qualified as an example of a Related Party transaction as per Paragraph 4 of Appendix 1 of the Rules, we have sought information and documentary evidence from the Company (as attached) of its own fair value assessment of each relevant transaction.

4) [Obtain the schedule detailing the Net Expenditure on Youth Development Activities and reconcile the list of expenditure included therein to the expenditure allowed under Appendix B of the Rules];

5) [Obtain the schedule detailing the Financial support for the Championship Club’s Charitable Community Scheme and reconcile the list of expenditure included therein to the expenditure allowed under Appendix C of the Rules];

6) [Obtain a copy of all Players’ contracts and transfer fee agreements in relation to which Promotion Related Payments have been detailed in the calculation and reconcile the figures per the calculation back to the Players’ contracts and transfer fee agreements];

7) [Obtain confirmation from the directors of the company that the amount of contributions from Equity participants and/or related parties utilised in the Fair Play Calculation was invested in the relevant Reporting Period and has been recognised as equity in line with the relevant accounting standards];

8) [For each funding contribution made to the company during both, the year ended [date] and the post year end period ended 1st December 2014, obtain a copy of the relevant documentation along with confirmation of whether the funding has been treated as debt or equity. Agree that the associated terms and conditions demonstrate that the classification of these funding contributions meet the criteria for being either a debt or equity instrument in line with the appropriate accounting standards].

There are no practicable procedures that would enable us to identify items not showing in the Calculation or the accounting records of the [Club] or [Group] or which have not otherwise been brought to our attention. We have, however, obtained written representations from the directors of the Club that the Calculation is complete and accurate.

As a result of our work we can report that that no errors were found in respect of these agreed procedures [save for our reported findings below:

a) With respect to item 1) we found…..

b) With respect to item 2) we found…..

c) With respect to item 3) we found….. etc].

Yours faithfully

[Firm]

Date

PART 2 – CHAMPIONSHIP PROFITABILITY AND SUSTAINABILITY RULES

Notes: Capitalised Terms have the meanings ascribed to them in Regulation 1 or 16 of the Regulations of The League unless otherwise indicated.

The following Rules are supplemental to the Regulations.

1 Definitions

1.1 Capitalised Terms have the meanings ascribed to them in the Articles of Association and the Regulations of The League unless otherwise indicated below:

1.1.1 Accounting Reference Period means the period in respect of which Annual Accounts are prepared.

1.1.2 Adjusted Earnings Before Tax means Earnings Before Tax adjusted to exclude costs (or estimated costs as the case may be) in respect of the following:

(a) depreciation and/or impairment of tangible fixed assets, amortisation or impairment of goodwill and other intangible assets (but excluding amortisation and/or impairment of the costs of players’ registrations);

(b) Women’s Football Expenditure;

(c) Youth Development Expenditure; and

(d) Community Development Expenditure.

Each of Youth Development Expenditure, Women’s Football Expenditure and Community Development Expenditure shall only be excluded from the calculation of Adjusted Earnings Before Tax if separately disclosed:

(i) by way of notes to the Annual Accounts; or

(ii) by way of supplementary information which reconciles to the Annual Accounts and which has been subject to independent audit.

1.1.3 Annual Accounts means:

(a) the accounts which each Club’s directors are required to prepare pursuant to section 394 of the 2006 Act; or

(b) if the Club considers it appropriate or the Executive so requests, the group accounts of the Group of which the Club is a member and which it is required to prepare pursuant to section 399 of the 2006 Act, or which it is required to deliver to the Registrar of Companies pursuant to section 400(2)(e) or section 401(2)(f) of the 2006 Act,

provided that in either case the accounts are prepared to an accounting reference date (as defined in section 391 of the 2006 Act) which falls between 31st May and 31st July inclusive. If the accounting reference date falls at any other time, separate accounts for the Club or the Group as appropriate must be prepared for a period of twelve months ending on a date between 31st May and 31st July inclusive, and in such a case “Annual Accounts” means those accounts.

Annual Accounts must be prepared and audited in accordance with all legal and regulatory requirements applicable to accounts prepared pursuant to Section 394 of the 2006 Act.

1.1.4 Cash Losses means aggregate Adjusted Earnings Before Tax after:

(a) write back of:

(i) amortisation and/or impairment of Players’ registrations; and

(ii) profit or loss on the transfer of Players’ registrations; and

(b) inclusion of net cash flow in respect of transfers of Players’ registrations.

1.1.5 Championship FFP Rules means the Championship Financial Fair Play Rules adopted by Championship Clubs in April 2012.

1.1.6 Community Development Expenditure means:

(a) net expenditure by a Club directly attributable to activities (whether in the United Kingdom or abroad) for the public benefit to promote participation in sport and advance social development; and

(b) donations made by the Club:

(i) to United Kingdom charities in a form recognised by such charities; and/or

(ii) for foreign charitable purposes in a form which (had the donations been made to registered United Kingdom charities) would have been recognised as charitable.

1.1.7 Earnings Before Tax means profit or loss before tax, as shown in the Annual Accounts.

1.1.8 Fair Market Value means the amount for which an asset could be sold, licensed or exchanged, a liability settled, or a service provided, between knowledgeable, willing parties in an arm’s length transaction.

1.1.9 Group for the purposes of these Rules, has the meaning set out in Section 474(1) of the 2006 Act save that it shall also include any other entity that carries on any material aspect of the football operations of the Club.

1.1.10 Related Party Transaction means a transaction:

(a) disclosed in a Club’s Annual Accounts as a related party transaction; or

(b) which would have been disclosed as such except for an exemption under the accounting standards under which the Annual Accounts were prepared, in which case it must be detailed by way of supplementary information which reconciles to the Annual Accounts and which has been subject to independent audit.

Guidance

If the accounting standards applied by the Club do not require the Club to disclose Related Party Transactions within the notes to the Annual Accounts, the transactions should be detailed in a separate schedule and submitted to the Executive.

1.1.11 Secure Funding means funds which have been or will be made available to the Club in an amount equal to or in excess of any Cash Losses which the Club has made in respect of the period from T-2 or is forecast to make up to the end of T+2. Secure Funding may not be a loan and shall consist of:

(a) contributions that an equity participant has made by way of payments for shares through the Club’s share capital account or share premium reserve account; or

(b) an irrevocable commitment by an equity participant to make future payments for shares through the Club’s share capital account or share premium reserve account. This irrevocable commitment shall be evidenced by a legally binding agreement between the Club and the equity participant and may if the Executive so requires be secured by one of the following:

(i) a personal guarantee from the ultimate beneficial owner of the Club, provided that the Executive is satisfied that

1) he is of sufficient standing; and

2) the terms of the guarantee are satisfactory;

(ii) a guarantee from the Club’s Parent Undertaking or another company in the Club’s Group, provided that the Executive is satisfied that

1) the guaranteeing company is of sufficient standing; and

2) the terms of the guarantee are satisfactory;

(iii) a letter of credit from a Financial Institution of sufficient standing and an undertaking from the Club’s directors to The League to call on the letter of credit in default of the payments from the equity participant being made;

(iv) payments into an escrow account, to be paid to the Club on terms satisfactory to the Executive; or

(v) such other form of security as the Executive considers satisfactory; or

(c) such other form of secure funding as the Executive considers satisfactory.

1.1.12 T means the Club’s Accounting Reference Period ending in the year in which assessment pursuant to Rules 2.2 to 2.9 takes place, and:

(a) T-1 means the Club’s Accounting Reference Period immediately preceding T;

(b) T-2 means the Club’s Accounting Reference Period immediately preceding T-1;

(c) T+1 means the Club’s Accounting Reference Period immediately following T; and

(d) T+2 means the Club’s Accounting Reference Period immediately following T+1.

1.1.13 Women’s Football Expenditure means expenditure by a Club directly attributable to activities to train, educate and develop players involved in women’s football teams (including, for the avoidance of doubt, such activities as they relate to female players under the age of 18);

1.1.14 Youth Development Expenditure means expenditure by a Club directly attributable to activities to train, educate and develop Academy Players net of any youth development grant income received by the Club from any of the football governing bodies.

2 Profitability and Sustainability

2.1 Rules 2.2 to 2.9 shall apply with effect from Season 2016/17.

2.2 Each Club shall by 1st March in each Season submit to the Executive:

2.2.1 copies of its Annual Accounts for T-1 (and T-2 if these have not previously been submitted to the Executive) together with copies of the directors’ report(s) and auditor’s report(s) on those accounts;

2.2.2 its estimated profit and loss account and balance sheet for T which shall:

(a) be prepared in all material respects in a format similar to the Club’s Annual Accounts; and

(b) be based on the latest information available to the Club and be, to the best of the Club’s knowledge and belief, an accurate estimate as at the time of preparation of future financial performance; and 2.2.3 if Rule 2.5 applies to the Club, the calculation of its aggregated Adjusted Earnings Before Tax for T, T-1 and T-2 in a form approved by the Executive from time to time and which as at the date of these Rules is set out in Appendix 1.

Guidance

The Executive will in due course consider the Annual Accounts for the Accounting Reference Period in respect of which information pursuant to Rule 2.2.2 is submitted and in particular examine whether any material variances indicate that the estimated financial information was not prepared in accordance with Rule 2.2.2(b).

2.3 The Executive shall determine whether consideration included in the Club’s Earnings Before Tax arising from a Related Party Transaction is recorded in the Club’s Annual Accounts at a Fair Market Value. If it is not, the Executive shall restate it to Fair Market Value. 2.4 The Executive shall not exercise its power set out in Rule 2.3 without first having given the Club reasonable opportunity to make submissions as to:

2.4.1 whether the said consideration should be restated; and/or

2.4.2 what constitutes its Fair Market Value.

2.5 If the aggregation of a Club’s Earnings Before Tax for T-1 and T-2 results in a loss, any consideration from Related Party Transactions having been adjusted (if appropriate) pursuant to Rule 2.3, then the Club must submit to the Secretary the calculation of its Adjusted Earnings Before Tax for each of T, T-1 and T-2.

2.6 If the aggregation of a Club’s Adjusted Earnings Before Tax for T, T-1 and T-2 results in a loss of up to the Lower Loss Threshold (calculated in accordance with Rule 3), then the Executive shall determine whether the Club will, until the end of T+1, be able to fulfil its obligations as set out in Regulations 16.19.8(a), (b) or (c).

2.7 Where the Executive determines, in its reasonable opinion and having considered any information provided to it by the Club, that the Club may not be able to fulfil its obligations as set out in Regulations 16.19.8(a), (b) or (c), the Executive shall have the powers set out in Regulation 16.20.

2.8 If the aggregation of a Club’s Adjusted Earnings Before Tax for T, T-1 and T-2 results in a loss that exceeds the Lower Loss Threshold, then the following shall apply:

2.8.1 the Club shall provide, by 31st March in the relevant Season, Future Financial Information to cover the period commencing from its last accounting reference date (as defined in section 391 of the 2006 Act) until the end of T+2 and a calculation of estimated aggregated Adjusted Earnings Before Tax until the end of T+2 based on that Future Financial Information;

2.8.2 the Club shall provide such evidence of Secure Funding as the Executive considers sufficient; and 2.8.3 if the Club is unable to provide evidence of Secure Funding as set out in Rule 2.8.2, the Executive shall have the powers set out in Regulation 16.20.

2.9 If the aggregation of a Club’s Adjusted Earnings Before Tax for T, T-1 and T-2 results in a loss that exceeds the Upper Loss Threshold (calculated in accordance with Rule 3) then: 2.9.1 the Executive may exercise its powers set out in Regulation 16.20;

2.9.2 the Club shall be treated as being in breach of these Rules and accordingly The League shall refer the breach to the Disciplinary Commission in accordance with section 8 of the Regulations.

3 Loss Thresholds

3.1 The Lower Loss Threshold and Upper Loss Threshold for each Club shall be calculated based on the aggregation of the Annual Lower Loss Thresholds and Annual Upper Loss Thresholds set out in the following table, by reference to the league of which the Club was a member in the Season covered by the applicable Accounting Reference Period:

Annual Lower Loss Threshold Annual Upper Loss Threshold

Premier League Subject to Rule 3.2, £5 million Subject to Rule 3.2, £35 million

The League Subject to Rule 3.3, £5 million Subject to Rule 3.3, £13 million

Guidance

By way of example a Club that was a member of The League in 2014/15, the Premier League in 2015/16 and The League in 2016/17, will have:

(a) a Lower Loss Threshold of £15m; and (b) an Upper Loss Threshold of £61m (using the figures set out in Rule 3.1).

3.2 The Loss Thresholds for any Accounting Reference Periods relating to Seasons when Clubs were members of the Premier League shall be calculated on the basis of the three year aggregated figures set out in Premier League Rules E.57 and E.59 respectively (as amended, extended or replaced from time to time in accordance with the Rules of the Premier League) divided into three equal annual instalments.

3.3 Where there is an adjustment to the Premier League’s Annual Lower Loss Threshold and/or Annual Upper Loss Threshold, as described in Rule 3.2, then The League’s Annual Lower Loss Threshold and/or Annual Upper Loss Threshold for the equivalent period shall be adjusted by a percentage equal to the percentage change applied by the Premier League.

Guidance

By way of example, if for Season 2017/18 the Premier League introduce an Annual Lower Threshold of £6m and an Annual Upper Threshold of £36m then the Thresholds for The League in that Season will be £6m and £13.37m. For ease, threshold figures will be rounded up to the nearest £10,000.

4 Duty of Disclosure

4.1 The Executive may require a Club to provide such further information as the Executive deems necessary (acting reasonably) for the purposes of enabling the Executive to assess whether a Club has met (as applicable) the Profitability and Sustainability Rules or not. By way of example, and without limitation, additional information may be requested where:

4.1.1 any submission is incomplete;

4.1.2 there are insufficient assumptions; or

4.1.3 additional evidence is required to support certain assumptions.

4.2 Any such request shall be made in writing (including by email to the Finance Director or equivalent) and shall be responded to in full within 5 Normal Working Days of any such request being made.

4.3 Without prejudice to the right of The League to refer any breach of rules to the Disciplinary Commission in accordance with section 8 of the Regulations, where any Club is in breach of any requirement of these Rules relating to the provision of information, the Executive may refuse any application by that Club to register any Player or any new contract of an existing Player of that Club.

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 to or take any unfair advantage in relation to the assessment of fulfilment (or non-fulfilment) of the requirements of the Rules.

5 Clubs Ceasing to be Members of the Championship

5.1 If a Club is promoted or relegated out of the Championship Division that Club shall, notwithstanding promotion or relegation, remain bound by these as if it were still a Championship Club, until such time as it has complied with all of its obligations relating to its last Season as a Championship Club.

6 Review Applications

6.1 Where in these Rules there is any reference to the Executive making a determination, including by way of example and without limitation:

6.1.1 assessment of Secured Funding; and 6.1.2 determinations by the Executive in accordance with Rule 2, the Club shall subject to the provisions of Rules 6.2 and 6.3, have a right to have such decision reviewed by the Disciplinary Commission.

6.2 The only grounds on which a Club may present an application to the Disciplinary Commission for a review of a decision by the Executive shall be that the decision:

6.2.1 was reached outside the jurisdiction of the Executive; or

6.2.2 could not have been reached by any reasonable Executive which had applied its mind properly to the issues to be decided; or

6.2.3 was reached as a result of fraud, malice or bad faith; or

6.2.4 was contrary to English Law; and

directly and foreseeably prejudices the interests of the Club.

6.3 Any application for a review must be presented within 14 days of the date of the decision to be reviewed (time of the essence).

6.4 Any Disciplinary Commission convened pursuant to or otherwise in relation to any matter covered by these Rules shall include at least one member who holds a nationally recognised qualification as an accountant or auditor (but who shall not sit as the chairman of the Disciplinary Commission, who shall be qualified as set out in Regulation 86.3.1) (the Finance Member).

6.5 The Finance Member shall be selected by the Independent Directors of the Board from a panel of Finance Members approved by a simple majority of the member clubs in the Championship division as at the date the panel is presented for approval. For the purposes of Regulation 86.3.2, the Finance Member shall be deemed to be the member appointed by The League.

7 Confidentiality

7.1 Information provided by a Club to the Executive in accordance with these Rules shall only be made available to such members of the Executive as are required to know such information in order to fulfil their duties to The League (and who are bound by obligations of confidentiality as part of their contract of employment).

8 Implementation and Transition

8.1 For the purposes of Rule 2, the first ‘T’ Season will be 2016/17, and as a consequence these Rules are effective (in so far as they relate to T-1 and T-2) for the 2014/15 and 2015/16 Seasons.

8.2 If:

8.2.1 a Club’s Adjusted Earnings Before Tax resulted in losses of £13 million (or greater) in Season 2014/15 and/or Season 2015/16: and

8.2.2 that Club was sanctioned in accordance with the Championship FFP Rules in respect of the applicable Season,

then, but not otherwise, the Adjusted Earnings Before Tax loss for that Club for that Season (for the purposes of these Rules) will be capped at £13m.

8.3 The Championship FFP Rules remain in force for Seasons 2014/15 and 2015/16.

Appendix 1 – Profitability and Sustainability Calculation

Part 1 – Profitability and Sustainability Calculation

Part 2 – Board Statement

In accordance with the requirements of the Championship Profitability and Sustainability Rules of The League, we, the Directors of XYZ Football Club Limited (the Club), hereby report in respect of the [Club’s] OR [the Group’s (of which the Club is a member)] accounting period of ♦ months ended on ♦ 20♦ that [with the exception(s) noted below]:

(4) the [Club / Group] has operated internal financial control policies and procedures which are designed to meet the Championship Profitability and Sustainability rules of The League (the Rules);

(5) the Profitability and Sustainability Calculation of the directors of the [Club / Group] (the Calculation) as set out above has been prepared in accordance with the Rules;

(6) the other information provided by the [Club/Group] has been prepared in accordance with the Rules.

[The exception(s) referred to above is/are as follows:

• …..]

For and on behalf of the Board of XYZ Football Club Limited:

[Signature of Director and date of signing]

PART 3 – LEAGUE ONE SALARY COST MANAGEMENT PROTOCOL (SCMP) GUIDANCE NOTES

1 SCMP Requirement

1.1 All League 1 Clubs (hereafter Clubs or Club) are required to meet the SCMP Requirement (as defined in Note 1.2) for each Reporting Period (as defined in Note 1.3).

1.2 The SCMP Requirement is a measure whereby a Club’s Player Related Expenditure (as defined in Appendix B) shall not exceed the sum of:

1.2.1 60% of the Club’s Relevant Turnover (as defined in Paragraph 1 of Appendix A) for the Reporting Period, plus

1.2.2 100% of the club’s Football Fortune Income (as defined in Paragraph 2 of Appendix A) for the Reporting Period.

Note: With effect from the commencement of Season 2018/19 the figure of 55% in Rule 1.2.1 will be amended down to 50% pursuant to a resolution of League Two Clubs passed on 6th April 2017.

1.3 The Reporting Period in respect of which a Club is assessed for the purpose of the SCMP Requirement is (subject to Note 2) the 12 month period recorded in the Club’s Annual Accounts.

Guidance

For those Clubs with a financial year ending in the period May, June or July in any year the Reporting Period for the 20xx/yy Season is the 12 month period ending May, June or July 20yy.

1.4 Measurement of a Club’s compliance with the SCMP Requirement is based on the submission by the Club of the Pre-Season SCMP Submission and Mid-Season SCMP Submission (each as defined in Note 3 below) (together the SCMP Submissions).

2 Variations From ‘Standard’ Reporting Periods

2.1 Clubs may not adjust Reporting Periods for subsequent Seasons without the prior written consent of The League, such consent not to be unreasonably withheld.

2.2 If any Club has a financial year ending other than during the period May, June or July, then that Club must prepare its SCMP Submissions for a 12 month period ending on 30th June so as to provide The League with an SCMP Submission aligned to the Reporting Period as defined in Note 1.3.

2.3 If any Club has a financial year end other than in June, then that Club may opt to prepare its SCMP Submission for a 12 month period ending June so as to provide The League with an SCMP Submission aligned to Player Contracts.

3 SCMP Submissions

3.1 By the third Friday in June each year, each Club must submit its Pre-Season SCMP Submission for the immediately following Reporting Period. The Pre-Season SCMP Submission will be in the form of an Excel workbook setting out the information required therein (and including the requirements set out in Note 5 below) and will be in such format as The League may prescribe from time to time. For the current Season this requires submission of the following Worksheets:

3.1.1 Assumptions

3.1.2 Key Indicators;

3.1.3 Relevant Turnover;

3.1.4 Turnover Reconciliation;

3.1.5 Player Related Expenditure; and

3.1.6 Player Salary Costs.

Guidance

By 17th June 2016 each Club must submit its Pre-Season SCMP Submission for the financial year ending May, June or July 2017 (exactly which date will be determined in accordance with Note 2).

3.2 For the avoidance of doubt, the Pre-Season SCMP Submission must be supplied notwithstanding the fact that during the preceding Season the Club was either a Championship Club relegated into League 1 (Former Championship Club) or a League 2 Club which was then promoted into League 1 (Promoted League 2 Club).

3.3 By the second Friday in December each year, each Club must submit its Mid-Season SCMP Submission for the current Reporting Period. The Mid-Season SCMP Submission will be in the form of an Excel workbook setting out the information required therein (and including the requirements set out in Note 6 below) and will be in such format as The League may prescribe from time to time. For the current Season this requires submission of the following Worksheets:

3.3.1 Assumptions;

3.3.2 Key Indicators;

3.3.3 Relevant Turnover;

3.3.4 Turnover Reconciliation;

3.3.5 Player Related Expenditure; and

3.3.6 Player Salary Costs.

Guidance

By the 9th December 2016 each Club must submit its Mid-Season SCMP Submission for the financial year ending May, June or July 2017 (exactly which date will be determined in accordance with Note 2).

3.4 The SCMP Submission must relate to the Club or if applicable and agreed with The League (as detailed in Regulation 16.4), the Group of which the Club is a member.

3.5 All SCMP Submissions must be sent to The League’s Finance Department by e-mail. In the event that an e-mail submission is not possible, the SCMP Submission should be posted to the Office so as to arrive not later than the relevant deadlines set out in this Note 3.

4 Duty of Disclosure

4.1 The League may at any time require a Club to provide such further information as The League deems necessary (acting reasonably) for the purposes of enabling The League to assess whether a Club has fulfilled (or not) the SCMP Requirement. By way of example, and without limitation, additional information may be requested where:

4.1.1 any SCMP Submission is incomplete;

4.1.2 there are insufficient assumptions; or

4.1.3 additional evidence is required to support certain assumptions.

4.2 Any such request shall be made in writing (including by email from the Finance Department) and shall be responded to in full within 5 Normal Working Days of any such request being made.

4.3 Each Club shall, at all times and in all matters within the scope of these Guidance Notes, 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 a SCMP Submission which is intended to seek to or does take any unfair advantage in relation to the assessment of fulfilment (or non-fulfilment) of the SCMP Requirement.

5 Completion of the Pre-Season SCMP Submission

5.1 For the purposes of these Notes:

5.1.1 Aggregate Player Salary Costs shall mean the sum total of all the Individual Player Salary Costs;

5.1.2 Individual Player Salary Costs shall, in respect of each Contract Player (as defined by Note 5.9.2) and Temporary Contract Player (as defined by Noted 5.9.3), include such sums as are required to be disclosed in or annexed to the Standard Contract including, by way of example and without limitation:

(a) gross basic salaries;

(b) signing on fees;

(c) appearance fees;

(d) individual player bonuses; and

(e) accommodation / relocation / travel / motor costs;

5.1.3 Headroom means the amount by which Player Related Expenditure is less than the amount equal to:

(a) 60% of Relevant Turnover; plus

(b) 100% of Football Fortune Income;

Note: With effect from the commencement of Season 2018/19 the figure of 55% in Rule 5.1.3(a) will be amended down to 50% pursuant to a resolution of League Two Clubs passed on 6th April 2017.

5.1.4 Football Fortune Income is defined in Paragraph 2 of Appendix A;

5.1.5 Relevant Turnover is defined in Paragraph 1 of Appendix A;

5.1.6 Player Related Expenditure is defined in Appendix B;

5.1.7 the following years shall be given the following references:

(a) Reporting Period means the financial year / Season in which the Club is required to report in accordance with these Notes;

(b) RP-1 means the financial year / Season prior to the Reporting Period; and

(c) RP-2 means the financial year / Season prior to RP-1.

Guidance

For the 2016/17 Reporting Period, RP-1 means the 2015/16 financial year/Season and RP-2 means the 2014/15 financial year/Season.

5.2 All of the Worksheets within the Pre-Season SCMP Submission must:

5.2.1 be completed prior to submission to The League; and

5.2.2 include any and all adjustments necessary to ensure the Club complies with the requirements of Note 2.

5.3 Key assumptions are to be detailed within the Assumptions Worksheet to support the estimated figures throughout the Worksheets for the Reporting Period.

5.4 The Key Indicator Worksheet feeds information through from the relevant Worksheets in order to calculate the Club’s SCMP percentage. This will indicate the level of Relevant Turnover, Football Fortune Income and Player Related Expenditure and, if any, the Headroom the Club has available.

5.5 When completing the Relevant Turnover Worksheet, and having regard to any adjustments required to comply with the requirements of Note 2:

5.5.1 Column 1 of the Relevant Turnover Worksheet should replicate, where relevant, the figures in the Club’s Annual Accounts and supporting management account schedules, for RP-2. In the event that the Club’s Annual Accounts have not been finalised by the Club’s auditor, unaudited figures should be used;

5.5.2 Column 2 should replicate the Club’s latest forecast (or actual unaudited figures, if available) for RP-1;

5.5.3 Column 3 should reflect the Club’s budget for the Reporting Period; and

5.5.4 if there are any variances, a separate written explanation should be provided.

5.6 Claims for any item of income to be treated as Football Fortune Income are subject to the prior written approval of The League.

5.7 A reconciliation between Relevant Turnover, Football Fortune Income (i.e. Column 1 in the Relevant Turnover Worksheet) and Reported Turnover per the latest Club Annual Accounts (or actual unaudited figures) is required to be performed on the Turnover Reconciliation Worksheet.

5.8 When completing the Player Related Expenditure Worksheet:

5.8.1 Column 1 of the Player Related Expenditure Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts and supporting management account schedules, for RP-2. In the event that the Club’s Annual Accounts have not been finalised by the auditor, unaudited figures should be used;

5.8.2 Column 2 should replicate the Club’s latest forecast (or actual unaudited figures, if available) for RP-1;

5.8.3 Column 3 should reflect the Club’s budgeted Aggregate Player Salary Costs and other Player Related Expenditure for the Reporting Period;

5.8.4 Columns 1, 2 and 3 feed directly through from the Player Salary Costs Worksheet. Where any other figures in the Player Related Expenditure Worksheet do not feed through from the Player Salary Costs Worksheet these must be completed by the Club, where relevant; and

5.8.5 if there are any variances, a separate written explanation should be provided.

5.9 When completing the Player Salary Costs Worksheet:

5.9.1 completion of all sections is to be on a Player by Player basis and be the Club’s current best estimate of Individual Player Salary Costs that have been and/or must be paid during the relevant Reporting Period;

5.9.2 Section 1 is to be completed in full for all Contract Players, which term means for the purposes of these Notes, Players registered with the Club who are not classified as Temporary Contract Players (as defined by Note 5.9.3) or Professional Under 21 Players (as defined by Note 7.1).

5.9.3 Section 2 is to be completed for all Players who are registered with the Club on an:

(a) Emergency Goalkeeper Loan;

(b) Standard Loan;

(c) Multiplicity Contract;

(d) Monthly Contract;

(e) Monthly Extension Contract; and

(f) Non Contract basis,

(Temporary Contract Players).

5.9.4 Section 3 is to be completed in full for all Players classified as Professional Under 21 Players.

5.9.5 For the avoidance of doubt, Players registered as Youth Players or Scholars are not subject to the requirements of these Notes.

6 Completion of the Mid-Season SCMP Submission

6.1 All of the Worksheets within the Mid-Season SCMP Submission must:

6.1.1 be completed prior to submission to The League; and

6.1.2 include any and all adjustments necessary to ensure the Club complies with the requirements of Note 2.

6.2 Any material variances from the Pre-Season SCMP Submission are to be detailed within the Assumptions Worksheet.

6.3 When completing the Relevant Turnover Worksheet:

6.3.1 Column 1 of the Relevant Turnover Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts and supporting management account schedules for RP-1. In the event that the Club’s Annual Accounts have not been finalised by the Club’s auditor, unaudited figures should be used;

6.3.2 Column 2 should replicate Column 3 in the Relevant Turnover Worksheet of the Pre-Season SCMP Submission for that Reporting Period;

6.3.3 Column 3 should reflect the Club’s actual Relevant Turnover figures up to the date of the Mid-Season SCMP Submission and any revised budget for the Reporting Period; and

6.3.4 if there are any variances a separate written explanation should be provided.

6.4 A reconciliation between Relevant Turnover, Football Fortune Income (i.e. Column 1 in the Relevant Turnover Worksheet) and Reported Turnover per the latest Club Annual Accounts (or actual unaudited figures) is required to be performed on the Turnover Reconciliation Worksheet.

6.5 When completing the Player Related Expenditure Worksheet:

6.5.1 Column 1 of the Player Related Expenditure Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts for RP-1. In the event that the Club’s Annual Accounts have not been finalised by the auditor, unaudited figures should be used;

6.5.2 Column 2 should replicate Column 3 in the Player Related Expenditure Worksheet of the Pre-Season SCMP Submission for that Reporting Period;

6.5.3 Column 3 should reflect the Club’s actual Player Related Expenditure up to the date of the Mid-Season SCMP Submission and any revised budget for the Reporting Period;

6.5.4 Columns 1, 2 and 3 feed directly through from the Player Salary Costs Worksheet. Where any other figures in the Player Related Expenditure Worksheet do not feed through from the Player Salary Costs Worksheet these must be completed by the Club, where relevant; and

6.5.5 if there are any variances a separate written explanation should be provided.

6.6 When completing the Player Salary Costs Worksheet for the Mid-Season SCMP Submission, the Club is required to update the Player Salary Costs Worksheet for any Player movements and re-negotiated contracts since the preparation of the Pre-Season SCMP Submission.

7 Professional Under 21 Players

7.1 Professional Under 21 Player means any Player registered with the Club as a Contract Player on a Full Contract basis who is aged 20 years or under as at the 1st July immediately preceding the commencement of the Season to which the Reporting Period relates.

Guidance

For example a player aged 20 on or after the 1st July 2016 is classed as an Under 21 Player for Season 2016/17, but not for 2017/18.

7.2 The Individual Player Salary Costs of a Professional Under 21 Player are excluded from the Club’s total Player Related Expenditure for the purposes of assessing whether that Club has complied with the SCMP Requirement. However, the Individual Player Salary Costs for Professional Under 21 Players shall be separately reported in the Player Salary Costs Worksheet of any SCMP Submission in accordance with Note 5.9.4 and/or Note 6.6.

8 On-going Monitoring

8.1 Each Club is responsible for keeping their SCMP Submission updated at all times and (without prejudice to Note 9 below) reporting any variances to The League.

8.2 The League will also monitor Player registrations made by Clubs.

9 Notifiable Events

9.1 Where:

9.1.1 the Player Related Expenditure of a Club exceeds, or is likely to exceed (having regard to all the circumstances), 95% of the maximum amount of Player Related Expenditure permitted under Rule 1.2 (Additional Reporting Threshold); and /or

9.1.2 any Club fails, or is likely to fail (having regard to all the circumstances), to meet the SCMP Requirement,

that Club shall forthwith notify The League to that effect in writing (by email or fax) (Notification).

9.2 Where The League considers, acting reasonably, that the Club may be subject to an obligation to notify under Note 9.19.1 and the Club itself has not so notified, The League may serve notice on the Club to that effect in writing (by email or fax). Nothing in this Note 9.2 discharges the Club of any obligation under Note 9.1.

9.3 Where:

9.3.1 the Club serves Notification; and/or 9.3.2 The League serves notice under Note 9.2, the provisions of Notes 10 and/or 11 (as applicable) apply.

10 Consequences of Notification / Other Failure to Comply

10.1 A Club which:

10.1.1 does not file any SCMP Submission by the required date;

10.1.2 does not provide information where requested to do so by The League; and/or

10.1.3 fails to fulfil the SCMP Requirement,

shall be subject to a Player registration embargo (the “Embargo”) such that The League shall refuse any application made by that Club to register any Player or any new contract of an existing Player with that Club save in the circumstances set out in Note 10.2. 10.2 The circumstances referred to in Note 10.1 are:

10.2.1 On a one out one in basis. These will only be allowed where:

(a) the Club’s registered playing squad is 24 or fewer registered Established Players (as defined by Note 10.3); and

(b) the annual Employee Cost of the Player coming in is no more than 75% of the equivalent annual Employee Cost (as defined by Note 10.3) of the Player going out (calculated as an average over the term of the remaining period of both Players’ contracts, taking note of any contract cancellation payments where relevant);

10.2.2 Where the Club needs to offer terms of re-engagement to an Under 24 Player or offer professional terms to a Scholar for the purposes of maintaining compensation rights in respect of that Under 24 Player or Scholar (as applicable); 10.2.3 Emergency Goalkeeper Loan in accordance with the provisions of Regulation 55. 10.3 For the purposes of Note 10.2 only:

10.3.1 an Established Player is one who has made at least one competitive appearance in the starting eleven for that Club at any time; and

10.3.2 Employee Cost means the aggregate of the average annual:

(a) basic salary (but excluding appearance fees and other bonuses e.g. promotion or loyalty bonuses);

(b) pension payment; and/or

(c) image rights payment,

for the respective Players.

10.4 The Embargo will be effective:

10.4.1 in the case of a Club which is in default of any obligation to provide information in accordance with these Guidance Notes, from the date of default until such time as the default is remedied to the reasonable satisfaction of The League; and

10.4.2 in the case of a Club which fails to fulfil the SCMP Requirement, until The League has been provided with the necessary information in order to be satisfied that the Club is no longer in breach of the SCMP Requirement.

10.5 For the avoidance of doubt, where the registration of any Player(s) will in the opinion of The League, acting reasonably, result in a Club failing to meet the SCMP Requirement, such registrations will be refused.

11 Clubs Subject to the Additional Reporting Threshold

11.1 If a Club becomes aware, or if a Club is informed by The League that, the Player Related Expenditure of that Club exceeds, or is likely to exceed (having regard to all the circumstances including for the avoidance of doubt the Player Related Expenditure in respect of any Proposed Registration (as defined below)) the Additional Reporting Threshold, then that Club will be subject to the requirements of this Note 11 (a Threshold Club).

11.2 Any Threshold Club that wishes to register a new Player (each a Proposed Registration) must prior to the lodging of the Proposed Registration, submit a duly completed Self Certification on Club letterhead (in accordance with Appendix C).

11.3 Where any Proposed Registration will, in the opinion of The League, acting reasonably, result in the Club failing to meet the SCMP Requirement, that Proposed Registration will be refused.

12 Former Championship Clubs

12.1 The SCMP requirement for a Former Championship Club shall, in its first season as a League 1 Club, be amended such that the Club’s Player Related Expenditure (as defined in Appendix B) shall not exceed:

12.1.1 75% of the Club’s Relevant Turnover (as defined in paragraph 1 of Appendix A) for the Reporting Period, plus

12.1.2 100% of the Club’s Football Fortune Income (as defined in Paragraph 2 of Appendix A) for the Reporting Period.

13 Confidentiality

13.1 Information provided by a Club to The League in accordance with these Notes shall only be made available to such members of the Executive as are required to know such information in order to fulfil their duties to The League (and who are bound by obligations of confidentiality as part of their contract of employment) and shall not be disclosed to the Board in any manner so as to enable Clubs to be identified provided always that:

13.1.1 generic management reporting to the Board and Clubs is permitted; and

13.1.2 The League shall be entitled to publish reports of any decisions relating to any breaches.

APPENDIX A – DEFINITION OF RELEVANT TURNOVER AND FOOTBALL FORTUNE INCOME

1 Relevant Turnover – Definitions

Relevant Turnover can be summarised as shown below, with explanatory note to explain the various treatments of different sources of income.

1.1 League Distributions – All League distributions, including facility fees for TV and Radio, as included in the profit and loss account.

1.2 Premier League Distributions – Include Premier League Solidarity and Parachute payments relating to the Reporting Period.

1.3 Match Revenue, Season Tickets – Include only in the relevant season. Where season tickets are sold covering more than one season, income should be declared pro-rata for the relevant season.

1.4 Match Revenue, League Gate Receipts – Actual receipts before deduction of match day expenditure and any levies.

1.5 Match Revenue, Cup Gate Receipts – The home club should declare actual receipts net of away club’s expenses but before other match day expenditure and budgets should assume the Club does not progress past Round 1 of any competition. The away club should include actual receipts received.

1.6 Match Revenue, Friendlies Gate Receipts – The Club should declare actual receipts net of direct match day costs.

1.7 Commercial Net Income, Hospitality – The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply hospitality, or where hospitality is outsourced, the actual amount received by the Club.

1.8 Commercial Net Income, Commercial - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply commercial activities, or where commercial activities are outsourced, the actual amount received by the Club.

1.9 Commercial Net Income, Sponsorship - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply sponsorship, or where sponsorship is outsourced, the actual amount received by the Club.

1.10 Commercial Net Income, Programmes - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply programmes, or where programmes is outsourced, the actual amount received by the Club.

1.11 Commercial Net Income, Shop Merchandise - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply shop merchandise, or where shop merchandise is outsourced, the actual amount received by the Club.

1.12 Commercial Net Income, Club Lottery - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply the club lottery, or where the club lottery is outsourced, the actual amount received by the Club.

1.13 Commercial Net Income, Catering - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply catering, or where catering is outsourced, the actual amount received by the Club.

1.14 Stadium Revenue, Rental Income – Rental due on stadium and facilities in the relevant Reporting Period.

1.15 Stadium Revenue, Share of Stadium Revenue – Include actual receipts.

1.16 Other Football Income – To be assessed on a case by case basis.

2 Football Fortune Income – Definitions

Football Fortune Income includes the following revenue streams on the basis that they can reasonably be regarded as a “bonus” to Clubs during the Reporting Period.

2.1 EFL Cup and EFL Trophy Distributions – Include any EFL Cup or EFL Trophy prize money and facility fees on an actual basis. Budgets should assume the Club does not progress past Round 1 of any competition.

2.2 Football Association Distributions – Include any FA Cup prize money and facility fees on an actual basis. Budgets should assume the Club does not progress past Round 1 of any competition.

2.3 League Parachute Income – Include all Parachute income receivable from The League for the relevant Reporting Period.

2.4 Net Transfer Income – Include actual cash received in the year from other clubs by way of Compensation Fee, Transfer Fee and / or Loan Fee (in these Notes, “Transfer Fees”), less any actual cash paid to other clubs by way of Transfer Fees. Any advances of Transfer Fees from organisations such as Close Leasing can only be included where the instalments being advanced against fall due within the Reporting Period covered by the relevant SCMP Submission.

2.5 Donations – Donations from independently run lotteries, PFA contributions for Private Medical Insurance, small gifts from benefactors, donations towards Player salary costs, payment for taxation losses etc. are allowable. Significant donations must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account by the end of the relevant Reporting Period. To be included in the Club’s SCMP Submission, a signed Letter of Guarantee (in the format required by The League from time to time and which as at the date of these Rules, is as set out in Appendix D) must be received by The League to confirm that there is no interest linked to the donation or any requirement for future repayment of the donation by the Club.

2.6 Cash Injections – Significant cash injections from companies or benefactors must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account by the end of the relevant Reporting Period. To be included in the Club’s SCMP Submission, a signed Letter of Guarantee (in the format required by The League from time to time and which as at the date of these Rules, is as set out in Appendix D) must be received by The League to confirm that there is no interest linked to the cash injection or any requirement for future repayment by the Club of the cash injection.

2.7 Equity Injections – Only include non-redeemable Equity investments received (or to be received) in the relevant Reporting Period. The:

2.7.1 conversion to Equity of any debt; and/or

2.7.2 writing off of any debt, where such debt was created in any prior Reporting Period, does not constitute a form of revenue as no cash is provided to the Club to finance wages in the current Reporting Period. Further, any linked transactions whereby loans are repaid followed by an injection of cash in exchange for Equity, will not be allowed. Any injection of cash as Equity must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account, and a copy of the signed Companies House forms confirming the issue of new share capital must be received by The League by the end of the relevant Reporting Period. To be included in the Club’s SCMP Submission, a signed Letter of Guarantee (in the format required by The League from time to time and which as at the date of these Rules, is as set out in Appendix D) must be received by The League to confirm that the Club’s shareholder(s) will inject the necessary Equity into the Club prior to the end of the relevant Reporting Period.

2.8 Accumulated Profit – Only include reserves extracted from audited Annual Accounts that have been filed with Companies House. For the avoidance of doubt any revaluation reserves do not qualify for inclusion.

2.9 Other Income – To be assessed on a case by case basis.

3 Other Notes

3.1 All amounts should be shown net of attributable Value Added Tax.

3.2 Where a Club enters into a contra deal with a sponsor (e.g. perimeter advertising in exchange for the provision of motor vehicles to a Club) then, provided there is an independent third party valuation attaching to the supply being provided to the Club, this amount can be incorporated in Relevant Turnover (e.g. within Sponsorship income)

3.3 Where a Club offers equity to investors then that equity is included in the year in which that offer becomes unconditional.

3.4 No loan funding, from whatever source and on whatever terms, should be included.

3.5 Youth Development funding should NOT be included as part of Relevant Turnover or Football Fortune Income for the purposes of the Salary Cost Management Documentation.

3.6 Bad debts should be netted off against the Relevant Turnover line in the period in which any claim for bad debt relief is made.

3.7 Management charges received from any group companies should also be netted off income in the year in which the charges are levied. This income should be specified as other income.

APPENDIX B – DEFINITION OF PLAYER RELATED EXPENDITURE

1. Player Related Expenditure includes all expenses that are due during a Reporting Period to a Contract Player, Temporary Contract Player or Professional Under 21 Player under the terms of his contract, calculated in accordance with the following paragraphs.

2. Those Players transferred out on loan should be excluded for any period that they are out on loan. As Clubs have the ability to share the wages of Players sent out on loan, then the treatment of wages should be treated proportionately.

3. Clubs should include all Players registered with them at any point during the current Reporting Period, along with their associated costs for the period of registration.

4. Any salary, fees or remuneration due under the terms of the Player’s contract and any image rights contract (if any) should be included. This would include not only basic salaries but also any additional salary payments which may become due dependent upon age etc.

5. Clubs should include any signing on fees due to be paid on registration of a Player.

6. Any additional payments which may become dependent upon appearances, either full or substitute appearances should be included.

7. Clubs should include any match, win, loyalty, promotion or other kind of bonus, save that promotion bonuses would be treated as expenditure in the following Reporting Period.

8. Include any accommodation, holiday, or relocation expenses in relation to a Player (to include all expenses met on behalf of the Player whether the expenses are legal, removal, travel or other associated costs).

9. Include the cost to the Club of providing any benefit in kind, such as the cost of vehicles used privately (the P11d benefit figure should be used in calculating the cost to the Club) and any hotel expenses (other than those directly relating to matches). It is not proposed to include training/fitness Player Related Expenditure.

10. Clubs should include National Insurance Contributions and taxes accrued in respect of the Player.

11. Include any agents’ fees payable by the Club, as well as any settled by the Club on the Player’s behalf.

12. Pension contributions due in respect of any Player in relation to the current Reporting Period.

13. Clubs should include any insurance premiums paid in respect of any Player. Personal accident, health and life insurance etc., whether or not these are specifically provided for under the terms of any employment contract should be included.

14. Any personal expenses paid as well as other expenses ordinarily and necessarily incurred in connection with complying in full with the obligations under the terms of any employment contract should be included within the Player Related Expenditure.

15. Any loan made, or to be made to a Player which is not repaid within the same Reporting Period should be included as other Player Related Expenditure.

16. Exclusions may apply in respect of any Players who are declared permanently unfit to play at any point during the Reporting Period, for the period after such declaration, but not for any other period of incapacity (e.g. short term injury and short term illness etc.).

17. Redundancy and/or Compromise payments made to Players (e.g. the payment of the balance of the contract as a lump sum which has been discounted to represent accelerated receipt)

should also be included for the purposes of determining Player Related Expenditure. Where redundancy payments are staged they should be allocated into the SCMP Documentation for the Reporting Period in which the payments fall due.

18. Some Clubs appoint Players to other roles e.g. manager or coach. So as to avoid Clubs seeking to load salary payments in favour of the second role, the payments under both roles will be amalgamated and 50% of the total will be attributed as Player Related Expenditure for the purposes of determining compliance with the SCMP Requirement.

19. All of the Player Related Expenditure definitions will be described as being made to a Player or any third party on his behalf, either directly or indirectly, whether in this country or elsewhere.

APPENDIX C – SELF-CERTIFICATION FORM

SALARY COST MANAGEMENT PROTOCOL

LEAGUE 1

On behalf of __________________________ Football Club I enclose the necessary registration

documents in respect of the permanent / loan / loan extension / signing of __________________

(Player name).

I confirm that having made due enquiry of the Club’s current and anticipated financial outturn for the current Reporting Period (as detailed in the most recent SCMP Submission) this registration will not result in the Club breaching the SCMP Requirement.

Signed: ____________________________________________ (duly authorised official)

Position: ___________________________________________

Date: ______________________________________________

APPENDIX D –LETTER OF GUARANTEE TEMPLATE

[To be drafted on Company/Personal Letterhead]

[Addressed to the Football Club]

[Date]

Dear Sirs,

Re: [Equity/Cash Injection / Donation] to [Football Club Full Company Name] (Club)

This letter is to confirm that [I/We] have reviewed the Salary Cost Management Protocol submission prepared for the Board of the Club in respect of the [20XX/20YY] Reporting Period (SCMP Forecasts), copies of which are attached to this letter.

In consideration of the Club agreeing to enter into financial commitments as outlined in the SCMP Forecasts, [I/we] confirm that [I/we] intend to, and will, support the Club [and its subsidiaries] by making available up to [£X] as [Equity/Cash Injection / Donation] as set out in the SCMP Forecasts to enable the Club to meet the SCMP Requirement until at least [30th June 20YY].

This letter is to confirm that the [Equity/Cash Injection / Donation] of up to £[x] will be made in full to [Football Club Full Company Name] prior to the end of the [20XX/20YY] Reporting Period.

[I/We] confirm that:

(a) the [Equity/Cash Injection / Donation] is a permanent [injection / donation] to the Club with no linked interest payable by the Club to [me/us] or any other third party at any time; and

(b) there is no future requirement for the Club to repay the [Equity/Cash Injection / Donation].

Yours faithfully

[Printed Name]

[Position]

[Address]

PART 4 – LEAGUE 2 FINANCIAL FAIR PLAY SALARY COST MANAGEMENT PROTOCOL (SCMP) GUIDANCE NOTES

1 SCMP Requirement

1.1 All League 2 Clubs (hereafter Clubs or Club) are required to meet the SCMP Requirement (as defined in Note 1.2) for each Reporting Period (as defined in Note 1.3).

1.2 The SCMP Requirement is a measure whereby a Club’s Player Related Expenditure (as defined in Appendix B) shall not exceed the sum of:

1.2.1 50% of the Club’s Relevant Turnover (as defined in Paragraph 1 of Appendix A) for the Reporting Period; plus

1.2.2 100% of the Club’s Football Fortune Income (as defined in Paragraph 2 of Appendix A) for the Reporting Period.

1.3 The Reporting Period in respect of which a Club is assessed for the purpose of the SCMP Requirement is (subject to Note 2) the 12 month period recorded in the Club’s Annual Accounts.

Guidance

For those Clubs with a financial year ending in the period May, June or July the Reporting Period for the 20xx/yy Season is the 12 month period ending May, June or July 20yy.

1.4 Measurement of a Club’s compliance with the SCMP Requirement is based on the submission by the Club of the Pre-Season SCMP Submission and Mid-Season SCMP Submission (each as defined in Note 3 below) (together the SCMP Submissions).

2 Variations From ‘Standard’ Reporting Periods

2.1 Clubs may not adjust Reporting Periods for subsequent Seasons without the prior written consent of The League, such consent not to be unreasonably withheld.

2.2 If any Club has a financial year ending other than during the period May, June or July, then that Club must prepare its SCMP Submissions for a 12 month period ending on 30th June so as to provide The League with an SCMP Submission aligned to the Reporting Period as defined in Note 1.3.

2.3 If any Club has a financial year end other than in June, then that Club may opt to prepare its SCMP Submission for a 12 month period ending June so as to provide The League with an SCMP Submission aligned to Player Contracts.

3 SCMP Submissions

3.1 By the third Friday in June each year, each Club must submit its Pre-Season SCMP Submission for the immediately following Reporting Period. The Pre-Season SCMP Submission will be in the form of an Excel workbook setting out the information required therein (and including the requirements set out in Note 5 below) and will be in such format as The League may prescribe from time to time. For the current Season this requires submission of the following Worksheets:

3.1.1 Assumptions

3.1.2 Key Indicators;

3.1.3 Relevant Turnover;

3.1.4 Turnover Reconciliation;

3.1.5 Player Related Expenditure; and

3.1.6 Player Salary Costs.

Guidance

By 17th June 2016 each Club must submit its Pre-Season SCMP Submission for the financial year ending May, June or July 2017 (exactly which date will be determined in accordance with Note 2).

3.2 For the avoidance of doubt, the Pre-Season SCMP Submission must be supplied notwithstanding the fact that during the preceding Season the Club was either a League 1 Club relegated into League 2 or a National League Premier Division Club which was then promoted into League 2.

3.3 By the second Friday in December each year, each Club must submit its Mid-Season SCMP Submission for the current Reporting Period. The Mid-Season SCMP Submission will be in the form of an Excel workbook setting out the information required therein (and including the requirements set out in Note 6 below) and will be in such format as The League may prescribe from time to time. For Season 2016/17 this requires submission of the following Worksheets:

3.3.1 Assumptions;

3.3.2 Key Indicators;

3.3.3 Relevant Turnover;

3.3.4 Turnover Reconciliation;

3.3.5 Player Related Expenditure; and

3.3.6 Player Salary Costs.

Guidance

By the 9h December 2016 each Club must submit its Mid-Season SCMP Submission for the financial year ending May, June or July 2017 (exactly which date will be determined in accordance with Note 2).

3.4 The SCMP Submission must relate to the Club or if applicable and agreed with The League (as detailed in Regulation 16.4), the Group of which the Club is a member.

3.5 All SCMP Submissions must be sent to The League’s Finance Department by e-mail. In the event that an e-mail submission is not possible, the SCMP Submission should be posted to the Office so as to arrive not later than the relevant deadlines set out in this Note 3.

4 Duty of Disclosure

4.1 The League may at any time require a Club to provide such further information as The League deems necessary (acting reasonably) for the purposes of enabling The League to assess whether a Club has fulfilled (or not) the SCMP Requirement. By way of example, and without limitation, additional information may be requested where:

4.1.1 any SCMP Submission is incomplete;

4.1.2 there are insufficient assumptions; or

4.1.3 additional evidence is required to support certain assumptions; or

4.1.4 an application is made for a revenue stream to be included as Football Fortune Income.

4.2 Any such request shall be made in writing (including by email from the Finance Department)

and shall be responded to in full within 5 Normal Working Days of any such request being made.

4.3 Each Club shall, at all times and in all matters within the scope of these Guidance Notes, 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 SCMP Submission which is intended to seek to or does take any unfair advantage in relation to the assessment of fulfilment (or non-fulfilment) of the SCMP Requirement.

5 Completion of the Pre-Season SCMP Submission

5.1 For the purposes of these Notes:

5.1.1 Aggregate Player Salary Costs shall mean the sum total of all the Individual Player Salary Costs;

5.1.2 Individual Player Salary Costs shall, in respect of each Contract Player (as defined by Note 5.9.2) and Temporary Contract Player (as defined by Noted 5.9.3), include such sums as are required to be disclosed in or annexed to the Standard Contract including, by way of example and without limitation:

(a) gross basic salaries;

(b) signing on fees;

(c) appearance fees;

(d) individual player bonuses; and

(e) accommodation / relocation / travel / motor costs;

5.1.3 Headroom means the amount by which Player Related Expenditure is less than the amount equal to:

(a) 50% of Relevant Turnover; plus

(b) 100% of Football Fortune Income.

5.1.4 Football Fortune Income is defined in Paragraph 2 of Appendix A;

5.1.5 Relevant Turnover is defined in Paragraph 1 of Appendix A;

5.1.6 Player Related Expenditure is defined in Appendix B;

5.1.7 the following years shall be given the following references:

(a) Reporting Period means the financial year / Season in which the Club is required to report in accordance with these Notes;

(b) RP-1 means the financial year / Season prior to the Reporting Period; and

(c) RP-2 means the financial year / Season prior to Reporting Period-1.

Guidance

For the 2016/17 Reporting Period, RP-1 means the 2015/16 financial year/Season and RP-2 means the 2014/15 financial year/Season.

5.2 All of the Worksheets within the Pre-Season SCMP Submission must:

5.2.1 be completed prior to submission to The League; and

5.2.2 include any and all adjustments necessary to ensure the Club complies with the requirements of Note 2.

5.3 Key assumptions are to be detailed within the Assumptions Worksheet to support the estimated figures throughout the Worksheets for the Reporting Period.

5.4 The Key Indicator Worksheet feeds information through from the relevant Worksheets in order to calculate the Club’s SCMP percentage. This will indicate the level of Relevant Turnover, Football Fortune Income and Player Related Expenditure and, if any, the Headroom the Club has available.

5.5 When completing the Relevant Turnover Worksheet, and having regard to any adjustments required to comply with the requirements of Note 2:

5.5.1 Column 1 of the Relevant Turnover Worksheet should replicate, where relevant, the figures in the Club’s Annual Accounts and supporting management account schedules, for RP-2. In the event that the Club’s Annual Accounts have not been finalised by the Club’s auditor, unaudited figures should be used;

5.5.2 Column 2 should replicate the Club’s latest forecast (or actual unaudited figures, if available) for RP-1;

5.5.3 Column 3 should reflect the Club’s budget for the Reporting Period; and

5.5.4 if there are any variances, a separate written explanation should be provided.

5.6 Claims for any item of income to be treated as Football Fortune are subject to the prior written approval of The League.

5.7 A reconciliation between Relevant Turnover, Football Fortune Income (i.e. Column 1 in the Relevant Turnover Worksheet) and Reported Turnover per the latest Club Annual Accounts (or actual unaudited figures) is required to be performed on the Turnover Reconciliation Worksheet.

5.8 When completing the Player Related Expenditure Worksheet:

5.8.1 Column 1 of the Player Related Expenditure Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts and supporting management account schedules, for RP-2. In the event that the Club’s Annual Accounts have not been finalised by the auditor, unaudited figures should be used;

5.8.2 Column 2 should replicate the Club’s latest forecast (or actual unaudited figures, if available) for RP-1;

5.8.3 Column 3 should reflect the Club’s budgeted Aggregate Player Salary Costs and other Player Related Expenditure for the Reporting Period;

5.8.4 Columns 1, 2 and 3 feed directly through from the Player Salary Costs Worksheet. Where any other figures in the Player Related Expenditure Worksheet do not feed through from the Player Salary Costs Worksheet these must be completed by the Club, where relevant; and

5.8.5 if there are any variances, a separate written explanation should be provided.

5.9 When completing the Player Salary Costs Worksheet:

5.9.1 completion of all sections is to be on a Player by Player basis and be the Club’s current best estimate of Individual Player Salary Costs that have been and/or must be paid during the relevant Reporting Period;

5.9.2 Section 1 is to be completed in full for all Contract Players, which term means for the purposes of these Notes, Players registered with the Club who are not classified as Temporary Contract Players (as defined by Note 5.9.3) or Professional Under 21 Players (as defined by Note 7.1).

5.9.3 Section 2 is to be completed for all Players who are registered with the Club on an:

(a) Emergency Goalkeeper Loan;

(b) Standard Loan;

(c) Multiplicity Contract;

(d) Monthly Contract;

(e) Monthly Extension Contract; and

(f) Non Contract basis,

(Temporary Contract Players).

5.9.4 Section 3 is to be completed in full for all Players classified as Professional Under 21 Players.

5.9.5 For the avoidance of doubt, Players registered as Youth Players or Scholars are not subject to the requirements of these Notes.

6 Completion of the Mid-Season SCMP Submission

6.1 All of the Worksheets within the Mid-Season SCMP Submission must:

6.1.1 be completed prior to submission to The League; and

6.1.2 include any and all adjustments necessary to ensure the Club complies with the requirements of Note 2.

6.2 Any material variances from the Pre-Season SCMP Submission are to be detailed within the Assumptions Worksheet.

6.3 When completing the Relevant Turnover Worksheet:

6.3.1 Column 1 of the Relevant Turnover Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts and supporting management account schedules for RP-1. In the event that the Club’s Annual Accounts have not been finalised by the Club’s auditor, unaudited figures should be used;

6.3.2 Column 2 should replicate Column 3 in the Relevant Turnover Worksheet of the Pre-Season SCMP Submission for that Reporting Period;

6.3.3 Column 3 should reflect the Club’s actual Relevant Turnover and Football Fortune Income figures up to the date of the Mid-Season SCMP Submission and any revised budget for the Reporting Period; and

6.3.4 if there are any variances a separate written explanation should be provided.

6.4 A reconciliation between Relevant Turnover, Football Fortune Income (i.e. Column 1 in the Relevant Turnover Worksheet) and Reported Turnover per the latest Club Annual Accounts (or actual unaudited figures) is required to be performed on the Turnover Reconciliation Worksheet.

6.5 When completing the Player Related Expenditure Worksheet:

6.5.1 Column 1 of the Player Related Expenditure Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts for RP-1. In the event that the Club’s

Annual Accounts have not been finalised by the auditor, unaudited figures should be used;

6.5.2 Column 2 should replicate Column 3 in the Player Related Expenditure Worksheet of the Pre-Season SCMP Submission for that Reporting Period;

6.5.3 Column 3 should reflect the Club’s actual Player Related Expenditure up to the date of the Mid-Season SCMP Submission and any revised budget for the Reporting Period;

6.5.4 Columns 1, 2 and 3 feed directly through from the Player Salary Costs Worksheet. Where any other figures in the Player Related Expenditure Worksheet do not feed through from the Player Salary Costs Worksheet these must be completed by the Club, where relevant; and

6.5.5 if there are any variances a separate written explanation should be provided.

6.6 When completing the Player Salary Costs Worksheet for the Mid-Season SCMP Submission, the Club is required to update the Player Salary Costs Worksheet for any Player movements and re-negotiated contracts since the preparation of the Pre-Season SCMP Submission.

7 Professional Under 21 Players

7.1 Professional Under 21 Player means any Player registered with the Club as a Contract Player on a Full Contract basis who is aged 20 years or under as at the 1st July immediately preceding the commencement of the Season to which the Reporting Period relates.

Guidance

A player aged 20 on or after the 1st July 2016 is classed as an Under 21 Player for Season 2016/17, but not for 2017/18.

7.2 The Individual Player Salary Costs of a Professional Under 21 Player are excluded from the Club’s total Player Related Expenditure for the purposes of assessing whether that Club has complied with the SCMP Requirement. However, the Individual Player Salary Costs for Professional Under 21 Players shall be separately reported in the Player Salary Costs Worksheet of any SCMP Submission in accordance with Note 5.9.4 and/or Note 6.6.

8 On-going Monitoring

8.1 Each Club is responsible for keeping their SCMP Submission updated at all times and (without prejudice to Note 9 below) reporting any variances to The League.

8.2 The League will also monitor Player registrations made by Clubs.

9 Notifiable Events

9.1 Where:

9.1.1 the Player Related Expenditure of a Club exceeds, or is likely to exceed (having regard to all the circumstances), 95% of the maximum amount of Player Related Expenditure permitted under Rule 1.2 (Additional Reporting Threshold); and /or

9.1.2 any Club fails, or is likely to fail (having regard to all the circumstances), to meet the SCMP Requirement,

that Club shall forthwith notify The League to that effect in writing (by email or fax) (Notification).

9.2 Where The League considers, acting reasonably, that the Club may be subject to an obligation to notify under Note 9.1 and the Club itself has not so notified, The League may serve notice on the Club to that effect in writing (by email or fax). Nothing in this Note 9.2 discharges the Club of any obligation under Note 9.1.

9.3 Where:

9.3.1 the Club serves Notification; and/or 9.3.2 The League serves notice under Note 9.2, the provisions of Notes 10 and/or 11 (as applicable) apply.

10 Consequences of Notification / Other Failure to Comply

10.1 A Club which:

10.1.1 does not file any SCMP Submission by the required date;

10.1.2 does not provide information where requested to do so by The League; and/or

10.1.3 fails to fulfil the SCMP Requirement,

shall be subject to a Player registration embargo (the “Embargo”) such that The League shall refuse any application made by that Club to register any Player or any new contract of an existing Player with that Club save in the circumstances set out in Note 10.2. 10.2 The circumstances referred to in Note 10.1 are:

10.2.1 On a one out one in basis. These will only be allowed where:

(a) the Club’s registered playing squad is 24 or fewer registered Established Players (as defined by Note 10.3); and

(b) the annual Employee Cost of the Player coming in is no more than 75% of the equivalent annual Employee Cost (as defined by Note 10.3) of the Player going out (calculated as an average over the term of the remaining period of both Players’ contracts, taking note of any contract cancellation payments where relevant);

10.2.2 Where the Club needs to offer terms of re-engagement to an Under 24 Player or offer professional terms to a Scholar for the purposes of maintaining compensation rights in respect of that Under 24 Player or Scholar (as applicable); 10.2.3 Emergency Goalkeeper Loan in accordance with the provisions of Regulation 55. 10.3 For the purposes of Note 10.2 only:

10.3.1 an Established Player is one who has made at least one competitive appearance in the starting eleven for that Club at any time; and

10.3.2 Employee Cost means the aggregate of the average annual:

(a) basic salary (but excluding appearance fees and other bonuses e.g. promotion or loyalty bonuses);

(b) pension payment; and/or

(c) image rights payment,

for the respective Players.

10.4 The Embargo will be effective:

10.4.1 in the case of a Club which is in default of any obligation to provide information in accordance with these Guidance Notes, from the date of default until such time as the default is remedied to the reasonable satisfaction of The League; and

10.4.2 in the case of a Club which fails to fulfil the SCMP Requirement, until The League has been provided with the necessary information in order to be satisfied that the Club is no longer in breach of the SCMP Requirement.

10.5 For the avoidance of doubt, where the registration of any Player(s) will in the opinion of The League, acting reasonably, result in a Club failing to meet the SCMP Requirement, such registrations will be refused.

11 Clubs Subject to the Additional Reporting Threshold

11.1 If a Club becomes aware, or if a Club is informed by The League that, the Player Related Expenditure of that Club exceeds, or is likely to exceed (having regard to all the circumstances including for the avoidance of doubt the Player Related Expenditure in respect of any Proposed Registration (as defined below)) the Additional Reporting Threshold, then that Club will be subject to the requirements of this Note 11 (a Threshold Club).

11.2 Any Threshold Club that wishes to register a new Player (each a Proposed Registration) must prior to the lodging of the Proposed Registration, submit a duly completed Self Certification on Club letterhead (in accordance with Appendix C).

11.3 Where any Proposed Registration will, in the opinion of The League, acting reasonably, result in the Club failing to meet the SCMP Requirement, that Proposed Registration will be refused.

12 Confidentiality

12.1 Information provided by a Club to The League in accordance with these Notes shall only be made available to such members of The League as are required to know such information in order to fulfil their duties to The League (and who are bound by obligations of confidentiality as part of their contract of employment) and shall not be disclosed to the Board in any manner so as to enable Clubs to be identified provided always that:

12.1.1 generic management reporting to the Board and Clubs is permitted; and

12.1.2 The League shall be entitled to publish reports of any decisions relating to any breaches.

APPENDIX A – DEFINITIONS OF RELEVANT TURNOVER AND FOOTBALL FORTUNE INCOME

1 Relevant Turnover – Definitions

Relevant Turnover can be summarised as shown below, with explanatory notes to explain the various treatments of different sources of income.

1.1 League Distributions – All League distributions, including facility fees for TV and Radio relating to the Reporting Period.

1.2 Premier League Distributions – Include Premier League Solidarity and Parachute payments relating to the Reporting Period.

1.3 Match Revenue, Season Tickets – Include only in the relevant season. Where season tickets are sold covering more than one season, income should be declared pro-rata for the relevant season.

1.4 Match Revenue, League Gate Receipts – Actual receipts before deduction of match day expenditure and any levies.

1.5 Match Revenue, Cup Gate Receipts – The home club should declare actual receipts net of away club’s expenses but before other match day expenditure and budgets should assume the Club does not progress past Round 1 of any competition. The away club should include actual receipts received.

1.6 Match Revenue, Friendlies Gate Receipts – The Club should declare actual receipts net of direct match day costs.

1.7 Commercial Net Income, Hospitality – The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply hospitality, or where hospitality is outsourced, the actual amount received by the Club.

1.8 Commercial Net Income, Commercial - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply commercial activities, or where commercial activities are outsourced, the actual amount received by the Club.

1.9 Commercial Net Income, Sponsorship - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply sponsorship, or where sponsorship is outsourced, the actual amount received by the Club.

1.10 Commercial Net Income, Programmes - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply programmes, or where programmes is outsourced, the actual amount received by the Club.

1.11 Commercial Net Income, Shop Merchandise - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply shop merchandise, or where shop merchandise is outsourced, the actual amount received by the Club.

1.12 Commercial Net Income, Club Lottery - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply the club lottery, or where the club lottery is outsourced, the actual amount received by the Club.

1.13 Commercial Net Income, Catering - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply catering, or where catering is outsourced, the actual amount received by the Club.

1.14 Stadium Revenue, Rental Income – Rental due on stadium and facilities in the relevant

Reporting Period.

1.15 Stadium Revenue, Share of Stadium Revenue – Include actual receipts.

1.16 Other Football Income – To be assessed on a case by case basis.

2 Football Fortune – Definitions

Football Fortune Income includes the following revenues streams on the basis that they can reasonably be regarded as a “bonus” to Clubs during the Reporting Period.

2.1 EFL Cup and EFL Trophy Distributions – Include any EFL Cup or EFL Trophy prize money and facility fees on an actual basis. Budgets should assume the Club does not progress past Round 1 of any competition.

2.2 Football Association Distributions – Include any FA Cup prize money and facility fees on an actual basis. Budgets should assume the Club does not progress past Round 1 of any competition.

2.3 League Parachute Income – Include all Parachute income receivable from The League for the relevant Reporting Period.

2.4 Net Transfer Income – Include actual cash received in the year from other clubs by way of Compensation Fee, Transfer Fee and / or Loan Fee (in these Notes, “Transfer Fees”), less any actual cash paid to other clubs by way of Transfer Fees. Any advances of Transfer Fees from organisations such as Close Leasing can only be included where the instalments being advanced against fall due within the Reporting Period covered by the relevant SCMP Submission.

2.5 Donations – Donations from independently run lotteries, PFA contributions for Private Medical Insurance, small gifts from benefactors, donations towards Player salary costs, payment for taxation losses etc. are allowable. Significant donations must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account. Before being included in the Club’s SCMP Submission, a signed Letter of Guarantee (in accordance with Appendix D) must also be received by The League to confirm that there is no interest linked to the donation or any requirement for future repayment of the donation by the Club.

2.6 Cash Injections – Significant cash injections from companies or benefactors must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account. Before being included in the Club’s SCMP Submission, a signed Letter of Guarantee (in accordance with Appendix D) must also be received by The League to confirm that there is no interest linked to the donation or any requirement for future repayment of the injection by the Club.

2.7 Equity Injections – Only include non-redeemable equity investments received in the relevant period. The conversion of debt to equity does not constitute a form of revenue as no cash injection is provided to the Club to finance wages in the future. Further, any linked transactions whereby loans are repaid followed by a cash injection in exchange for equity, will not be allowed. All equity cash injections must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account. Before being included in the Club’s SCMP Submission, a copy of the signed Companies House forms confirming the issue of new share capital must also be received by The League.

2.8 Accumulated Profit – Only include reserves extracted from audited Annual Accounts that have been filed with Companies House. For the avoidance of doubt any revaluation reserves do not qualify for inclusion.

2.9 Other Income – To be assessed on a case by case basis.

2.10 Clubs are required to apply to The League (providing supporting evidence) in order to utilise the Football Fortune Income streams shown below within their SCMP Submission.

3 Other Notes

3.1 All amounts should be shown net of attributable Value Added Tax.

3.2 Where a Club enters into a contra deal with a sponsor (e.g. perimeter advertising in exchange for the provision of motor vehicles to a Club) then, provided there is an independent third party valuation attaching to the supply being provided to the Club, this amount can be incorporated in Relevant Turnover (e.g. within Sponsorship income)

3.3 Where a Club offers equity to investors then that equity is included in the year in which that offer becomes unconditional.

3.4 No loan funding, from whatever source and on whatever terms, should be included.

3.5 Youth Development funding should NOT be included as part of Relevant Turnover or Football Fortune Income for the purposes of the Salary Cost Management Documentation.

3.6 Bad debts should be netted off against the Relevant Turnover line in the period in which any claim for bad debt relief is made.

3.7 Management charges received from any group companies should also be netted off income in the year in which the charges are levied. This income should be specified as other income.

APPENDIX B – DEFINITION OF PLAYER RELATED EXPENDITURE

1. Player Related Expenditure includes all expenses that are due during a Reporting Period to a Contract Player, Temporary Contract Player or Professional Under 21 Player under the terms of his contract, calculated in accordance with the following paragraphs.

2. Those Players transferred out on loan should be excluded for any period that they are out on loan. As Clubs have the ability to share the wages of Players sent out on loan, then the treatment of wages should be treated proportionately.

3. Clubs should include all Players registered with them at any point during the current Reporting Period, along with their associated costs for the period of registration.

4. Any salary, fees or remuneration due under the terms of the Player’s contract and any image rights contract (if any) should be included. This would include not only basic salaries but also any additional salary payments which may become due dependent upon age etc.

5. Clubs should include any signing on fees due to be paid on registration of a Player.

6. Any additional payments which may become dependent upon appearances, either full or substitute appearances should be included.

7. Clubs should include any match, win, loyalty, promotion or other kind of bonus, save that promotion bonuses would be treated as expenditure in the following Reporting Period.

8. Include any accommodation, holiday, or relocation expenses in relation to a Player (to include all expenses met on behalf of the Player whether the expenses are legal, removal, travel or other associated costs).

9. Include the cost to the Club of providing any benefit in kind, such as the cost of vehicles used privately (the P11d benefit figure should be used in calculating the cost to the Club) and any hotel expenses (other than those directly relating to matches). It is not proposed to include training/fitness Player Related Expenditure.

10. Clubs should include National Insurance Contributions and taxes accrued in respect of the Player.

11. Include any agents’ fees payable by the Club, as well as any settled by the Club on the Player’s behalf.

12. Pension contributions due in respect of any Player in relation to the current Reporting Period.

13. Clubs should include any insurance premiums paid in respect of any Player. Personal accident, health and life insurance etc., whether or not these are specifically provided for under the terms of any employment contract should be included.

14. Any personal expenses paid as well as other expenses ordinarily and necessarily incurred in connection with complying in full with the obligations under the terms of any employment contract should be included within the Player Related Expenditure.

15. Any loan made, or to be made to a Player which is not repaid within the same Reporting Period should be included as other Player Related Expenditure.

16. Exclusions may apply in respect of any Players who are declared permanently unfit to play at any point during the Reporting Period, for the period after such declaration, but not for any other period of incapacity (e.g. short term injury and short term illness etc.).

17. Redundancy and/or Compromise payments made to Players (e.g. the payment of the balance of the contract as a lump sum which has been discounted to represent accelerated receipt) should also be included for the purposes of determining Player Related Expenditure. Where redundancy payments are staged they should be allocated into the SCMP Documentation for

the Reporting Period in which the payments fall due.

18. Some Clubs appoint Players to other roles e.g. manager or coach. So as to avoid Clubs seeking to load salary payments in favour of the second role, the payments under both roles will be amalgamated and 50% of the total will be attributed as Player Related Expenditure for the purposes of determining compliance with the SCMP Requirement.

19. All of the Player Related Expenditure definitions will be described as being made to a Player or any third party on his behalf, either directly or indirectly, whether in this country or elsewhere.

APPENDIX C – SELF-CERTIFICATION FORM

SALARY COST MANAGEMENT PROTOCOL

LEAGUE 2

SEASON 20xx/yy REPORTING PERIOD

On behalf of __________________________ Football Club I enclose the necessary registration

documents in respect of the permanent / loan / loan extension / signing of __________________

(Player name).

I confirm that having made due enquiry of the Club’s current and anticipated financial outturn for the current Reporting Period (as detailed in the most recent SCMP Submission) this registration will not result in the Club breaching the SCMP Requirement.

Signed: ____________________________________________ (duly authorised official)

Position: ___________________________________________

Date: ______________________________________________

APPENDIX D – LETTER OF GUARANTEE TEMPLATE

[To be drafted on Company/Personal Letterhead]

[Addressed to the Football Club]

[Date]

Dear Sirs,

Re: Non-Repayment of Cash Injection to [Football Club FC Ltd] (Club)

This letter is to confirm that [I/We] have made a cash injection of £[x] to [Football Club FC Ltd] (Donation)

[I/We] confirm that:

(a) the Donation is a permanent donation to the Club with no linked interest payable by the Club to [me/us] or any other third party at any time; and

(b) there is no future requirement for the Club to repay the Donation.

Yours faithfully

Yours faithfully

[Printed Name]

[Position]

[Address]

APPENDIX 6 STANDARD CLAUSES FOR MANAGER CONTRACTS

1 The Manager shall observe and comply with the rules and regulations for the time being in force of any organisation or body the rules and regulations of which the Club is bound to observe including those of The Football Association and the League.

2 The Manager shall comply with all reasonable instructions and requests

(a) given to Club Managers by the League; or

(b) given to the Manager by the Club,

which arise in the first case out of any commercial contract entered into by the League for the benefit of its members or in the second case out of any such contract entered into by the Club for its own benefit and the Manager shall not himself enter into any such contract which conflicts or competes or is reasonably likely to conflict or compete with those entered into by the League

 

 

 

PART 1 – CHAMPIONSHIP FAIR PLAY RULES
Notes: Capitalised Terms have the meanings ascribed to them in Regulation 1 or 16 of the Regulations of The League unless otherwise indicated. The following Rules are supplemental to the Regulations.
This Part consists of the Championship Fair Play Rules which continue to apply for the purposes of reporting in respect of Season 2015/16, and the consequences arising from those reports. Part 2 contains the Profitability and Sustainability Rules which are applicable for Season 2016/17 onwards.
1 Fair Play Requirement
1.1 All Championship Clubs are required to meet the Fair Play Requirement (as defined in Rule 1.2) for each Reporting Period (as defined in Rule 1.4) following the commencement of these Rules. The first Reporting Period for the purposes of these Rules will cover the 2011/12 Season but the consequences of failing to fulfil the Fair Play Requirement will not be effective until 1st December 2014 (see Rule 6 below).
1.2 The Fair Play Requirement is a measure whereby a Championship Club’s Fair Play Result must be:
1.2.1 an amount equal to £nil or greater; or 1.2.2 an amount less than the aggregate of the Permitted Allowances (defined in Rule 5) in relation to the relevant Reporting Period.
1.3 The Fair Play Result is an amount equal to a Championship Club’s profit / loss before tax, after adjustment in accordance with the provisions of Rule 4.2.
1.4 A Reporting Period is the period over which a Championship Club is assessed for the purpose of the Fair Play Requirement. For each Season the Reporting Period is (subject to Rule 2.2 or Rule 2.3) the immediately preceding 12 month period recorded in the Championship Club’s Annual Accounts. For example, for those Championship Clubs with a financial year ending in the period May, June or July the Reporting Period for the 2014/15 Season is the 12 month period ending May, June or July 2014.
2 Variations From ‘Standard’ Reporting Periods
2.1 Championship Clubs may not adjust Reporting Periods for subsequent Seasons without the prior written consent of The League, such consent not to be unreasonably withheld.
2.2 If:
2.2.1 the Annual Accounts for any Championship Club are for a period other than the 12 months described by Rule 1.4, then that Championship Club must prepare 12 Month Accounts (as defined in Rule 2.3); or
2.2.2 any Championship Club has a financial year ending other than during the period May, June or July, then that Championship Club must prepare Additional Accounts (as defined in Rule 2.3).
2.3 The 12 Month Accounts and the Additional Accounts (as applicable) must be an additional set of full accounts (in the same manner and with the same degree of verified detail as if the
Championship Club was obliged to lodge those additional accounts at Companies House) reviewed by the Championship Club’s auditor for a 12 month period ending during May, June or July so as to provide The League with a set of accounts aligned to the Reporting Period as defined in Rule 1.4.
3 Submission of Fair Play Information
3.1 By the 1st December in each Season a Championship Club must submit its:
3.1.1 Annual Accounts;
3.1.2 12 Month Accounts; or
3.1.3 Additional Accounts,
for the immediately preceding Reporting Period together with a Fair Play Calculation (in the form prescribed by The League from time-to-time, and which as at the date of the implementation of these Rules is as set out in Part 1 of Appendix G) for the same Reporting Period (together the Fair Play Information).
3.2 References in these Rules to “Accounts” shall mean the Annual Accounts, 12 Month Accounts or Additional Accounts as applicable to that Championship Club.
3.3 By way of example, by 1st December 2012 each Championship Club must submit it’s Fair Play Information for the financial year ending May, June or July 2012 (exactly which date will be determined by the year end date of the Accounts).
3.4 For the avoidance of doubt the Fair Play Information must be supplied notwithstanding the fact that for the Season covered by the Reporting Period the Championship Club was either a Premier League Club relegated into the Championship (Former Premier League Club) or a League One Club which was then promoted into the Championship (Promoted League One Club).
3.5 The Fair Play Information must: 3.5.1 relate to the Championship Club or if applicable (as detailed in Regulation 16.4) the Group of which the Championship Club is a member;
3.5.2 be approved by management, as evidenced by way of a brief statement (Board Statement) confirming the completeness and accuracy of the information (in the format required by The League from time to time and which as at the date of these Rules is as set out in Part 2 of Appendix G), and signature on behalf of the board of directors of the Championship Club; and
3.5.3 be accompanied by a statement confirming the completeness and accuracy of the information (in the format required by The League from time to time and which as at the date of these Rules is as set out in Appendix H) by the auditor of the Accounts.
3.6 The League may require a Championship Club to provide such further information as it deems necessary (acting reasonably) for the purposes of enabling The League to assess whether a Championship Club has fulfilled (or not) the Fair Play Requirement.
3.7 Any such request shall be made in writing (including by email to the Club Secretary) and shall be responded to in full within 10 Normal Working Days of any such request being made.
3.8 Each Championship 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 Championship 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, Championship Clubs shall not manage their affairs or submit Fair Play Information which is intended to seek to or does take any unfair advantage in relation to the assessment of fulfilment (or non-fulfilment) of the Fair Play Requirement.
4 Fair Play Result
4.1 A Championship Club’s Fair Play Result will be calculated in accordance with these Rules by reference to its Fair Play Information together with any additional information lodged in accordance with Regulation 16.5 and / or Rule 3.6.
4.2 The Fair Play Result is calculated as profit / loss before tax (as identified by the Accounts), adjusted to take into account:
4.2.1 profit / loss on disposal of tangible fixed assets;
4.2.2 depreciation / impairment of tangible fixed assets (net of any capital grants);
4.2.3 amortisation / impairment of intangible fixed assets (other than player registrations);
4.2.4 the element of any transaction(s) with Related Party(ies) (as defined in Appendix A), above or below fair value;
4.2.5 net expenditure on Youth Development Activities (as defined in Appendix B);
4.2.6 financial support for the Championship Club’s Charitable Community Scheme (as defined in Appendix C);
4.2.7 Permitted Exceptional Items (as defined in Appendix D); and
4.2.8 in the case of Promoted League One Clubs or Promoted Championship Clubs (as defined in Rule 8.1) only, Promotion Related Payments (as defined in Appendix E). 4.3 Each of the items listed in paragraphs 4.2.1 to 4.2.3 are as set out in the Accounts, and each of the items listed in paragraphs 4.2.4 to 4.2.8 shall be calculated in accordance with the Appendices A to E to these Rules.
4.4 If the Fair Play Result is £nil or above in any particular Reporting Period, the Championship Club has met the Fair Play Requirement for that Reporting Period.
4.5 Where a Championship Club’s Fair Play Result shows a loss (Fair Play Deficit) then the Fair Play Calculation must also set out the Permitted Allowances (as defined in Rule 5), if any, utilised by the Championship Club during the Reporting Period to meet (if it can) the Fair Play Requirement.
4.6 If the amount of the Fair Play Deficit is equal to or less than the maximum amount of Permitted Allowances available and utilised in respect of the relevant Reporting Period then the Club has met the Fair Play Requirement.
4.7 If the Fair Play Deficit exceeds the maximum amount of Permitted Allowances available and utilised in respect of the relevant Reporting Period then the Club has failed to fulfil the Fair Play Requirement and the provisions of Rule 6 shall apply.
5 Permitted Allowances
5.1 Permitted Allowances means the aggregate of: - 5.1.1 Acceptable Deviation (as defined in Rule 5.2); and
5.1.2 Contributions from Equity Participants and / or Related Party(ies) (as defined in Appendix F).
5.2 The maximum amount of Acceptable Deviation for each Season is as follows:
Reporting Period Acceptable Deviation
2011/12 £4 million
2012/13 £4 million
2013/14 £3 million
2014/15 £3 million
2015/16 £5 million
5.3 The maximum amount of Contributions from Equity Participants and / or Related Party(ies) is as follows:
Reporting Period Equity Contributions
2011/12 £8 million
2012/13 £6 million
2013/14 £5 million
2014/15 £3 million
2015/16 £8 million
5.4 Any amounts claimed to be included within Contributions from Equity Participants and / or Related Party(ies) must have been invested during the relevant Reporting Period or by 1st December immediately following the end of that relevant Reporting Period.
5.5 Further detail regarding Contributions from Equity Participants and / or Related Party(ies) is set out in Appendix F.
6 Consequences of non-fulfilment of the Fair Play Requirement of these Rules (effective 1st December 2014)
6.1 A Championship Club which fails to fulfil the Fair Play Requirement in accordance with these Rules (or is in default of any obligation to provide information in accordance with these Rules) shall be subject to a registration embargo (the “Embargo”) such that The League shall refuse any application by that Championship Club to register any Player with that Championship Club save where the Championship Club:
6.1.1 wishes to offer terms of re-engagement to any Contract Player, Academy Player or Scholar (but always excluding any extension of a Temporary Loan Transfer, as described to in Regulation 52.1); 6.1.2 notwithstanding the exclusion in Rule 6.1.1 regarding Temporary Loan Transfers, obtains permission to register a Goalkeeper in accordance with Regulation 55;
6.1.3 has less than 24 Established Players, but these will only be allowed where the annual Employee Cost of the Player coming in is no more than £600,000 per annum (or pro-rata for shorter contract lengths);
6.1.4 has 24 Established Players, but these will only be allowed where the annual Employee Cost of the Player coming in is no more than:
(a) 75% of the annual equivalent Employee Cost of the Player going out (calculated as an average over the term of the remaining period of both Players’ contracts); or
(b) £600,000 per annum (or pro-rata for shorter contract lengths),
whichever is the lower;
6.1.5 wishes to apply for a non-first team registration for a Player who is as at the proposed date of registration, under the age of 21. For the purposes of these Rules, a non-first team registration is the registration of a Player in accordance with the requirements of the Regulations but whose registration shall, during the period in which the Club is subject to the Embargo, be restricted to the extent that the Player shall not be eligible to:
(a) participate in any first team matches on behalf of that Club; and
(b) may not be the subject of a temporary transfer to any other Club (or club).
The annual Employee Cost of the Player registered on any non-first team registration shall be no more than £60,000 per annum (or pro-rata for shorter contract lengths).
6.2 A Championship Club subject to an Embargo shall not be permitted to:
6.2.1 pay or commit to pay any Transfer Fee, Compensation Fee, Loan Fee or any other form of payment including without limitation sell on and/or contingent payments, in respect of the registration of Players permitted by Rule 6.1; or
6.2.2 make or commit to any payments to Agents in respect of the registration of Players permitted by Rule 6.1, other than by way of payments: (a) in respect of any Player registered in accordance with Rules 6.1.1 and 6.1.2; (b) in respect of any Player registered in accordance with Rules 6.1.3 and 6.1.4 where the payment is:
(i) a benefit in kind and which is required to be disclosed on the Player’s P11D (or equivalent); or
(ii) a deduction from net wages, and payments made in accordance with this Rule 6.2.2(b) shall be referred to as Permitted Agent Payments. 6.3 For the purposes of Rules 6.1.3 and 6.1.5 only, Employee Cost means the payment to or benefits paid in cash or in kind on behalf of a Player including, by way of example and without limitation:
6.3.1 gross basic salary;
6.3.2 signing on fees;
6.3.3 loyalty bonuses;
6.3.4 pension payments;
6.3.5 Permitted Agent Payments;
6.3.6 Image Contract Payment; and/or
6.3.7 (where applicable), employer’s National Insurance Contributions;
for the respective Players.
6.4 An Established Player is:
6.4.1 any Player registered with the Championship Club at the time of the imposition of the Embargo, who:
(a) was 21 years of age or older as at the 30th June immediately prior to the commencement of the Season in which the Club is subject to the Embargo; and
(b) has been named in the starting eleven on the Team Sheet (and started the game) at least five times in:
(i) League Matches;
(ii) matches in the EFL Cup, EFL Trophy; and/or
(iii) matches in the Football Association Challenge Cup,
for that Championship Club (at any time); or
any Player registered with the Club whilst subject to the Embargo (excluding Academy Players, Players registered pursuant to Rule 6.1.5, Scholars and any Emergency Goalkeeper Loan) pursuant to this Rule 6.
6.5 The Embargo will be effective:
in the case of a Championship Club which is in default of any obligation to provide information in accordance with these Rules, from the date of default until such time as the default is remedied to the reasonable satisfaction of The League; and
in the case of a Championship Club which fails to fulfil the Fair Play Requirement, from 1st January in the relevant Season and will apply until such time as the Club meets the Fair Play Requirement in any subsequent Reporting Period (in accordance with these Rules) or The League grants any application lodged in accordance with Rule 6.6.
Guidance
By way of example only, a Championship Club which fails to fulfil the Fair Play Requirement for the Reporting Period 2014/15, or fails to provide Fair Play Information by 1st December 2015 as required by these Rules, shall with effect from 1st January 2016 be subject to an Embargo until such time as that Championship Club lodges Fair Play Information that, when interpreted in accordance with these Rules, confirms that the Championship Club has met the Fair Play Requirement.
6.6 Any Championship Club which is subject to an Embargo under these Rules may, at the same time as lodging its interim accounts and Future Financial Information (each in accordance with the requirements of Regulation 16) (Interim Information) submit an application to have the Embargo lifted where that Championship Club can demonstrate to the Fair Play Panel that, having regard to the detail set out in the Interim Information the Club will, in respect of the Reporting Period to which the Interim Information relates, fulfil the Fair Play Requirement for that Reporting Period. Where any application is approved the Embargo will only be lifted with effect from the opening of the Transfer Window (as determined in accordance with the Regulations) next following the filing of the Interim Information, or the date of the determination of the application (if later).
Guidance
By way of example only, a Championship Club which is subject to an Embargo from 1st January 2016 may apply for that Embargo to be lifted when it lodges Interim Information in March 2016 provided that the Interim Information demonstrates that the Club will by 1st December 2016 lodge Fair Play Information which demonstrates that the Club will fulfil the Fair Play Requirement for the 2015/16 Reporting Period. The Embargo will be lifted on 2nd May 2016 (last day of the Season), or the date of the determination of the application (if later).
6.7 Any Championship Club which has its Embargo removed but which subsequently fails to fulfil the Fair Play Requirement (or is in default of any obligation to provide information in accordance with these Rules) in respect of the period during which the Embargo was lifted shall be treated as being in breach of these Rules and accordingly the Board shall refer the breach to a Disciplinary Commission.
7 Clubs Relegated Out of the Championship
7.1 If a Championship Club is relegated to League One (a Relegated Club) the Relegated Club shall, notwithstanding relegation, remain bound by these Rules following relegation as if it were still a Championship Club until such time as it has complied with all of its obligations in respect of the Reporting Period covering its last Season as a Championship Club. Until such time as the Relegated Club has so complied, each of these Rules shall be deemed to apply to that Relegated Club, other than Rule 6.
7.2 By way of example only:
7.2.1 a Championship Club which becomes a Relegated Club in May 2014 must still submit its Fair Play Information in accordance with Rule 3 for the Reporting Period ending May, June or July 2014 by 1st December 2014 notwithstanding the fact that it is no longer a Championship Club in Season 2014/15; and
7.2.2 if that Relegated Club fails to fulfil the Fair Play Requirement for the Reporting Period 2013/14, or fails to provide Fair Play Information by 1st December 2014 as required by these Rules, it shall not be entitled to a share in the Distribution (if any) (as defined in Rule 10.4) but will not be subject to an Embargo whilst in League One.
8 Clubs Promoted Out of the Championship
8.1 If a Championship Club is promoted to the Premier League (a Promoted Championship Club) the Promoted Championship Club shall, notwithstanding promotion, remain bound by these Rules following promotion as if it were still a Championship Club, until such time as it has complied with all of its obligations in respect of the Reporting Period covering its last Season as a Championship Club. Until such time as the Promoted Championship Club has so complied, each of these Rules shall be deemed to apply to that Promoted Championship Club (other than Rule 6).
8.2 By way of example, a Championship Club promoted in May 2014 shall by 1st December 2014 submit its Fair Play Information in accordance with Rule 3 notwithstanding the fact that it is no longer a member of The League. 8.3 Failure to comply with Rule 8.1 will result in that Promoted Championship Club not being entitled to share in the Distribution (if any) (as defined in Rule 10.4). Further, the Annual Accounts next filed for that Promoted Championship Club shall be utilised by The League for determining whether the Promoted Championship Club has fulfilled the Fair Play Requirement or not (“Accounts Based Assessment”). The Accounts Based Assessment shall (absent manifest error) be final and binding for the purposes of calculating the Fine (if any) payable in accordance with Rule 10.
9 Clubs Relegated Into the Championship
9.1 Former Premier League Club means a Championship Club which was relegated into the Championship at the end of the immediately preceding Season.
9.2 A Former Premier League Club that, during its final Season as a Premier League Club, fully complied with the obligations imposed by Section E of the Rules of the Premier League (and any modification thereof) shall during its first Season as a Championship Club not be subject to
the provisions of: 9.2.1 Rule 6 (save where it fails to comply with the obligation imposed at Rule 3.4, in which case this exemption shall not apply); and 9.2.2 Rule 10.
9.3 Should that Championship Club become a Promoted Championship Club at the end of its first Season in the Championship then the Fair Play Information relating to the Reporting Period covering that first Season as a Championship Club will be assessed in accordance with Rule 8.1 and Rule 10.
9.4 Should that Championship Club not become a Promoted Championship Club at the end of its first Season in the Championship then the Fair Play Information relating to the Reporting Period covering that first Season as a Championship Club will be assessed in accordance with all provisions of these Rules, with no exceptions.
9.5 By way of example:
9.5.1 a Former Premier League Club relegated at the end of Season 2013/14 which had fully complied with the obligations imposed under Premier League Rules in the 2013/14 Season will, on 1st December 2014, be required to submit Fair Play Information relating to the Reporting Period ending in May, June or July 2014. That Club will not be subject to an Embargo or fine even if that Fair Play Information demonstrates that the Fair Play Requirement has not been fulfilled in respect of that Reporting Period.
9.5.2 Further if that Club:
(a) secures promotion in May 2015, and if the Fair Play Information lodged in December 2015 demonstrates that the Fair Play Requirement was not fulfilled in respect of the 2014/15 Reporting Period, the Club will be fined in accordance with Rule 10; or
(b) fails to secure promotion in May 2015, and the Fair Play Information relating to the Reporting Period ending in May, June or July 2015 demonstrates that the Fair Play Requirement was not fulfilled in respect of that Reporting Period, that Club will be subject to an Embargo with effect from 1st January 2016.
10 Financial Penalties
10.1 If non-fulfilment of the Fair Play Requirement is reported by a Promoted Championship Club for the Reporting Period covering the Season in which promotion was achieved (commencing with the 2013/14 Reporting Period (a Defaulting Club) then that Defaulting Club shall be subject to an automatic financial penalty (“Fine”) calculated on the basis of the amount by which the Championship Club failed to fulfil the Fair Play Requirement (“Excess”):
10.1.1 1% of the Excess between £1 and £100,000;
10.1.2 20% of the Excess between £100,001 and £500,000;
10.1.3 40% of the Excess between £500,001 and £1,000,000;
10.1.4 60% of the Excess between £1,000,001 and £5,000,000;
10.1.5 80% of the Excess between £5,000,001 and £10,000,000; and
10.1.6 100% of the Excess over £10,000,000.
10.2 By way of example, if a Defaulting Club had exceeded the Fair Play Requirement by £300,000 then that Defaulting Club would be fined:
10.2.1 1% of the first £100,000 (i.e. £1,000); and
10.2.2 20% of the next £200,000 (i.e. £40,000),
giving a total Fine of £41,000.
10.3 Any Fine shall be payable by a Defaulting Club within 14 days of receipt by the Defaulting Club of a notice from The League setting out the basis of calculation of the Fine or within 7 days of the determination of any appeal, if later. In the event that payment is not made by a Promoted Championship Club in accordance with this timescale, that Championship Club will be deemed to have explicitly authorised The League to notify the Premier League of such non-payment and to register the same as a debt due to The League for the purposes of Premier League Rule E.25 (or any replacement or modified rule) and will be deemed to have irrevocably waived the right to raise any objection to that action. 10.4 Fines collected in accordance with Rule 10.1 shall not be paid into the Pool Account but shall instead be paid into a Championship Financial Fair Play Account.
Guidance
The use of any Fine is dealt with in accordance with the Solidarity arrangements with the Premier League.
11 Fair Play Panel
11.1 The League shall create a Fair Play Panel to:
11.1.1 consider any challenge by a Championship Club, Promoted Championship Club or Relegated Club to a decision of The League in respect of the determination of its Fair Play Result and the consequences thereof, including (by way of example and without limitation):
(a) assessment of transactions with Related Party(ies) above or below fair value;
(b) the imposition of an Embargo in accordance with the provisions of Rule 6;
(c) refusal of permission to register a Player; and
11.1.2 consider any application for Permitted Exceptional Items to be considered in calculating the Fair Play Result.
11.2 The Fair Play Panel shall be made up of any two of the independent directors of the Board of The League (excluding the Chief Executive).
11.3 The Fair Play Panel shall, in assessing any application, at all times bear in mind:
11.3.1 the overall objective of seeking to prevent any attempt to circumvent the Financial Fair Play Objectives as defined in Regulation 18.1 of the Regulations of The League;
11.3.2 the substance of any proposed transaction or relationship, and not merely the legal form;
11.3.3 the need to maintain the integrity of competition within the Championship; and
11.3.4 the need for equal treatment of all Championship Clubs wherever possible. 11.4 When determining any application in accordance with Rule 11.1.1 and / or 11.1.2 the Fair Play Panel may, notwithstanding Rule 12 below, choose to publish reasons for any decision where it considers that to do so would assist Championship Clubs generally in complying with these Rules. However, wherever possible the Fair Play Panel shall seek to ensure any such reasons that are published are generic and do not disclose confidential information relating to any particular Club.
11.5 The League and the Chairman of the Board shall consider decisions of the Fair Play Panel in any review of the operation of these Rules in conjunction with the Championship Division.
11.6 The decisions of the Fair Play Panel shall be final and binding on all Championship Clubs.
12 Confidentiality
12.1 Information provided by a Championship Club to The League and/or the Fair Play Panel in accordance with these Rules shall only be made available to such members of the Executive as are required to know such information in order to fulfil their duties to The League (and who are bound by obligations of confidentiality as part of their contract of employment) and the members of the Fair Play Panel and shall not be disclosed to the Board generally, provided always that The League shall be entitled to publish reports of any decision of the Fair Play Panel in accordance with Rule 11.4 and details of any fines imposed in accordance with Rule 10.1.
APPENDIX A - TRANSACTIONS WITH RELATED PARTY(IES)
1 Introduction
1.1 Having set a limit on the amount of Contributions from Equity Participants and / or Related Party(ies) it is important that the principle is not undermined by other arrangements with Related Party(ies) which are other than for fair value.
2 Disclosure
2.1 If there have been transactions between Related Parties during a Reporting Period, the Championship Club must disclose the nature of the relationship with the Related Party(ies), as well as information about those transactions and outstanding balances, including commitments, necessary for an understanding of the potential effect of the relationship on the Accounts.
2.2 If under FRS 8, the Championship Club is not required to disclose such transactions with Related Party(ies) within the notes to the Accounts, the transactions should be detailed in a separate schedule attached to the Fair Play Calculation as described in Appendix G Part 1.
2.3 Items of a similar nature may be disclosed in aggregate except when separate disclosure is necessary for an understanding of the effects of Related Party Transactions on the Accounts.
3 Principle of Adjustment
3.1 Where any element of profit / loss before tax relates to any transaction(s) with Related Party(ies) above or below fair value then, for the purpose of the Fair Play Result, the Championship Club must determine the fair value of any Related Party Transaction(s). If the estimated fair value is different to the recorded value then an appropriate adjustment must be made in calculating the Fair Play Result, bearing in mind, however, that:
3.1.1 no upward adjustments can be made to income; and
3.1.2 no downward adjustments can be made to costs / expenses.
4 Examples of Related Party Transactions
4.1 Examples of Related Party Transactions that require a Championship Club to demonstrate the estimated fair value of the transaction include, but are not limited to:
4.1.1 sale of sponsorship rights by a Championship Club to a Related Party;
4.1.2 sale of corporate hospitality tickets and / or sale of the right to use of an executive box, by a Championship Club to a Related Party; and
4.1.3 any transaction with a Related Party whereby goods or services are provided to a Championship Club.
4.2 Examples of Related Party Transactions that must always be excluded from income are:
4.2.1 monies received by a Championship Club from a Related Party as a donation; and
4.2.2 settlement of liabilities on behalf of the Championship Club by a Related Party.
4.3 In effect, contributions from / savings in relation to a Related Party will be treated as Contributions from Equity Participants / Related Party(ies) as further described in Appendix F.
5 Related Party, Related Party Transactions and Fair Value of Related Party Transactions
5.1 A Related Party is a person or entity (or any Associate of that person or entity) that is Interested in the Championship Club (or any member of the Group that is included within the Accounts lodged in accordance with these Rules). 5.2 Interested and Associate shall have the meanings as ascribed to them in Regulations 101.2 to 101.4 inclusive and 102.1 of the Regulations. Regulation 101.5 (holdings of 10% or less held for investment purposes only to be disregarded) shall not apply for the purposes of these Rules.
5.3 In considering each possible relationship, attention is directed to the substance of the relationship and not merely the legal form.
5.4 A Related Party Transaction is a transfer of resources, services or obligations between Related Party(ies), regardless of whether a price has been charged.
5.5 A Related Party Transaction may, or may not, have taken place at fair value. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction. An arrangement or a transaction is deemed to be ‘not transacted on an arm’s length basis’ if it has been entered into on terms more favourable to either party to the arrangement than would have been obtained if there had been no Related Party relationship.
APPENDIX B – NET EXPENDITURE ON YOUTH DEVELOPMENT ACTIVITIES
1 Introduction
1.1 The Fair Play Requirement allows a Championship Club to exclude expenditure on Youth Development Activities from expenses in arriving at the Fair Play Result because the aim is to encourage investment and expenditure on facilities and activities for the long-term benefit of the Championship Club.
1.2 Appropriate adjustment may be made such that Expenditure on Youth Development (as defined at Paragraph 2 below), is excluded from the calculation of the Fair Play Result to the extent (if any) that Expenditure on Youth Development exceeds any grant income received by the Championship Club from any of the football governing bodies and is charged in the Accounts being assessed under Rule 3.1.
1.3 In practice it is envisaged this figure will be derived from the returns submitted by the Championship Club to the Football League Trust Limited (or any replacement body) as part of the on-going financial monitoring of the operation of the Championship Club’s Academy or Centre of Excellence, subject to any adjustments pursuant to Paragraph 5 below. However, The League reserves the right to require such further information as it determines to enable it to verify compliance with the Rules.
2 Expenditure on Youth Development
2.1 Expenditure on Youth Development means expenditure by a Championship Club that is Directly Attributable (i.e. would have been avoided if the Championship Club did not undertake Youth Development Activities) to activities to train, educate and develop the Championship Club’s Youth Players.
3 Youth Development Activities
3.1 Activities that are considered as Youth Development Activities include, but are not limited to:
3.1.1 organisation of a youth programme;
3.1.2 youth teams taking part in official competitions or programmes played at national, regional or local level and recognised by the member association;
3.1.3 football education programme for different age groups (e.g. playing skills, technical, tactical and physical);
3.1.4 education programme on the Laws of the Game;
3.1.5 medical support for youth players; and
3.1.6 non-football education arrangements.
4 Directly Attributable Expenses
4.1 Directly Attributable Expenses include, but are not limited to costs of:
4.1.1 materials and services used or consumed in undertaking the Youth Development Activities, such as accommodation costs, medical fees, educational fees, travel and subsistence, kit and clothing, facility hire;
4.1.2 employee benefits for employees wholly involved in Youth Development Activities (other than players), including the Academy Manager and Assistant Academy manager referred to in Regulation 16.15.1(f), if their employment by the Championship Club is wholly for the Youth Development Activities; and
4.1.3 employee salary and any other benefits for Youth Players and Scholars of the Championship Club.
5 Excluded Items
5.1 If a Championship Club cannot separately identify expenditure on Youth Development Activities from other expenditure, then such expenditure will not be treated as expenditure on Youth Development Activities. 5.2 Subject to Paragraph 5.3, the following are not part of expenditure on Youth Development Activities for the purpose of this requirement:
5.2.1 player scouting costs;
5.2.2 fees to obtain the registration of a Youth Player, such as any fees paid to an agent or to another Championship Club;
5.2.3 selling, administrative and other general overhead expenditure unless this expenditure can be directly attributed to the Youth Development Activities;
5.2.4 costs of employee benefits for employees only partly involved in Youth Development Activities (for example, a coach having part-time involvement in Youth Development Activities and otherwise working for the Championship Club); and
5.2.5 the cost of property, stadium and equipment and / or depreciation thereof (the depreciation of tangible fixed assets including, but not limited to, any such assets relating to Youth Development Activities is already capable of being added back under Rule 4.2.2).
5.3 In the event that EPPP allows any of the above excluded items to count towards the calculation of a Championship Club’s grant funding then, to that extent, such costs will be allowable under these Rules.
APPENDIX C – FINANCIAL SUPPORT FOR A CLUB’S CHARITABLE COMMUNITY SCHEME
1 Introduction
1.1 The Fair Play Requirement allows a Championship Club to exclude the net amount of any financial support it provides to its own Charitable Community Scheme (one only) because the aim is to encourage investment in the scheme for the long-term benefit of the Championship Club’s local community.
1.2 Appropriate adjustment may be made such that Net Financial Support for the Charitable Community Scheme is excluded from the calculation of the Fair Play Result.
2 Charitable Community Scheme
2.1 The Charitable Community Scheme means the one charitable body established by the Club and which is recognised by Football League (Community) Limited as that Championship Club’s community scheme.
3 Net Financial Support
3.1 Net Financial Support means any amounts paid by the Championship Club to the Charitable Community Scheme net of any amounts paid by the Charitable Community Scheme to the Championship Club.
3.2 Non cash transactions are to be disregarded for the purposes of this assessment.
APPENDIX D – PERMITTED EXCEPTIONAL ITEMS
1 Introduction
1.1 This Appendix sets out further details as to what may (or may not) be regarded as a Permitted Exceptional Item within the Fair Play Calculation.
2 Permitted Exceptional Items
2.1 Championship Clubs can apply to the Fair Play Panel at any time for permission for any item to be included as a Permitted Exceptional Item adjustment (in accordance with Rule 4.2.7) in calculating their Fair Play Result. 2.2 The Fair Play Panel shall, subject always to Rule 11.3, have absolute discretion when determining any application made under paragraph 2. 2.3 Applications under paragraph 2.1 must be made in writing together with copies of all documents in support of such application, to The League which will then (absent any prior decision of the Fair Play Panel on the same subject matter) refer the matter to the Fair Play Panel for determination. The decision of the Fair Play Panel shall be provided to the Club not later than 28 days after the date of receipt of the application. For the avoidance of doubt, the last date for filing any application for a given Reporting Period is 1st October immediately preceding the date for filing Fair Pay Information for that Reporting Period in accordance with the provisions of Rule 3.1.
2.4 The following items may be the subject of an application for treatment as a Permitted Exceptional Item under these Rules by a Championship Club:
2.4.1 The timing of transfer fund receipts and their subsequent use in financing replacement players (for example where a Championship Club recognises a transfer receipt in one Reporting Period but then utilises those funds for player purchases in a subsequent Reporting Period);
2.4.2 Post year end player sales proceeds which can be demonstrated to have been used to fund previous losses;
2.4.3 Costs (net of any insurance proceeds) associated with a career ending injury;
2.4.4 Exceptional litigation and associated professional fees;
2.4.5 Exceptional bad debts; and
2.4.6 Stadium revaluation losses or reversal of losses including depreciation adjustments to the extent that these are recognised in the profit and loss account in line with FRS 15 or equivalent International Accounting Standard.
2.5 By way of further illustration in the event a Championship Club suffers a material loss through, say, its major contracted sponsor being unable to fulfil its financial obligations under that contract or where a material bad debt arises through the liquidation of another football club both these items would be covered by 2.4.5 above.
2.6 The League may from time to time add to the list of Permitted Exceptional Items set out in paragraph 2.4 without requiring an amendment to these Rules.
2.7 The following items cannot be the subject of an application for treatment as a Permitted Exceptional Item under these Rules by a Championship Club:
2.7.1 profit / loss on the disposal of player registrations; 2.7.2 amortisation / impairment of player registrations (subject to 2.4.3 above); and
2.7.3 any costs associated with a change in team management including, by way of example and without limitation, termination payments to former managers, or compensation fees to former clubs.
APPENDIX E – PROMOTION RELATED PAYMENTS
1 Introduction
1.1 The Fair Play Requirement is intended to address expenditure incurred in the relevant Reporting Period and recognises that a Club securing promotion would ordinarily be obliged to account for Promotion Related Payments within that Reporting Period even though they only arise once promotion has been secured.
1.2 Appropriate adjustment may be made such that the total amount of any Promotion Related Payments is excluded from the calculation of the Fair Play Result.
2 Promotion Related Payments
2.1 Promotion Related Payments include:
2.1.1 any payments paid (or accruing due to be paid) to any employee(s) under the terms of a contract of employment entered into between the Promoted Championship Club or Promoted League One Club (as applicable) and the employee(s);
2.1.2 amortisation costs of any contingent amounts of any Compensation Fee, Transfer Fee or Loan Fee paid (or accruing due to be paid) to any other Club (or club) or any Agent’s Fee which have been capitalised as intangible assets by the Championship Club; and 2.1.3 amounts required to be paid pursuant to Regulation 10.
in each case in the Reporting Period relating to the Season in which promotion was achieved, to the extent that amounts deriving from such payments are reflected in the Reporting Period’s Accounts and only where such sums are as a direct consequence of the Promoted Championship Club or Promoted League One Club (as applicable) securing promotion.
2.2 Promotion Related Payments do not include:
2.2.1 “win”, “position” or other types of bonuses ordinarily payable during the course of a Season to any employee as distinguished from payments only payable in the event of promotion;
2.2.2 salary increases awarded to employees under any contract following promotion to apply in the first Season following such promotion (so-called divisional related pay); and
2.2.3 any reclassification of amounts paid (or already accrued due to be paid) as Promotion Related Payments.
APPENDIX F - CONTRIBUTIONS FROM EQUITY PARTICIPANTS / RELATED PARTY(IES)
1 Introduction
1.1 This Appendix sets out further details as to what will (or will not) be regarded as a Contribution from an Equity Participant and / or Related Party.
2 Contributions
2.1 Contributions from Equity Participants are to be classified in accordance with FRS 25 or equivalent International Accounting Standard. The classification of a financial instrument between liabilities and equity is based on the substance of the contractual arrangement. (FRS 25 Para 15).
2.2 Contributions from a Related Party include:
2.2.1 capital contributions being a contribution by a Related Party that is an unconditional gift made to the Championship Club by a Related Party which increases the Championship Club’s equity without any obligation for repayment or to do anything in consideration for receiving them. This is an increase in equity and typically, such amounts are recorded in a separate reserve, often known as the ‘capital reserve’. For example, a permanent and unconditional waiver of inter-company or Related Party debt must be treated as a capital contribution, as it results in an increase in equity; and / or
2.2.2 the difference between the actual income / expenditure in a Reporting Period and the fair value of the transaction(s) in a Reporting Period (as determined in accordance with Appendix A) actually received / saved during the Reporting Period.
2.3 The following types of transaction are not Contributions from Equity Participants and / or Related Party(ies):
2.3.1 positive movement in net assets / liabilities arising from a revaluation;
2.3.2 creation, or increase in the balance, of other reserves where there is no contribution from equity participants;
2.3.3 a transaction whereby the Championship Club has a liability in that the entity has a present obligation to act or perform in a certain way;
2.3.4 contributions from owners in respect of instruments classified as liabilities; and
2.3.5 the write off of any historical interest accrued on debts due to or from Equity Participants and / or Related Party(ies) or members of the Group of the Championship Club.
2.4 The onus is on the Championship Club to demonstrate the substance of the transaction, which must have been completed in all respects and without any condition attached. An intention or commitment from owners to make a contribution is not sufficient for such a contribution to be taken into consideration.
2.5 For the avoidance of doubt to the extent that Contributions from Equity Participants and / or Related Party(ies) made after the end of the Reporting Period but prior to 1st December immediately following the end of that Reporting Period are utilised in accordance with Rule 4.5 in respect of the earlier Reporting Period they cannot also be utilised again during the subsequent Reporting Period notwithstanding the fact that the relevant transaction was completed during that subsequent Reporting Period.
APPENDIX G: FAIR PLAY CALCULATION AND BOARD STATEMENT
Part 1 – Fair Play Calculation
Part 2 – Board Statement
In accordance with the requirements of the Championship Financial Fair Play Rules of The League, we, the Directors of XYZ Football Club Limited (the Club), hereby report in respect of the [Club’s] OR [the Group’s (of which the Club is a member)] accounting period of ♦ months ended on ♦ 20♦ (the Reporting Period) that [with the exception(s) noted below]:
(1) the [Club / Group] has operated internal financial control policies and procedures which are designed to meet the Championship Financial Fair Play rules of The League (the Rules);
(2) the Fair Play Calculation of the directors of the [Club / Group] (the Calculation) as set out above has been prepared in accordance with the Rules;
(3) the other Fair Play Information has been prepared in accordance with the Rules.
[The exception(s) referred to above is/are as follows:
• …..]
For and on behalf of the Board of XYZ Football Club Limited:
[Signature of Director and date of signing]
APPENDIX H: INDEPENDENT AUDITOR’S STATEMENT
The Directors
[XYZ Football Club Limited]
Dear Sirs
Report of [firm] to [Football Club Limited] ("the Company") on agreed procedures in relation to the Championship Financial Fair Play Rules of The League (“the Rules”)
In accordance with the terms of our engagement letter dated [date], we have completed those procedures which we have agreed with the Directors of the Company and set out below relating to the attached Fair Play Calculation of the directors of the Club (“the Calculation”) [including the summary of Related Party Transactions and the summary of Promotion Related Payments] for the accounting period of [ ] months ending [date] (“Schedule A”), which has been prepared by, and is the sole responsibility of, the Directors of the Company. Our engagement was undertaken in accordance with International Standard on Related Services 4400 Engagements to Perform Agreed-upon Procedures Regarding Financial Information.
Our report has been prepared for the Company solely in connection with the Championship Financial Fair Play Rules of The League. It has been released to the Company on the basis that our report shall not be copied, referred to or disclosed, in whole (save for the Company's own internal purposes and submission to The League) or in part, without our prior written consent.
Our report was designed to meet the agreed requirements of the Company determined by the Company's needs at the time. Our report should not therefore be regarded as suitable to be used or relied on by any party wishing to acquire rights against us other than the Company for any purpose or in any context. Any party other than the Company who obtains access to our report or a copy and chooses to rely on our report (or any part of it) will do so at its own risk. To the fullest extent permitted by law, [firm] will accept no responsibility or liability in respect of our report to any other party.
As the agreed procedures do not constitute either an audit or a review in accordance with International Standards on Auditing (UK and Ireland) or International Standards on Review Engagements (UK and Ireland), we do not express any assurance on the Calculation. Had we been engaged to perform and had performed additional procedures, an audit or a review in accordance with International Standards on Auditing (UK and Ireland) or International Standards on Review Engagements (UK and Ireland), other matters might have come to light that would have been reported to you.
This report relates only to the financial information specified and does not extend to any financial statements of the Company taken as a whole.
The agreed procedures that we have performed were as follows:
1) Obtain a copy of the Company’s Fair Play Calculation (“Schedule A”) and check it for arithmetical accuracy with reference to the Rules;
2) Check the extraction of the figures detailed in the Fair Play Calculation shown in Schedule A from the underlying financial records, being the nominal ledger and year-end financial statements;
3) Obtain from the Company a breakdown of all of the Company’s Related Party Transactions (as defined in Paragraph 5 of Appendix A of the Rules) during the Reporting Period. Where any transaction is both in excess of £100,000 and also would have qualified as an example of a Related Party transaction as per Paragraph 4 of Appendix 1 of the Rules, we have sought information and documentary evidence from the Company (as attached) of its own fair value assessment of each relevant transaction.
4) [Obtain the schedule detailing the Net Expenditure on Youth Development Activities and reconcile the list of expenditure included therein to the expenditure allowed under Appendix B of the Rules];
5) [Obtain the schedule detailing the Financial support for the Championship Club’s Charitable Community Scheme and reconcile the list of expenditure included therein to the expenditure allowed under Appendix C of the Rules];
6) [Obtain a copy of all Players’ contracts and transfer fee agreements in relation to which Promotion Related Payments have been detailed in the calculation and reconcile the figures per the calculation back to the Players’ contracts and transfer fee agreements];
7) [Obtain confirmation from the directors of the company that the amount of contributions from Equity participants and/or related parties utilised in the Fair Play Calculation was invested in the relevant Reporting Period and has been recognised as equity in line with the relevant accounting standards];
8) [For each funding contribution made to the company during both, the year ended [date] and the post year end period ended 1st December 2014, obtain a copy of the relevant documentation along with confirmation of whether the funding has been treated as debt or equity. Agree that the associated terms and conditions demonstrate that the classification of these funding contributions meet the criteria for being either a debt or equity instrument in line with the appropriate accounting standards].
There are no practicable procedures that would enable us to identify items not showing in the Calculation or the accounting records of the [Club] or [Group] or which have not otherwise been brought to our attention. We have, however, obtained written representations from the directors of the Club that the Calculation is complete and accurate.
As a result of our work we can report that that no errors were found in respect of these agreed procedures [save for our reported findings below:
a) With respect to item 1) we found…..
b) With respect to item 2) we found…..
c) With respect to item 3) we found….. etc].
Yours faithfully
[Firm]
Date
PART 2 – CHAMPIONSHIP PROFITABILITY AND SUSTAINABILITY RULES
Notes: Capitalised Terms have the meanings ascribed to them in Regulation 1 or 16 of the Regulations of The League unless otherwise indicated.
The following Rules are supplemental to the Regulations.
1 Definitions
1.1 Capitalised Terms have the meanings ascribed to them in the Articles of Association and the Regulations of The League unless otherwise indicated below:
1.1.1 Accounting Reference Period means the period in respect of which Annual Accounts are prepared.
1.1.2 Adjusted Earnings Before Tax means Earnings Before Tax adjusted to exclude costs (or estimated costs as the case may be) in respect of the following:
(a) depreciation and/or impairment of tangible fixed assets, amortisation or impairment of goodwill and other intangible assets (but excluding amortisation and/or impairment of the costs of players’ registrations);
(b) Women’s Football Expenditure;
(c) Youth Development Expenditure; and
(d) Community Development Expenditure.
Each of Youth Development Expenditure, Women’s Football Expenditure and Community Development Expenditure shall only be excluded from the calculation of Adjusted Earnings Before Tax if separately disclosed:
(i) by way of notes to the Annual Accounts; or
(ii) by way of supplementary information which reconciles to the Annual Accounts and which has been subject to independent audit.
1.1.3 Annual Accounts means:
(a) the accounts which each Club’s directors are required to prepare pursuant to section 394 of the 2006 Act; or
(b) if the Club considers it appropriate or the Executive so requests, the group accounts of the Group of which the Club is a member and which it is required to prepare pursuant to section 399 of the 2006 Act, or which it is required to deliver to the Registrar of Companies pursuant to section 400(2)(e) or section 401(2)(f) of the 2006 Act,
provided that in either case the accounts are prepared to an accounting reference date (as defined in section 391 of the 2006 Act) which falls between 31st May and 31st July inclusive. If the accounting reference date falls at any other time, separate accounts for the Club or the Group as appropriate must be prepared for a period of twelve months ending on a date between 31st May and 31st July inclusive, and in such a case “Annual Accounts” means those accounts.
Annual Accounts must be prepared and audited in accordance with all legal and regulatory requirements applicable to accounts prepared pursuant to Section 394 of the 2006 Act.
1.1.4 Cash Losses means aggregate Adjusted Earnings Before Tax after:
(a) write back of:
(i) amortisation and/or impairment of Players’ registrations; and
(ii) profit or loss on the transfer of Players’ registrations; and
(b) inclusion of net cash flow in respect of transfers of Players’ registrations.
1.1.5 Championship FFP Rules means the Championship Financial Fair Play Rules adopted by Championship Clubs in April 2012.
1.1.6 Community Development Expenditure means:
(a) net expenditure by a Club directly attributable to activities (whether in the United Kingdom or abroad) for the public benefit to promote participation in sport and advance social development; and
(b) donations made by the Club:
(i) to United Kingdom charities in a form recognised by such charities; and/or
(ii) for foreign charitable purposes in a form which (had the donations been made to registered United Kingdom charities) would have been recognised as charitable.
1.1.7 Earnings Before Tax means profit or loss before tax, as shown in the Annual Accounts.
1.1.8 Fair Market Value means the amount for which an asset could be sold, licensed or exchanged, a liability settled, or a service provided, between knowledgeable, willing parties in an arm’s length transaction.
1.1.9 Group for the purposes of these Rules, has the meaning set out in Section 474(1) of the 2006 Act save that it shall also include any other entity that carries on any material aspect of the football operations of the Club.
1.1.10 Related Party Transaction means a transaction:
(a) disclosed in a Club’s Annual Accounts as a related party transaction; or
(b) which would have been disclosed as such except for an exemption under the accounting standards under which the Annual Accounts were prepared, in which case it must be detailed by way of supplementary information which reconciles to the Annual Accounts and which has been subject to independent audit.
Guidance
If the accounting standards applied by the Club do not require the Club to disclose Related Party Transactions within the notes to the Annual Accounts, the transactions should be detailed in a separate schedule and submitted to the Executive.
1.1.11 Secure Funding means funds which have been or will be made available to the Club in an amount equal to or in excess of any Cash Losses which the Club has made in respect of the period from T-2 or is forecast to make up to the end of T+2. Secure Funding may not be a loan and shall consist of:
(a) contributions that an equity participant has made by way of payments for shares through the Club’s share capital account or share premium reserve account; or
(b) an irrevocable commitment by an equity participant to make future payments for shares through the Club’s share capital account or share premium reserve account. This irrevocable commitment shall be evidenced by a legally binding agreement between the Club and the equity participant and may if the Executive so requires be secured by one of the following:
(i) a personal guarantee from the ultimate beneficial owner of the Club, provided that the Executive is satisfied that
1) he is of sufficient standing; and
2) the terms of the guarantee are satisfactory;
(ii) a guarantee from the Club’s Parent Undertaking or another company in the Club’s Group, provided that the Executive is satisfied that
1) the guaranteeing company is of sufficient standing; and
2) the terms of the guarantee are satisfactory;
(iii) a letter of credit from a Financial Institution of sufficient standing and an undertaking from the Club’s directors to The League to call on the letter of credit in default of the payments from the equity participant being made;
(iv) payments into an escrow account, to be paid to the Club on terms satisfactory to the Executive; or
(v) such other form of security as the Executive considers satisfactory; or
(c) such other form of secure funding as the Executive considers satisfactory.
1.1.12 T means the Club’s Accounting Reference Period ending in the year in which assessment pursuant to Rules 2.2 to 2.9 takes place, and:
(a) T-1 means the Club’s Accounting Reference Period immediately preceding T;
(b) T-2 means the Club’s Accounting Reference Period immediately preceding T-1;
(c) T+1 means the Club’s Accounting Reference Period immediately following T; and
(d) T+2 means the Club’s Accounting Reference Period immediately following T+1.
1.1.13 Women’s Football Expenditure means expenditure by a Club directly attributable to activities to train, educate and develop players involved in women’s football teams (including, for the avoidance of doubt, such activities as they relate to female players under the age of 18);
1.1.14 Youth Development Expenditure means expenditure by a Club directly attributable to activities to train, educate and develop Academy Players net of any youth development grant income received by the Club from any of the football governing bodies.
2 Profitability and Sustainability 2.1 Rules 2.2 to 2.9 shall apply with effect from Season 2016/17.
2.2 Each Club shall by 1st March in each Season submit to the Executive:
2.2.1 copies of its Annual Accounts for T-1 (and T-2 if these have not previously been submitted to the Executive) together with copies of the directors’ report(s) and auditor’s report(s) on those accounts;
2.2.2 its estimated profit and loss account and balance sheet for T which shall:
(a) be prepared in all material respects in a format similar to the Club’s Annual Accounts; and
(b) be based on the latest information available to the Club and be, to the best of the Club’s knowledge and belief, an accurate estimate as at the time of preparation of future financial performance; and 2.2.3 if Rule 2.5 applies to the Club, the calculation of its aggregated Adjusted Earnings Before Tax for T, T-1 and T-2 in a form approved by the Executive from time to time and which as at the date of these Rules is set out in Appendix 1.
Guidance
The Executive will in due course consider the Annual Accounts for the Accounting Reference Period in respect of which information pursuant to Rule 2.2.2 is submitted and in particular examine whether any material variances indicate that the estimated financial information was not prepared in accordance with Rule 2.2.2(b).
2.3 The Executive shall determine whether consideration included in the Club’s Earnings Before Tax arising from a Related Party Transaction is recorded in the Club’s Annual Accounts at a Fair Market Value. If it is not, the Executive shall restate it to Fair Market Value. 2.4 The Executive shall not exercise its power set out in Rule 2.3 without first having given the Club reasonable opportunity to make submissions as to:
2.4.1 whether the said consideration should be restated; and/or
2.4.2 what constitutes its Fair Market Value.
2.5 If the aggregation of a Club’s Earnings Before Tax for T-1 and T-2 results in a loss, any consideration from Related Party Transactions having been adjusted (if appropriate) pursuant to Rule 2.3, then the Club must submit to the Secretary the calculation of its Adjusted Earnings Before Tax for each of T, T-1 and T-2.
2.6 If the aggregation of a Club’s Adjusted Earnings Before Tax for T, T-1 and T-2 results in a loss of up to the Lower Loss Threshold (calculated in accordance with Rule 3), then the Executive shall determine whether the Club will, until the end of T+1, be able to fulfil its obligations as set out in Regulations 16.19.8(a), (b) or (c).
2.7 Where the Executive determines, in its reasonable opinion and having considered any information provided to it by the Club, that the Club may not be able to fulfil its obligations as set out in Regulations 16.19.8(a), (b) or (c), the Executive shall have the powers set out in Regulation 16.20.
2.8 If the aggregation of a Club’s Adjusted Earnings Before Tax for T, T-1 and T-2 results in a loss that exceeds the Lower Loss Threshold, then the following shall apply:
2.8.1 the Club shall provide, by 31st March in the relevant Season, Future Financial Information to cover the period commencing from its last accounting reference date (as defined in section 391 of the 2006 Act) until the end of T+2 and a calculation of estimated aggregated Adjusted Earnings Before Tax until the end of T+2 based on that Future Financial Information;
2.8.2 the Club shall provide such evidence of Secure Funding as the Executive considers sufficient; and 2.8.3 if the Club is unable to provide evidence of Secure Funding as set out in Rule 2.8.2, the Executive shall have the powers set out in Regulation 16.20.
2.9 If the aggregation of a Club’s Adjusted Earnings Before Tax for T, T-1 and T-2 results in a loss that exceeds the Upper Loss Threshold (calculated in accordance with Rule 3) then: 2.9.1 the Executive may exercise its powers set out in Regulation 16.20;
2.9.2 the Club shall be treated as being in breach of these Rules and accordingly The League shall refer the breach to the Disciplinary Commission in accordance with section 8 of the Regulations.
3 Loss Thresholds
3.1 The Lower Loss Threshold and Upper Loss Threshold for each Club shall be calculated based on the aggregation of the Annual Lower Loss Thresholds and Annual Upper Loss Thresholds set out in the following table, by reference to the league of which the Club was a member in the Season covered by the applicable Accounting Reference Period:
Annual Lower Loss Threshold Annual Upper Loss Threshold
Premier League Subject to Rule 3.2, £5 million Subject to Rule 3.2, £35 million
The League Subject to Rule 3.3, £5 million Subject to Rule 3.3, £13 million
Guidance
By way of example a Club that was a member of The League in 2014/15, the Premier League in 2015/16 and The League in 2016/17, will have:
(a) a Lower Loss Threshold of £15m; and (b) an Upper Loss Threshold of £61m (using the figures set out in Rule 3.1).
3.2 The Loss Thresholds for any Accounting Reference Periods relating to Seasons when Clubs were members of the Premier League shall be calculated on the basis of the three year aggregated figures set out in Premier League Rules E.57 and E.59 respectively (as amended, extended or replaced from time to time in accordance with the Rules of the Premier League) divided into three equal annual instalments.
3.3 Where there is an adjustment to the Premier League’s Annual Lower Loss Threshold and/or Annual Upper Loss Threshold, as described in Rule 3.2, then The League’s Annual Lower Loss Threshold and/or Annual Upper Loss Threshold for the equivalent period shall be adjusted by a percentage equal to the percentage change applied by the Premier League.
Guidance
By way of example, if for Season 2017/18 the Premier League introduce an Annual Lower Threshold of £6m and an Annual Upper Threshold of £36m then the Thresholds for The League in that Season will be £6m and £13.37m. For ease, threshold figures will be rounded up to the nearest £10,000.
4 Duty of Disclosure
4.1 The Executive may require a Club to provide such further information as the Executive deems necessary (acting reasonably) for the purposes of enabling the Executive to assess whether a Club has met (as applicable) the Profitability and Sustainability Rules or not. By way of example, and without limitation, additional information may be requested where:
4.1.1 any submission is incomplete;
4.1.2 there are insufficient assumptions; or
4.1.3 additional evidence is required to support certain assumptions.
4.2 Any such request shall be made in writing (including by email to the Finance Director or equivalent) and shall be responded to in full within 5 Normal Working Days of any such request being made.
4.3 Without prejudice to the right of The League to refer any breach of rules to the Disciplinary Commission in accordance with section 8 of the Regulations, where any Club is in breach of any requirement of these Rules relating to the provision of information, the Executive may refuse any application by that Club to register any Player or any new contract of an existing Player of that Club.
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 to or take any unfair advantage in relation to the assessment of fulfilment (or non-fulfilment) of the requirements of the Rules.
5 Clubs Ceasing to be Members of the Championship
5.1 If a Club is promoted or relegated out of the Championship Division that Club shall, notwithstanding promotion or relegation, remain bound by these as if it were still a Championship Club, until such time as it has complied with all of its obligations relating to its last Season as a Championship Club.
6 Review Applications
6.1 Where in these Rules there is any reference to the Executive making a determination, including by way of example and without limitation:
6.1.1 assessment of Secured Funding; and 6.1.2 determinations by the Executive in accordance with Rule 2, the Club shall subject to the provisions of Rules 6.2 and 6.3, have a right to have such decision reviewed by the Disciplinary Commission.
6.2 The only grounds on which a Club may present an application to the Disciplinary Commission for a review of a decision by the Executive shall be that the decision:
6.2.1 was reached outside the jurisdiction of the Executive; or
6.2.2 could not have been reached by any reasonable Executive which had applied its mind properly to the issues to be decided; or
6.2.3 was reached as a result of fraud, malice or bad faith; or
6.2.4 was contrary to English Law; and
directly and foreseeably prejudices the interests of the Club.
6.3 Any application for a review must be presented within 14 days of the date of the decision to be reviewed (time of the essence).
6.4 Any Disciplinary Commission convened pursuant to or otherwise in relation to any matter covered by these Rules shall include at least one member who holds a nationally recognised qualification as an accountant or auditor (but who shall not sit as the chairman of the Disciplinary Commission, who shall be qualified as set out in Regulation 86.3.1) (the Finance Member).
6.5 The Finance Member shall be selected by the Independent Directors of the Board from a panel of Finance Members approved by a simple majority of the member clubs in the Championship division as at the date the panel is presented for approval. For the purposes of Regulation 86.3.2, the Finance Member shall be deemed to be the member appointed by The League.
7 Confidentiality
7.1 Information provided by a Club to the Executive in accordance with these Rules shall only be made available to such members of the Executive as are required to know such information in order to fulfil their duties to The League (and who are bound by obligations of confidentiality as part of their contract of employment).
8 Implementation and Transition 8.1 For the purposes of Rule 2, the first ‘T’ Season will be 2016/17, and as a consequence these Rules are effective (in so far as they relate to T-1 and T-2) for the 2014/15 and 2015/16 Seasons.
8.2 If:
8.2.1 a Club’s Adjusted Earnings Before Tax resulted in losses of £13 million (or greater) in Season 2014/15 and/or Season 2015/16: and
8.2.2 that Club was sanctioned in accordance with the Championship FFP Rules in respect of the applicable Season,
then, but not otherwise, the Adjusted Earnings Before Tax loss for that Club for that Season (for the purposes of these Rules) will be capped at £13m.
8.3 The Championship FFP Rules remain in force for Seasons 2014/15 and 2015/16.
Appendix 1 – Profitability and Sustainability Calculation
Part 1 – Profitability and Sustainability Calculation
Part 2 – Board Statement
In accordance with the requirements of the Championship Profitability and Sustainability Rules of The League, we, the Directors of XYZ Football Club Limited (the Club), hereby report in respect of the [Club’s] OR [the Group’s (of which the Club is a member)] accounting period of ♦ months ended on ♦ 20♦ that [with the exception(s) noted below]:
(4) the [Club / Group] has operated internal financial control policies and procedures which are designed to meet the Championship Profitability and Sustainability rules of The League (the Rules);
(5) the Profitability and Sustainability Calculation of the directors of the [Club / Group] (the Calculation) as set out above has been prepared in accordance with the Rules;
(6) the other information provided by the [Club/Group] has been prepared in accordance with the Rules.
[The exception(s) referred to above is/are as follows:
• …..]
For and on behalf of the Board of XYZ Football Club Limited:
[Signature of Director and date of signing]
PART 3 – LEAGUE ONE SALARY COST MANAGEMENT PROTOCOL (SCMP) GUIDANCE NOTES
1 SCMP Requirement
1.1 All League 1 Clubs (hereafter Clubs or Club) are required to meet the SCMP Requirement (as defined in Note 1.2) for each Reporting Period (as defined in Note 1.3).
1.2 The SCMP Requirement is a measure whereby a Club’s Player Related Expenditure (as defined in Appendix B) shall not exceed the sum of:
1.2.1 60% of the Club’s Relevant Turnover (as defined in Paragraph 1 of Appendix A) for the Reporting Period, plus
1.2.2 100% of the club’s Football Fortune Income (as defined in Paragraph 2 of Appendix A) for the Reporting Period.
Note: With effect from the commencement of Season 2018/19 the figure of 55% in Rule 1.2.1 will be amended down to 50% pursuant to a resolution of League Two Clubs passed on 6th April 2017.
1.3 The Reporting Period in respect of which a Club is assessed for the purpose of the SCMP Requirement is (subject to Note 2) the 12 month period recorded in the Club’s Annual Accounts.
Guidance
For those Clubs with a financial year ending in the period May, June or July in any year the Reporting Period for the 20xx/yy Season is the 12 month period ending May, June or July 20yy.
1.4 Measurement of a Club’s compliance with the SCMP Requirement is based on the submission by the Club of the Pre-Season SCMP Submission and Mid-Season SCMP Submission (each as defined in Note 3 below) (together the SCMP Submissions).
2 Variations From ‘Standard’ Reporting Periods
2.1 Clubs may not adjust Reporting Periods for subsequent Seasons without the prior written consent of The League, such consent not to be unreasonably withheld.
2.2 If any Club has a financial year ending other than during the period May, June or July, then that Club must prepare its SCMP Submissions for a 12 month period ending on 30th June so as to provide The League with an SCMP Submission aligned to the Reporting Period as defined in Note 1.3.
2.3 If any Club has a financial year end other than in June, then that Club may opt to prepare its SCMP Submission for a 12 month period ending June so as to provide The League with an SCMP Submission aligned to Player Contracts.
3 SCMP Submissions
3.1 By the third Friday in June each year, each Club must submit its Pre-Season SCMP Submission for the immediately following Reporting Period. The Pre-Season SCMP Submission will be in the form of an Excel workbook setting out the information required therein (and including the requirements set out in Note 5 below) and will be in such format as The League may prescribe from time to time. For the current Season this requires submission of the following Worksheets:
3.1.1 Assumptions
3.1.2 Key Indicators;
3.1.3 Relevant Turnover;
3.1.4 Turnover Reconciliation;
3.1.5 Player Related Expenditure; and
3.1.6 Player Salary Costs.
Guidance
By 17th June 2016 each Club must submit its Pre-Season SCMP Submission for the financial year ending May, June or July 2017 (exactly which date will be determined in accordance with Note 2).
3.2 For the avoidance of doubt, the Pre-Season SCMP Submission must be supplied notwithstanding the fact that during the preceding Season the Club was either a Championship Club relegated into League 1 (Former Championship Club) or a League 2 Club which was then promoted into League 1 (Promoted League 2 Club).
3.3 By the second Friday in December each year, each Club must submit its Mid-Season SCMP Submission for the current Reporting Period. The Mid-Season SCMP Submission will be in the form of an Excel workbook setting out the information required therein (and including the requirements set out in Note 6 below) and will be in such format as The League may prescribe from time to time. For the current Season this requires submission of the following Worksheets:
3.3.1 Assumptions;
3.3.2 Key Indicators;
3.3.3 Relevant Turnover;
3.3.4 Turnover Reconciliation;
3.3.5 Player Related Expenditure; and
3.3.6 Player Salary Costs.
Guidance
By the 9th December 2016 each Club must submit its Mid-Season SCMP Submission for the financial year ending May, June or July 2017 (exactly which date will be determined in accordance with Note 2).
3.4 The SCMP Submission must relate to the Club or if applicable and agreed with The League (as detailed in Regulation 16.4), the Group of which the Club is a member.
3.5 All SCMP Submissions must be sent to The League’s Finance Department by e-mail. In the event that an e-mail submission is not possible, the SCMP Submission should be posted to the Office so as to arrive not later than the relevant deadlines set out in this Note 3.
4 Duty of Disclosure
4.1 The League may at any time require a Club to provide such further information as The League deems necessary (acting reasonably) for the purposes of enabling The League to assess whether a Club has fulfilled (or not) the SCMP Requirement. By way of example, and without limitation, additional information may be requested where:
4.1.1 any SCMP Submission is incomplete;
4.1.2 there are insufficient assumptions; or
4.1.3 additional evidence is required to support certain assumptions.
4.2 Any such request shall be made in writing (including by email from the Finance Department) and shall be responded to in full within 5 Normal Working Days of any such request being made.
4.3 Each Club shall, at all times and in all matters within the scope of these Guidance Notes, 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 a SCMP Submission which is intended to seek to or does take any unfair advantage in relation to the assessment of fulfilment (or non-fulfilment) of the SCMP Requirement.
5 Completion of the Pre-Season SCMP Submission
5.1 For the purposes of these Notes:
5.1.1 Aggregate Player Salary Costs shall mean the sum total of all the Individual Player Salary Costs;
5.1.2 Individual Player Salary Costs shall, in respect of each Contract Player (as defined by Note 5.9.2) and Temporary Contract Player (as defined by Noted 5.9.3), include such sums as are required to be disclosed in or annexed to the Standard Contract including, by way of example and without limitation:
(a) gross basic salaries;
(b) signing on fees;
(c) appearance fees;
(d) individual player bonuses; and
(e) accommodation / relocation / travel / motor costs;
5.1.3 Headroom means the amount by which Player Related Expenditure is less than the amount equal to:
(a) 60% of Relevant Turnover; plus
(b) 100% of Football Fortune Income;
Note: With effect from the commencement of Season 2018/19 the figure of 55% in Rule 5.1.3(a) will be amended down to 50% pursuant to a resolution of League Two Clubs passed on 6th April 2017.
5.1.4 Football Fortune Income is defined in Paragraph 2 of Appendix A;
5.1.5 Relevant Turnover is defined in Paragraph 1 of Appendix A;
5.1.6 Player Related Expenditure is defined in Appendix B;
5.1.7 the following years shall be given the following references:
(a) Reporting Period means the financial year / Season in which the Club is required to report in accordance with these Notes;
(b) RP-1 means the financial year / Season prior to the Reporting Period; and
(c) RP-2 means the financial year / Season prior to RP-1.
Guidance
For the 2016/17 Reporting Period, RP-1 means the 2015/16 financial year/Season and RP-2 means the 2014/15 financial year/Season.
5.2 All of the Worksheets within the Pre-Season SCMP Submission must:
5.2.1 be completed prior to submission to The League; and
5.2.2 include any and all adjustments necessary to ensure the Club complies with the requirements of Note 2.
5.3 Key assumptions are to be detailed within the Assumptions Worksheet to support the estimated figures throughout the Worksheets for the Reporting Period.
5.4 The Key Indicator Worksheet feeds information through from the relevant Worksheets in order to calculate the Club’s SCMP percentage. This will indicate the level of Relevant Turnover, Football Fortune Income and Player Related Expenditure and, if any, the Headroom the Club has available.
5.5 When completing the Relevant Turnover Worksheet, and having regard to any adjustments required to comply with the requirements of Note 2:
5.5.1 Column 1 of the Relevant Turnover Worksheet should replicate, where relevant, the figures in the Club’s Annual Accounts and supporting management account schedules, for RP-2. In the event that the Club’s Annual Accounts have not been finalised by the Club’s auditor, unaudited figures should be used;
5.5.2 Column 2 should replicate the Club’s latest forecast (or actual unaudited figures, if available) for RP-1;
5.5.3 Column 3 should reflect the Club’s budget for the Reporting Period; and
5.5.4 if there are any variances, a separate written explanation should be provided.
5.6 Claims for any item of income to be treated as Football Fortune Income are subject to the prior written approval of The League.
5.7 A reconciliation between Relevant Turnover, Football Fortune Income (i.e. Column 1 in the Relevant Turnover Worksheet) and Reported Turnover per the latest Club Annual Accounts (or actual unaudited figures) is required to be performed on the Turnover Reconciliation Worksheet.
5.8 When completing the Player Related Expenditure Worksheet:
5.8.1 Column 1 of the Player Related Expenditure Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts and supporting management account schedules, for RP-2. In the event that the Club’s Annual Accounts have not been finalised by the auditor, unaudited figures should be used;
5.8.2 Column 2 should replicate the Club’s latest forecast (or actual unaudited figures, if available) for RP-1;
5.8.3 Column 3 should reflect the Club’s budgeted Aggregate Player Salary Costs and other Player Related Expenditure for the Reporting Period;
5.8.4 Columns 1, 2 and 3 feed directly through from the Player Salary Costs Worksheet. Where any other figures in the Player Related Expenditure Worksheet do not feed through from the Player Salary Costs Worksheet these must be completed by the Club, where relevant; and
5.8.5 if there are any variances, a separate written explanation should be provided.
5.9 When completing the Player Salary Costs Worksheet:
5.9.1 completion of all sections is to be on a Player by Player basis and be the Club’s current best estimate of Individual Player Salary Costs that have been and/or must be paid during the relevant Reporting Period;
5.9.2 Section 1 is to be completed in full for all Contract Players, which term means for the purposes of these Notes, Players registered with the Club who are not classified as Temporary Contract Players (as defined by Note 5.9.3) or Professional Under 21 Players (as defined by Note 7.1).
5.9.3 Section 2 is to be completed for all Players who are registered with the Club on an:
(a) Emergency Goalkeeper Loan;
(b) Standard Loan;
(c) Multiplicity Contract;
(d) Monthly Contract;
(e) Monthly Extension Contract; and
(f) Non Contract basis,
(Temporary Contract Players).
5.9.4 Section 3 is to be completed in full for all Players classified as Professional Under 21 Players.
5.9.5 For the avoidance of doubt, Players registered as Youth Players or Scholars are not subject to the requirements of these Notes.
6 Completion of the Mid-Season SCMP Submission
6.1 All of the Worksheets within the Mid-Season SCMP Submission must:
6.1.1 be completed prior to submission to The League; and
6.1.2 include any and all adjustments necessary to ensure the Club complies with the requirements of Note 2.
6.2 Any material variances from the Pre-Season SCMP Submission are to be detailed within the Assumptions Worksheet.
6.3 When completing the Relevant Turnover Worksheet:
6.3.1 Column 1 of the Relevant Turnover Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts and supporting management account schedules for RP-1. In the event that the Club’s Annual Accounts have not been finalised by the Club’s auditor, unaudited figures should be used;
6.3.2 Column 2 should replicate Column 3 in the Relevant Turnover Worksheet of the Pre-Season SCMP Submission for that Reporting Period;
6.3.3 Column 3 should reflect the Club’s actual Relevant Turnover figures up to the date of the Mid-Season SCMP Submission and any revised budget for the Reporting Period; and
6.3.4 if there are any variances a separate written explanation should be provided.
6.4 A reconciliation between Relevant Turnover, Football Fortune Income (i.e. Column 1 in the Relevant Turnover Worksheet) and Reported Turnover per the latest Club Annual Accounts (or actual unaudited figures) is required to be performed on the Turnover Reconciliation Worksheet.
6.5 When completing the Player Related Expenditure Worksheet:
6.5.1 Column 1 of the Player Related Expenditure Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts for RP-1. In the event that the Club’s Annual Accounts have not been finalised by the auditor, unaudited figures should be used;
6.5.2 Column 2 should replicate Column 3 in the Player Related Expenditure Worksheet of the Pre-Season SCMP Submission for that Reporting Period;
6.5.3 Column 3 should reflect the Club’s actual Player Related Expenditure up to the date of the Mid-Season SCMP Submission and any revised budget for the Reporting Period;
6.5.4 Columns 1, 2 and 3 feed directly through from the Player Salary Costs Worksheet. Where any other figures in the Player Related Expenditure Worksheet do not feed through from the Player Salary Costs Worksheet these must be completed by the Club, where relevant; and
6.5.5 if there are any variances a separate written explanation should be provided.
6.6 When completing the Player Salary Costs Worksheet for the Mid-Season SCMP Submission, the Club is required to update the Player Salary Costs Worksheet for any Player movements and re-negotiated contracts since the preparation of the Pre-Season SCMP Submission.
7 Professional Under 21 Players
7.1 Professional Under 21 Player means any Player registered with the Club as a Contract Player on a Full Contract basis who is aged 20 years or under as at the 1st July immediately preceding the commencement of the Season to which the Reporting Period relates.
Guidance
For example a player aged 20 on or after the 1st July 2016 is classed as an Under 21 Player for Season 2016/17, but not for 2017/18.
7.2 The Individual Player Salary Costs of a Professional Under 21 Player are excluded from the Club’s total Player Related Expenditure for the purposes of assessing whether that Club has complied with the SCMP Requirement. However, the Individual Player Salary Costs for Professional Under 21 Players shall be separately reported in the Player Salary Costs Worksheet of any SCMP Submission in accordance with Note 5.9.4 and/or Note 6.6.
8 On-going Monitoring
8.1 Each Club is responsible for keeping their SCMP Submission updated at all times and (without prejudice to Note 9 below) reporting any variances to The League.
8.2 The League will also monitor Player registrations made by Clubs.
9 Notifiable Events
9.1 Where:
9.1.1 the Player Related Expenditure of a Club exceeds, or is likely to exceed (having regard to all the circumstances), 95% of the maximum amount of Player Related Expenditure permitted under Rule 1.2 (Additional Reporting Threshold); and /or
9.1.2 any Club fails, or is likely to fail (having regard to all the circumstances), to meet the SCMP Requirement,
that Club shall forthwith notify The League to that effect in writing (by email or fax) (Notification).
9.2 Where The League considers, acting reasonably, that the Club may be subject to an obligation to notify under Note 9.19.1 and the Club itself has not so notified, The League may serve notice on the Club to that effect in writing (by email or fax). Nothing in this Note 9.2 discharges the Club of any obligation under Note 9.1.
9.3 Where:
9.3.1 the Club serves Notification; and/or 9.3.2 The League serves notice under Note 9.2, the provisions of Notes 10 and/or 11 (as applicable) apply.
10 Consequences of Notification / Other Failure to Comply
10.1 A Club which:
10.1.1 does not file any SCMP Submission by the required date;
10.1.2 does not provide information where requested to do so by The League; and/or
10.1.3 fails to fulfil the SCMP Requirement,
shall be subject to a Player registration embargo (the “Embargo”) such that The League shall refuse any application made by that Club to register any Player or any new contract of an existing Player with that Club save in the circumstances set out in Note 10.2. 10.2 The circumstances referred to in Note 10.1 are:
10.2.1 On a one out one in basis. These will only be allowed where:
(a) the Club’s registered playing squad is 24 or fewer registered Established Players (as defined by Note 10.3); and
(b) the annual Employee Cost of the Player coming in is no more than 75% of the equivalent annual Employee Cost (as defined by Note 10.3) of the Player going out (calculated as an average over the term of the remaining period of both Players’ contracts, taking note of any contract cancellation payments where relevant);
10.2.2 Where the Club needs to offer terms of re-engagement to an Under 24 Player or offer professional terms to a Scholar for the purposes of maintaining compensation rights in respect of that Under 24 Player or Scholar (as applicable); 10.2.3 Emergency Goalkeeper Loan in accordance with the provisions of Regulation 55. 10.3 For the purposes of Note 10.2 only:
10.3.1 an Established Player is one who has made at least one competitive appearance in the starting eleven for that Club at any time; and
10.3.2 Employee Cost means the aggregate of the average annual:
(a) basic salary (but excluding appearance fees and other bonuses e.g. promotion or loyalty bonuses);
(b) pension payment; and/or
(c) image rights payment,
for the respective Players.
10.4 The Embargo will be effective:
10.4.1 in the case of a Club which is in default of any obligation to provide information in accordance with these Guidance Notes, from the date of default until such time as the default is remedied to the reasonable satisfaction of The League; and
10.4.2 in the case of a Club which fails to fulfil the SCMP Requirement, until The League has been provided with the necessary information in order to be satisfied that the Club is no longer in breach of the SCMP Requirement.
10.5 For the avoidance of doubt, where the registration of any Player(s) will in the opinion of The League, acting reasonably, result in a Club failing to meet the SCMP Requirement, such registrations will be refused.
11 Clubs Subject to the Additional Reporting Threshold
11.1 If a Club becomes aware, or if a Club is informed by The League that, the Player Related Expenditure of that Club exceeds, or is likely to exceed (having regard to all the circumstances including for the avoidance of doubt the Player Related Expenditure in respect of any Proposed Registration (as defined below)) the Additional Reporting Threshold, then that Club will be subject to the requirements of this Note 11 (a Threshold Club).
11.2 Any Threshold Club that wishes to register a new Player (each a Proposed Registration) must prior to the lodging of the Proposed Registration, submit a duly completed Self Certification on Club letterhead (in accordance with Appendix C).
11.3 Where any Proposed Registration will, in the opinion of The League, acting reasonably, result in the Club failing to meet the SCMP Requirement, that Proposed Registration will be refused.
12 Former Championship Clubs
12.1 The SCMP requirement for a Former Championship Club shall, in its first season as a League 1 Club, be amended such that the Club’s Player Related Expenditure (as defined in Appendix B) shall not exceed:
12.1.1 75% of the Club’s Relevant Turnover (as defined in paragraph 1 of Appendix A) for the Reporting Period, plus
12.1.2 100% of the Club’s Football Fortune Income (as defined in Paragraph 2 of Appendix A) for the Reporting Period.
13 Confidentiality
13.1 Information provided by a Club to The League in accordance with these Notes shall only be made available to such members of the Executive as are required to know such information in order to fulfil their duties to The League (and who are bound by obligations of confidentiality as part of their contract of employment) and shall not be disclosed to the Board in any manner so as to enable Clubs to be identified provided always that:
13.1.1 generic management reporting to the Board and Clubs is permitted; and
13.1.2 The League shall be entitled to publish reports of any decisions relating to any breaches.
APPENDIX A – DEFINITION OF RELEVANT TURNOVER AND FOOTBALL FORTUNE INCOME
1 Relevant Turnover – Definitions
Relevant Turnover can be summarised as shown below, with explanatory note to explain the various treatments of different sources of income.
1.1 League Distributions – All League distributions, including facility fees for TV and Radio, as included in the profit and loss account.
1.2 Premier League Distributions – Include Premier League Solidarity and Parachute payments relating to the Reporting Period.
1.3 Match Revenue, Season Tickets – Include only in the relevant season. Where season tickets are sold covering more than one season, income should be declared pro-rata for the relevant season.
1.4 Match Revenue, League Gate Receipts – Actual receipts before deduction of match day expenditure and any levies.
1.5 Match Revenue, Cup Gate Receipts – The home club should declare actual receipts net of away club’s expenses but before other match day expenditure and budgets should assume the Club does not progress past Round 1 of any competition. The away club should include actual receipts received.
1.6 Match Revenue, Friendlies Gate Receipts – The Club should declare actual receipts net of direct match day costs.
1.7 Commercial Net Income, Hospitality – The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply hospitality, or where hospitality is outsourced, the actual amount received by the Club.
1.8 Commercial Net Income, Commercial - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply commercial activities, or where commercial activities are outsourced, the actual amount received by the Club.
1.9 Commercial Net Income, Sponsorship - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply sponsorship, or where sponsorship is outsourced, the actual amount received by the Club.
1.10 Commercial Net Income, Programmes - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply programmes, or where programmes is outsourced, the actual amount received by the Club.
1.11 Commercial Net Income, Shop Merchandise - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply shop merchandise, or where shop merchandise is outsourced, the actual amount received by the Club.
1.12 Commercial Net Income, Club Lottery - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply the club lottery, or where the club lottery is outsourced, the actual amount received by the Club.
1.13 Commercial Net Income, Catering - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply catering, or where catering is outsourced, the actual amount received by the Club.
1.14 Stadium Revenue, Rental Income – Rental due on stadium and facilities in the relevant Reporting Period.
1.15 Stadium Revenue, Share of Stadium Revenue – Include actual receipts.
1.16 Other Football Income – To be assessed on a case by case basis.
2 Football Fortune Income – Definitions
Football Fortune Income includes the following revenue streams on the basis that they can reasonably be regarded as a “bonus” to Clubs during the Reporting Period.
2.1 EFL Cup and EFL Trophy Distributions – Include any EFL Cup or EFL Trophy prize money and facility fees on an actual basis. Budgets should assume the Club does not progress past Round 1 of any competition.
2.2 Football Association Distributions – Include any FA Cup prize money and facility fees on an actual basis. Budgets should assume the Club does not progress past Round 1 of any competition.
2.3 League Parachute Income – Include all Parachute income receivable from The League for the relevant Reporting Period.
2.4 Net Transfer Income – Include actual cash received in the year from other clubs by way of Compensation Fee, Transfer Fee and / or Loan Fee (in these Notes, “Transfer Fees”), less any actual cash paid to other clubs by way of Transfer Fees. Any advances of Transfer Fees from organisations such as Close Leasing can only be included where the instalments being advanced against fall due within the Reporting Period covered by the relevant SCMP Submission.
2.5 Donations – Donations from independently run lotteries, PFA contributions for Private Medical Insurance, small gifts from benefactors, donations towards Player salary costs, payment for taxation losses etc. are allowable. Significant donations must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account by the end of the relevant Reporting Period. To be included in the Club’s SCMP Submission, a signed Letter of Guarantee (in the format required by The League from time to time and which as at the date of these Rules, is as set out in Appendix D) must be received by The League to confirm that there is no interest linked to the donation or any requirement for future repayment of the donation by the Club.
2.6 Cash Injections – Significant cash injections from companies or benefactors must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account by the end of the relevant Reporting Period. To be included in the Club’s SCMP Submission, a signed Letter of Guarantee (in the format required by The League from time to time and which as at the date of these Rules, is as set out in Appendix D) must be received by The League to confirm that there is no interest linked to the cash injection or any requirement for future repayment by the Club of the cash injection.
2.7 Equity Injections – Only include non-redeemable Equity investments received (or to be received) in the relevant Reporting Period. The:
2.7.1 conversion to Equity of any debt; and/or
2.7.2 writing off of any debt,
where such debt was created in any prior Reporting Period, does not constitute a form of revenue as no cash is provided to the Club to finance wages in the current Reporting Period. Further, any linked transactions whereby loans are repaid followed by an injection of cash in exchange for Equity, will not be allowed. Any injection of cash as Equity must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account, and a copy of the signed Companies House forms confirming the issue of new share capital must be received by The League by the end of the relevant Reporting Period. To be included in the Club’s SCMP Submission, a signed Letter of Guarantee (in the format required by The League from time to time and which as at the date of these Rules, is as set out in Appendix D) must be received by The League to confirm that the Club’s shareholder(s) will inject the necessary Equity into the Club prior to the end of the relevant Reporting Period.
2.8 Accumulated Profit – Only include reserves extracted from audited Annual Accounts that have been filed with Companies House. For the avoidance of doubt any revaluation reserves do not qualify for inclusion.
2.9 Other Income – To be assessed on a case by case basis.
3 Other Notes
3.1 All amounts should be shown net of attributable Value Added Tax.
3.2 Where a Club enters into a contra deal with a sponsor (e.g. perimeter advertising in exchange for the provision of motor vehicles to a Club) then, provided there is an independent third party valuation attaching to the supply being provided to the Club, this amount can be incorporated in Relevant Turnover (e.g. within Sponsorship income)
3.3 Where a Club offers equity to investors then that equity is included in the year in which that offer becomes unconditional.
3.4 No loan funding, from whatever source and on whatever terms, should be included.
3.5 Youth Development funding should NOT be included as part of Relevant Turnover or Football Fortune Income for the purposes of the Salary Cost Management Documentation.
3.6 Bad debts should be netted off against the Relevant Turnover line in the period in which any claim for bad debt relief is made.
3.7 Management charges received from any group companies should also be netted off income in the year in which the charges are levied. This income should be specified as other income.
APPENDIX B – DEFINITION OF PLAYER RELATED EXPENDITURE
1. Player Related Expenditure includes all expenses that are due during a Reporting Period to a Contract Player, Temporary Contract Player or Professional Under 21 Player under the terms of his contract, calculated in accordance with the following paragraphs.
2. Those Players transferred out on loan should be excluded for any period that they are out on loan. As Clubs have the ability to share the wages of Players sent out on loan, then the treatment of wages should be treated proportionately.
3. Clubs should include all Players registered with them at any point during the current Reporting Period, along with their associated costs for the period of registration.
4. Any salary, fees or remuneration due under the terms of the Player’s contract and any image rights contract (if any) should be included. This would include not only basic salaries but also any additional salary payments which may become due dependent upon age etc.
5. Clubs should include any signing on fees due to be paid on registration of a Player.
6. Any additional payments which may become dependent upon appearances, either full or substitute appearances should be included.
7. Clubs should include any match, win, loyalty, promotion or other kind of bonus, save that promotion bonuses would be treated as expenditure in the following Reporting Period.
8. Include any accommodation, holiday, or relocation expenses in relation to a Player (to include all expenses met on behalf of the Player whether the expenses are legal, removal, travel or other associated costs).
9. Include the cost to the Club of providing any benefit in kind, such as the cost of vehicles used privately (the P11d benefit figure should be used in calculating the cost to the Club) and any hotel expenses (other than those directly relating to matches). It is not proposed to include training/fitness Player Related Expenditure.
10. Clubs should include National Insurance Contributions and taxes accrued in respect of the Player.
11. Include any agents’ fees payable by the Club, as well as any settled by the Club on the Player’s behalf.
12. Pension contributions due in respect of any Player in relation to the current Reporting Period.
13. Clubs should include any insurance premiums paid in respect of any Player. Personal accident, health and life insurance etc., whether or not these are specifically provided for under the terms of any employment contract should be included.
14. Any personal expenses paid as well as other expenses ordinarily and necessarily incurred in connection with complying in full with the obligations under the terms of any employment contract should be included within the Player Related Expenditure.
15. Any loan made, or to be made to a Player which is not repaid within the same Reporting Period should be included as other Player Related Expenditure.
16. Exclusions may apply in respect of any Players who are declared permanently unfit to play at any point during the Reporting Period, for the period after such declaration, but not for any other period of incapacity (e.g. short term injury and short term illness etc.).
17. Redundancy and/or Compromise payments made to Players (e.g. the payment of the balance of the contract as a lump sum which has been discounted to represent accelerated receipt)
should also be included for the purposes of determining Player Related Expenditure. Where redundancy payments are staged they should be allocated into the SCMP Documentation for the Reporting Period in which the payments fall due.
18. Some Clubs appoint Players to other roles e.g. manager or coach. So as to avoid Clubs seeking to load salary payments in favour of the second role, the payments under both roles will be amalgamated and 50% of the total will be attributed as Player Related Expenditure for the purposes of determining compliance with the SCMP Requirement.
19. All of the Player Related Expenditure definitions will be described as being made to a Player or any third party on his behalf, either directly or indirectly, whether in this country or elsewhere.
APPENDIX C – SELF-CERTIFICATION FORM
SALARY COST MANAGEMENT PROTOCOL
LEAGUE 1
On behalf of __________________________ Football Club I enclose the necessary registration
documents in respect of the permanent / loan / loan extension / signing of __________________
(Player name).
I confirm that having made due enquiry of the Club’s current and anticipated financial outturn for the current Reporting Period (as detailed in the most recent SCMP Submission) this registration will not result in the Club breaching the SCMP Requirement.
Signed: ____________________________________________ (duly authorised official)
Position: ___________________________________________
Date: ______________________________________________
APPENDIX D –LETTER OF GUARANTEE TEMPLATE
[To be drafted on Company/Personal Letterhead]
[Addressed to the Football Club]
[Date]
Dear Sirs,
Re: [Equity/Cash Injection / Donation] to [Football Club Full Company Name] (Club)
This letter is to confirm that [I/We] have reviewed the Salary Cost Management Protocol submission prepared for the Board of the Club in respect of the [20XX/20YY] Reporting Period (SCMP Forecasts), copies of which are attached to this letter.
In consideration of the Club agreeing to enter into financial commitments as outlined in the SCMP Forecasts, [I/we] confirm that [I/we] intend to, and will, support the Club [and its subsidiaries] by making available up to [£X] as [Equity/Cash Injection / Donation] as set out in the SCMP Forecasts to enable the Club to meet the SCMP Requirement until at least [30th June 20YY].
This letter is to confirm that the [Equity/Cash Injection / Donation] of up to £[x] will be made in full to [Football Club Full Company Name] prior to the end of the [20XX/20YY] Reporting Period.
[I/We] confirm that:
(a) the [Equity/Cash Injection / Donation] is a permanent [injection / donation] to the Club with no linked interest payable by the Club to [me/us] or any other third party at any time; and
(b) there is no future requirement for the Club to repay the [Equity/Cash Injection / Donation].
Yours faithfully
[Printed Name]
[Position]
[Address]
PART 4 – LEAGUE 2 FINANCIAL FAIR PLAY SALARY COST MANAGEMENT PROTOCOL (SCMP) GUIDANCE NOTES
1 SCMP Requirement
1.1 All League 2 Clubs (hereafter Clubs or Club) are required to meet the SCMP Requirement (as defined in Note 1.2) for each Reporting Period (as defined in Note 1.3).
1.2 The SCMP Requirement is a measure whereby a Club’s Player Related Expenditure (as defined in Appendix B) shall not exceed the sum of:
1.2.1 50% of the Club’s Relevant Turnover (as defined in Paragraph 1 of Appendix A) for the Reporting Period; plus
1.2.2 100% of the Club’s Football Fortune Income (as defined in Paragraph 2 of Appendix A) for the Reporting Period.
1.3 The Reporting Period in respect of which a Club is assessed for the purpose of the SCMP Requirement is (subject to Note 2) the 12 month period recorded in the Club’s Annual Accounts.
Guidance
For those Clubs with a financial year ending in the period May, June or July the Reporting Period for the 20xx/yy Season is the 12 month period ending May, June or July 20yy.
1.4 Measurement of a Club’s compliance with the SCMP Requirement is based on the submission by the Club of the Pre-Season SCMP Submission and Mid-Season SCMP Submission (each as defined in Note 3 below) (together the SCMP Submissions).
2 Variations From ‘Standard’ Reporting Periods
2.1 Clubs may not adjust Reporting Periods for subsequent Seasons without the prior written consent of The League, such consent not to be unreasonably withheld.
2.2 If any Club has a financial year ending other than during the period May, June or July, then that Club must prepare its SCMP Submissions for a 12 month period ending on 30th June so as to provide The League with an SCMP Submission aligned to the Reporting Period as defined in Note 1.3.
2.3 If any Club has a financial year end other than in June, then that Club may opt to prepare its SCMP Submission for a 12 month period ending June so as to provide The League with an SCMP Submission aligned to Player Contracts.
3 SCMP Submissions
3.1 By the third Friday in June each year, each Club must submit its Pre-Season SCMP Submission for the immediately following Reporting Period. The Pre-Season SCMP Submission will be in the form of an Excel workbook setting out the information required therein (and including the requirements set out in Note 5 below) and will be in such format as The League may prescribe from time to time. For the current Season this requires submission of the following Worksheets:
3.1.1 Assumptions
3.1.2 Key Indicators;
3.1.3 Relevant Turnover;
3.1.4 Turnover Reconciliation;
3.1.5 Player Related Expenditure; and
3.1.6 Player Salary Costs.
Guidance
By 17th June 2016 each Club must submit its Pre-Season SCMP Submission for the financial year ending May, June or July 2017 (exactly which date will be determined in accordance with Note 2).
3.2 For the avoidance of doubt, the Pre-Season SCMP Submission must be supplied notwithstanding the fact that during the preceding Season the Club was either a League 1 Club relegated into League 2 or a National League Premier Division Club which was then promoted into League 2.
3.3 By the second Friday in December each year, each Club must submit its Mid-Season SCMP Submission for the current Reporting Period. The Mid-Season SCMP Submission will be in the form of an Excel workbook setting out the information required therein (and including the requirements set out in Note 6 below) and will be in such format as The League may prescribe from time to time. For Season 2016/17 this requires submission of the following Worksheets:
3.3.1 Assumptions;
3.3.2 Key Indicators;
3.3.3 Relevant Turnover;
3.3.4 Turnover Reconciliation;
3.3.5 Player Related Expenditure; and
3.3.6 Player Salary Costs.
Guidance
By the 9h December 2016 each Club must submit its Mid-Season SCMP Submission for the financial year ending May, June or July 2017 (exactly which date will be determined in accordance with Note 2).
3.4 The SCMP Submission must relate to the Club or if applicable and agreed with The League (as detailed in Regulation 16.4), the Group of which the Club is a member.
3.5 All SCMP Submissions must be sent to The League’s Finance Department by e-mail. In the event that an e-mail submission is not possible, the SCMP Submission should be posted to the Office so as to arrive not later than the relevant deadlines set out in this Note 3.
4 Duty of Disclosure
4.1 The League may at any time require a Club to provide such further information as The League deems necessary (acting reasonably) for the purposes of enabling The League to assess whether a Club has fulfilled (or not) the SCMP Requirement. By way of example, and without limitation, additional information may be requested where:
4.1.1 any SCMP Submission is incomplete;
4.1.2 there are insufficient assumptions; or
4.1.3 additional evidence is required to support certain assumptions; or
4.1.4 an application is made for a revenue stream to be included as Football Fortune Income.
4.2 Any such request shall be made in writing (including by email from the Finance Department)
and shall be responded to in full within 5 Normal Working Days of any such request being made.
4.3 Each Club shall, at all times and in all matters within the scope of these Guidance Notes, 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 SCMP Submission which is intended to seek to or does take any unfair advantage in relation to the assessment of fulfilment (or non-fulfilment) of the SCMP Requirement.
5 Completion of the Pre-Season SCMP Submission
5.1 For the purposes of these Notes:
5.1.1 Aggregate Player Salary Costs shall mean the sum total of all the Individual Player Salary Costs;
5.1.2 Individual Player Salary Costs shall, in respect of each Contract Player (as defined by Note 5.9.2) and Temporary Contract Player (as defined by Noted 5.9.3), include such sums as are required to be disclosed in or annexed to the Standard Contract including, by way of example and without limitation:
(a) gross basic salaries;
(b) signing on fees;
(c) appearance fees;
(d) individual player bonuses; and
(e) accommodation / relocation / travel / motor costs;
5.1.3 Headroom means the amount by which Player Related Expenditure is less than the amount equal to:
(a) 50% of Relevant Turnover; plus
(b) 100% of Football Fortune Income.
5.1.4 Football Fortune Income is defined in Paragraph 2 of Appendix A;
5.1.5 Relevant Turnover is defined in Paragraph 1 of Appendix A;
5.1.6 Player Related Expenditure is defined in Appendix B;
5.1.7 the following years shall be given the following references:
(a) Reporting Period means the financial year / Season in which the Club is required to report in accordance with these Notes;
(b) RP-1 means the financial year / Season prior to the Reporting Period; and
(c) RP-2 means the financial year / Season prior to Reporting Period-1.
Guidance
For the 2016/17 Reporting Period, RP-1 means the 2015/16 financial year/Season and RP-2 means the 2014/15 financial year/Season.
5.2 All of the Worksheets within the Pre-Season SCMP Submission must:
5.2.1 be completed prior to submission to The League; and
5.2.2 include any and all adjustments necessary to ensure the Club complies with the requirements of Note 2.
5.3 Key assumptions are to be detailed within the Assumptions Worksheet to support the estimated figures throughout the Worksheets for the Reporting Period.
5.4 The Key Indicator Worksheet feeds information through from the relevant Worksheets in order to calculate the Club’s SCMP percentage. This will indicate the level of Relevant Turnover, Football Fortune Income and Player Related Expenditure and, if any, the Headroom the Club has available.
5.5 When completing the Relevant Turnover Worksheet, and having regard to any adjustments required to comply with the requirements of Note 2:
5.5.1 Column 1 of the Relevant Turnover Worksheet should replicate, where relevant, the figures in the Club’s Annual Accounts and supporting management account schedules, for RP-2. In the event that the Club’s Annual Accounts have not been finalised by the Club’s auditor, unaudited figures should be used;
5.5.2 Column 2 should replicate the Club’s latest forecast (or actual unaudited figures, if available) for RP-1;
5.5.3 Column 3 should reflect the Club’s budget for the Reporting Period; and
5.5.4 if there are any variances, a separate written explanation should be provided.
5.6 Claims for any item of income to be treated as Football Fortune are subject to the prior written approval of The League.
5.7 A reconciliation between Relevant Turnover, Football Fortune Income (i.e. Column 1 in the Relevant Turnover Worksheet) and Reported Turnover per the latest Club Annual Accounts (or actual unaudited figures) is required to be performed on the Turnover Reconciliation Worksheet.
5.8 When completing the Player Related Expenditure Worksheet:
5.8.1 Column 1 of the Player Related Expenditure Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts and supporting management account schedules, for RP-2. In the event that the Club’s Annual Accounts have not been finalised by the auditor, unaudited figures should be used;
5.8.2 Column 2 should replicate the Club’s latest forecast (or actual unaudited figures, if available) for RP-1;
5.8.3 Column 3 should reflect the Club’s budgeted Aggregate Player Salary Costs and other Player Related Expenditure for the Reporting Period;
5.8.4 Columns 1, 2 and 3 feed directly through from the Player Salary Costs Worksheet. Where any other figures in the Player Related Expenditure Worksheet do not feed through from the Player Salary Costs Worksheet these must be completed by the Club, where relevant; and
5.8.5 if there are any variances, a separate written explanation should be provided.
5.9 When completing the Player Salary Costs Worksheet:
5.9.1 completion of all sections is to be on a Player by Player basis and be the Club’s current best estimate of Individual Player Salary Costs that have been and/or must be paid during the relevant Reporting Period;
5.9.2 Section 1 is to be completed in full for all Contract Players, which term means for the purposes of these Notes, Players registered with the Club who are not classified as Temporary Contract Players (as defined by Note 5.9.3) or Professional Under 21 Players (as defined by Note 7.1).
5.9.3 Section 2 is to be completed for all Players who are registered with the Club on an:
(a) Emergency Goalkeeper Loan;
(b) Standard Loan;
(c) Multiplicity Contract;
(d) Monthly Contract;
(e) Monthly Extension Contract; and
(f) Non Contract basis,
(Temporary Contract Players).
5.9.4 Section 3 is to be completed in full for all Players classified as Professional Under 21 Players.
5.9.5 For the avoidance of doubt, Players registered as Youth Players or Scholars are not subject to the requirements of these Notes.
6 Completion of the Mid-Season SCMP Submission
6.1 All of the Worksheets within the Mid-Season SCMP Submission must:
6.1.1 be completed prior to submission to The League; and
6.1.2 include any and all adjustments necessary to ensure the Club complies with the requirements of Note 2.
6.2 Any material variances from the Pre-Season SCMP Submission are to be detailed within the Assumptions Worksheet.
6.3 When completing the Relevant Turnover Worksheet:
6.3.1 Column 1 of the Relevant Turnover Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts and supporting management account schedules for RP-1. In the event that the Club’s Annual Accounts have not been finalised by the Club’s auditor, unaudited figures should be used;
6.3.2 Column 2 should replicate Column 3 in the Relevant Turnover Worksheet of the Pre-Season SCMP Submission for that Reporting Period;
6.3.3 Column 3 should reflect the Club’s actual Relevant Turnover and Football Fortune Income figures up to the date of the Mid-Season SCMP Submission and any revised budget for the Reporting Period; and
6.3.4 if there are any variances a separate written explanation should be provided.
6.4 A reconciliation between Relevant Turnover, Football Fortune Income (i.e. Column 1 in the Relevant Turnover Worksheet) and Reported Turnover per the latest Club Annual Accounts (or actual unaudited figures) is required to be performed on the Turnover Reconciliation Worksheet.
6.5 When completing the Player Related Expenditure Worksheet:
6.5.1 Column 1 of the Player Related Expenditure Worksheet should, where relevant, replicate the figures in the Club’s Annual Accounts for RP-1. In the event that the Club’s
Annual Accounts have not been finalised by the auditor, unaudited figures should be used;
6.5.2 Column 2 should replicate Column 3 in the Player Related Expenditure Worksheet of the Pre-Season SCMP Submission for that Reporting Period;
6.5.3 Column 3 should reflect the Club’s actual Player Related Expenditure up to the date of the Mid-Season SCMP Submission and any revised budget for the Reporting Period;
6.5.4 Columns 1, 2 and 3 feed directly through from the Player Salary Costs Worksheet. Where any other figures in the Player Related Expenditure Worksheet do not feed through from the Player Salary Costs Worksheet these must be completed by the Club, where relevant; and
6.5.5 if there are any variances a separate written explanation should be provided.
6.6 When completing the Player Salary Costs Worksheet for the Mid-Season SCMP Submission, the Club is required to update the Player Salary Costs Worksheet for any Player movements and re-negotiated contracts since the preparation of the Pre-Season SCMP Submission.
7 Professional Under 21 Players
7.1 Professional Under 21 Player means any Player registered with the Club as a Contract Player on a Full Contract basis who is aged 20 years or under as at the 1st July immediately preceding the commencement of the Season to which the Reporting Period relates.
Guidance
A player aged 20 on or after the 1st July 2016 is classed as an Under 21 Player for Season 2016/17, but not for 2017/18.
7.2 The Individual Player Salary Costs of a Professional Under 21 Player are excluded from the Club’s total Player Related Expenditure for the purposes of assessing whether that Club has complied with the SCMP Requirement. However, the Individual Player Salary Costs for Professional Under 21 Players shall be separately reported in the Player Salary Costs Worksheet of any SCMP Submission in accordance with Note 5.9.4 and/or Note 6.6.
8 On-going Monitoring
8.1 Each Club is responsible for keeping their SCMP Submission updated at all times and (without prejudice to Note 9 below) reporting any variances to The League.
8.2 The League will also monitor Player registrations made by Clubs.
9 Notifiable Events
9.1 Where:
9.1.1 the Player Related Expenditure of a Club exceeds, or is likely to exceed (having regard to all the circumstances), 95% of the maximum amount of Player Related Expenditure permitted under Rule 1.2 (Additional Reporting Threshold); and /or
9.1.2 any Club fails, or is likely to fail (having regard to all the circumstances), to meet the SCMP Requirement,
that Club shall forthwith notify The League to that effect in writing (by email or fax) (Notification).
9.2 Where The League considers, acting reasonably, that the Club may be subject to an obligation to notify under Note 9.1 and the Club itself has not so notified, The League may serve notice on the Club to that effect in writing (by email or fax). Nothing in this Note 9.2 discharges the Club of any obligation under Note 9.1.
9.3 Where:
9.3.1 the Club serves Notification; and/or 9.3.2 The League serves notice under Note 9.2, the provisions of Notes 10 and/or 11 (as applicable) apply.
10 Consequences of Notification / Other Failure to Comply
10.1 A Club which:
10.1.1 does not file any SCMP Submission by the required date;
10.1.2 does not provide information where requested to do so by The League; and/or
10.1.3 fails to fulfil the SCMP Requirement,
shall be subject to a Player registration embargo (the “Embargo”) such that The League shall refuse any application made by that Club to register any Player or any new contract of an existing Player with that Club save in the circumstances set out in Note 10.2. 10.2 The circumstances referred to in Note 10.1 are:
10.2.1 On a one out one in basis. These will only be allowed where:
(a) the Club’s registered playing squad is 24 or fewer registered Established Players (as defined by Note 10.3); and
(b) the annual Employee Cost of the Player coming in is no more than 75% of the equivalent annual Employee Cost (as defined by Note 10.3) of the Player going out (calculated as an average over the term of the remaining period of both Players’ contracts, taking note of any contract cancellation payments where relevant);
10.2.2 Where the Club needs to offer terms of re-engagement to an Under 24 Player or offer professional terms to a Scholar for the purposes of maintaining compensation rights in respect of that Under 24 Player or Scholar (as applicable); 10.2.3 Emergency Goalkeeper Loan in accordance with the provisions of Regulation 55. 10.3 For the purposes of Note 10.2 only:
10.3.1 an Established Player is one who has made at least one competitive appearance in the starting eleven for that Club at any time; and
10.3.2 Employee Cost means the aggregate of the average annual:
(a) basic salary (but excluding appearance fees and other bonuses e.g. promotion or loyalty bonuses);
(b) pension payment; and/or
(c) image rights payment,
for the respective Players.
10.4 The Embargo will be effective:
10.4.1 in the case of a Club which is in default of any obligation to provide information in accordance with these Guidance Notes, from the date of default until such time as the default is remedied to the reasonable satisfaction of The League; and
10.4.2 in the case of a Club which fails to fulfil the SCMP Requirement, until The League has been provided with the necessary information in order to be satisfied that the Club is no longer in breach of the SCMP Requirement.
10.5 For the avoidance of doubt, where the registration of any Player(s) will in the opinion of The League, acting reasonably, result in a Club failing to meet the SCMP Requirement, such registrations will be refused.
11 Clubs Subject to the Additional Reporting Threshold
11.1 If a Club becomes aware, or if a Club is informed by The League that, the Player Related Expenditure of that Club exceeds, or is likely to exceed (having regard to all the circumstances including for the avoidance of doubt the Player Related Expenditure in respect of any Proposed Registration (as defined below)) the Additional Reporting Threshold, then that Club will be subject to the requirements of this Note 11 (a Threshold Club).
11.2 Any Threshold Club that wishes to register a new Player (each a Proposed Registration) must prior to the lodging of the Proposed Registration, submit a duly completed Self Certification on Club letterhead (in accordance with Appendix C).
11.3 Where any Proposed Registration will, in the opinion of The League, acting reasonably, result in the Club failing to meet the SCMP Requirement, that Proposed Registration will be refused.
12 Confidentiality
12.1 Information provided by a Club to The League in accordance with these Notes shall only be made available to such members of The League as are required to know such information in order to fulfil their duties to The League (and who are bound by obligations of confidentiality as part of their contract of employment) and shall not be disclosed to the Board in any manner so as to enable Clubs to be identified provided always that:
12.1.1 generic management reporting to the Board and Clubs is permitted; and
12.1.2 The League shall be entitled to publish reports of any decisions relating to any breaches.
APPENDIX A – DEFINITIONS OF RELEVANT TURNOVER AND FOOTBALL FORTUNE INCOME
1 Relevant Turnover – Definitions
Relevant Turnover can be summarised as shown below, with explanatory notes to explain the various treatments of different sources of income.
1.1 League Distributions – All League distributions, including facility fees for TV and Radio relating to the Reporting Period.
1.2 Premier League Distributions – Include Premier League Solidarity and Parachute payments relating to the Reporting Period.
1.3 Match Revenue, Season Tickets – Include only in the relevant season. Where season tickets are sold covering more than one season, income should be declared pro-rata for the relevant season.
1.4 Match Revenue, League Gate Receipts – Actual receipts before deduction of match day expenditure and any levies.
1.5 Match Revenue, Cup Gate Receipts – The home club should declare actual receipts net of away club’s expenses but before other match day expenditure and budgets should assume the Club does not progress past Round 1 of any competition. The away club should include actual receipts received.
1.6 Match Revenue, Friendlies Gate Receipts – The Club should declare actual receipts net of direct match day costs.
1.7 Commercial Net Income, Hospitality – The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply hospitality, or where hospitality is outsourced, the actual amount received by the Club.
1.8 Commercial Net Income, Commercial - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply commercial activities, or where commercial activities are outsourced, the actual amount received by the Club.
1.9 Commercial Net Income, Sponsorship - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply sponsorship, or where sponsorship is outsourced, the actual amount received by the Club.
1.10 Commercial Net Income, Programmes - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply programmes, or where programmes is outsourced, the actual amount received by the Club.
1.11 Commercial Net Income, Shop Merchandise - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply shop merchandise, or where shop merchandise is outsourced, the actual amount received by the Club.
1.12 Commercial Net Income, Club Lottery - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply the club lottery, or where the club lottery is outsourced, the actual amount received by the Club.
1.13 Commercial Net Income, Catering - The actual receipts less the cost of purchases of materials and any directly attributable costs (e.g. labour) required to supply catering, or where catering is outsourced, the actual amount received by the Club.
1.14 Stadium Revenue, Rental Income – Rental due on stadium and facilities in the relevant
Reporting Period.
1.15 Stadium Revenue, Share of Stadium Revenue – Include actual receipts.
1.16 Other Football Income – To be assessed on a case by case basis.
2 Football Fortune – Definitions
Football Fortune Income includes the following revenues streams on the basis that they can reasonably be regarded as a “bonus” to Clubs during the Reporting Period.
2.1 EFL Cup and EFL Trophy Distributions – Include any EFL Cup or EFL Trophy prize money and facility fees on an actual basis. Budgets should assume the Club does not progress past Round 1 of any competition.
2.2 Football Association Distributions – Include any FA Cup prize money and facility fees on an actual basis. Budgets should assume the Club does not progress past Round 1 of any competition.
2.3 League Parachute Income – Include all Parachute income receivable from The League for the relevant Reporting Period.
2.4 Net Transfer Income – Include actual cash received in the year from other clubs by way of Compensation Fee, Transfer Fee and / or Loan Fee (in these Notes, “Transfer Fees”), less any actual cash paid to other clubs by way of Transfer Fees. Any advances of Transfer Fees from organisations such as Close Leasing can only be included where the instalments being advanced against fall due within the Reporting Period covered by the relevant SCMP Submission.
2.5 Donations – Donations from independently run lotteries, PFA contributions for Private Medical Insurance, small gifts from benefactors, donations towards Player salary costs, payment for taxation losses etc. are allowable. Significant donations must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account. Before being included in the Club’s SCMP Submission, a signed Letter of Guarantee (in accordance with Appendix D) must also be received by The League to confirm that there is no interest linked to the donation or any requirement for future repayment of the donation by the Club.
2.6 Cash Injections – Significant cash injections from companies or benefactors must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account. Before being included in the Club’s SCMP Submission, a signed Letter of Guarantee (in accordance with Appendix D) must also be received by The League to confirm that there is no interest linked to the donation or any requirement for future repayment of the injection by the Club.
2.7 Equity Injections – Only include non-redeemable equity investments received in the relevant period. The conversion of debt to equity does not constitute a form of revenue as no cash injection is provided to the Club to finance wages in the future. Further, any linked transactions whereby loans are repaid followed by a cash injection in exchange for equity, will not be allowed. All equity cash injections must be evidenced by a bank receipt or statement to show funds have been credited to the Club’s bank account. Before being included in the Club’s SCMP Submission, a copy of the signed Companies House forms confirming the issue of new share capital must also be received by The League.
2.8 Accumulated Profit – Only include reserves extracted from audited Annual Accounts that have been filed with Companies House. For the avoidance of doubt any revaluation reserves do not
qualify for inclusion.
2.9 Other Income – To be assessed on a case by case basis.
2.10 Clubs are required to apply to The League (providing supporting evidence) in order to utilise the Football Fortune Income streams shown below within their SCMP Submission.
3 Other Notes
3.1 All amounts should be shown net of attributable Value Added Tax.
3.2 Where a Club enters into a contra deal with a sponsor (e.g. perimeter advertising in exchange for the provision of motor vehicles to a Club) then, provided there is an independent third party valuation attaching to the supply being provided to the Club, this amount can be incorporated in Relevant Turnover (e.g. within Sponsorship income)
3.3 Where a Club offers equity to investors then that equity is included in the year in which that offer becomes unconditional.
3.4 No loan funding, from whatever source and on whatever terms, should be included.
3.5 Youth Development funding should NOT be included as part of Relevant Turnover or Football Fortune Income for the purposes of the Salary Cost Management Documentation.
3.6 Bad debts should be netted off against the Relevant Turnover line in the period in which any claim for bad debt relief is made.
3.7 Management charges received from any group companies should also be netted off income in the year in which the charges are levied. This income should be specified as other income.
APPENDIX B – DEFINITION OF PLAYER RELATED EXPENDITURE
1. Player Related Expenditure includes all expenses that are due during a Reporting Period to a Contract Player, Temporary Contract Player or Professional Under 21 Player under the terms of his contract, calculated in accordance with the following paragraphs.
2. Those Players transferred out on loan should be excluded for any period that they are out on loan. As Clubs have the ability to share the wages of Players sent out on loan, then the treatment of wages should be treated proportionately.
3. Clubs should include all Players registered with them at any point during the current Reporting Period, along with their associated costs for the period of registration.
4. Any salary, fees or remuneration due under the terms of the Player’s contract and any image rights contract (if any) should be included. This would include not only basic salaries but also any additional salary payments which may become due dependent upon age etc.
5. Clubs should include any signing on fees due to be paid on registration of a Player.
6. Any additional payments which may become dependent upon appearances, either full or substitute appearances should be included.
7. Clubs should include any match, win, loyalty, promotion or other kind of bonus, save that promotion bonuses would be treated as expenditure in the following Reporting Period.
8. Include any accommodation, holiday, or relocation expenses in relation to a Player (to include all expenses met on behalf of the Player whether the expenses are legal, removal, travel or other associated costs).
9. Include the cost to the Club of providing any benefit in kind, such as the cost of vehicles used privately (the P11d benefit figure should be used in calculating the cost to the Club) and any hotel expenses (other than those directly relating to matches). It is not proposed to include training/fitness Player Related Expenditure.
10. Clubs should include National Insurance Contributions and taxes accrued in respect of the Player.
11. Include any agents’ fees payable by the Club, as well as any settled by the Club on the Player’s behalf.
12. Pension contributions due in respect of any Player in relation to the current Reporting Period.
13. Clubs should include any insurance premiums paid in respect of any Player. Personal accident, health and life insurance etc., whether or not these are specifically provided for under the terms of any employment contract should be included.
14. Any personal expenses paid as well as other expenses ordinarily and necessarily incurred in connection with complying in full with the obligations under the terms of any employment contract should be included within the Player Related Expenditure.
15. Any loan made, or to be made to a Player which is not repaid within the same Reporting Period should be included as other Player Related Expenditure.
16. Exclusions may apply in respect of any Players who are declared permanently unfit to play at any point during the Reporting Period, for the period after such declaration, but not for any other period of incapacity (e.g. short term injury and short term illness etc.).
17. Redundancy and/or Compromise payments made to Players (e.g. the payment of the balance of the contract as a lump sum which has been discounted to represent accelerated receipt) should also be included for the purposes of determining Player Related Expenditure. Where redundancy payments are staged they should be allocated into the SCMP Documentation for
the Reporting Period in which the payments fall due.
18. Some Clubs appoint Players to other roles e.g. manager or coach. So as to avoid Clubs seeking to load salary payments in favour of the second role, the payments under both roles will be amalgamated and 50% of the total will be attributed as Player Related Expenditure for the purposes of determining compliance with the SCMP Requirement.
19. All of the Player Related Expenditure definitions will be described as being made to a Player or any third party on his behalf, either directly or indirectly, whether in this country or elsewhere.
APPENDIX C – SELF-CERTIFICATION FORM
SALARY COST MANAGEMENT PROTOCOL
LEAGUE 2
SEASON 20xx/yy REPORTING PERIOD
On behalf of __________________________ Football Club I enclose the necessary registration
documents in respect of the permanent / loan / loan extension / signing of __________________
(Player name).
I confirm that having made due enquiry of the Club’s current and anticipated financial outturn for the current Reporting Period (as detailed in the most recent SCMP Submission) this registration will not result in the Club breaching the SCMP Requirement.
Signed: ____________________________________________ (duly authorised official)
Position: ___________________________________________
Date: ______________________________________________
APPENDIX D – LETTER OF GUARANTEE TEMPLATE
[To be drafted on Company/Personal Letterhead]
[Addressed to the Football Club]
[Date]
Dear Sirs,
Re: Non-Repayment of Cash Injection to [Football Club FC Ltd] (Club)
This letter is to confirm that [I/We] have made a cash injection of £[x] to [Football Club FC Ltd] (Donation)
[I/We] confirm that:
(a) the Donation is a permanent donation to the Club with no linked interest payable by the Club to [me/us] or any other third party at any time; and
(b) there is no future requirement for the Club to repay the Donation.
Yours faithfully
Yours faithfully
[Printed Name]
[Position]
[Address]
APPENDIX 6 STANDARD CLAUSES FOR MANAGER CONTRACTS
1 The Manager shall observe and comply with the rules and regulations for the time being in force of any organisation or body the rules and regulations of which the Club is bound to observe including those of The Football Association and the League.
2 The Manager shall comply with all reasonable instructions and requests
(a) given to Club Managers by the League; or
(b) given to the Manager by the Club,
which arise in the first case out of any commercial contract entered into by the League for the benefit of its members or in the second case out of any such contract entered into by the Club for its own benefit and the Manager shall not himself enter into any such contract which conflicts or competes or is reasonably likely to conflict or compete with those entered into by the League