A study has found that football clubs registered as public limited companies have a better
firm performance compared with football clubs registered
as private limited companies; meaning those registered as public limited companies have
better financial performance than those as private limited companies.
Football clubs within the English premier league are housed in one of the following
formation of companies; i) A public limited company regulated by the stock exchange to which it isregistered
or ii) a private limited company which has shareholders who hold sway over the direction in which
thefootball club is going; this is the arrangement
for the majority of clubs in the English Premier League.
An example of how shareholders can change a club is when Chelsea almost went into administration
under Ken Bates, before Roman Abramovich became the majority shareholder - and Chelsea’s future changes.
The main exception to this rule is Arsenal, as they have a parent company.
The parent company is a public limited company; Arsenal Holdings PLC.
Public Limited Companies have their shares listed on a stock exchange where they
are traded and regulations must be adhered to.
Although Arsenal’s shareholder is a public limited company, their shares are traded infrequently
onthe NEX Exchange, which itself is a niche exchange.
Public limited companies have far more stringent rules and this was highlighted by the purchase
of shares of Arsenal Holdings PLC by Stan Kroenke.
As the majority shareholder of Arsenal Holdings
PLC, Kroenke has to make an offer on any shares that
are put forward for sale, this is to comply with company law rules.
Although public limited companies have more laws and corporate governance protocols to
follow there are still difficulties that arise and
Kroenke’s purchase shares of Arsenal Holdings PLC is a prime example of this.
Kroenke was not trusted when he purchased shares in the company in 2007.
Therefore, there was a sell off of shares between Kroenke and the second largest shareholder Alisher Usmanov.
Over a period of four years Kroenke went from being seen as a hostile shareholder to now
an ally of Arsenal football club and a non executive director of Arsenal Holdings PLC.
Kroenke holds 66.64% of Arsenal Holdings PLC and Usmanov holds 29.25%.
As mentioned, Public limited companies have significant governance rules and laws to abide
by and this gives a significant security to the company
as every move made by the public limited companies is scrutinised.
Private Limited companies on the other hand do not have the stringent rules to follow.
An example of how a single shareholder can change a football club, with little resistance
is Hull City AFC.
In December 2010, Assem Allam and his son Ehab Allem took over Hull City AFC for £1
on the condition that they invested £30 million into the football club.
As sole shareholders, through a private limited company and the only two directors
of Hull City AFC, there are no barriers to stop any changes by the board.
This became evident in the summer of 2013, when Assem Allam announced
that the club would dispense its 109 year old name and would be remarketed as Hull Tigers.
This received strong criticism from the fans; however,
Allam retorted “nobody questions my decisions in my business”.
In normal circumstances a private limited company would not need approval to change
their name however, as Hull City AFC belongs to the football association, the association gets the final say.
The FA rejected the name on a number of occasions and this infuriated Allem who stated
that he would "not invest a penny more in the club" unless he is allowed to change the
club's name ​to Hull Tigers.
In the same interview, Allam said, "I have never been a football fan.
I am still not a football fan.
I am a community fan.”
Since the year 2000 forty four football clubs across the Football League have been placed
into administration, which is a significant number
and shows that there is a fundamental flaw in the management of football clubs.
Both forms of company seemed to be flawed when it comes to
running football clubs however, public limited companies are much more regulated than private
limited companies and therefore, there is more scrutiny over the actions taken by the
clubs which appears to lead to greater financial protection.
The evidence also identifies that it is imperative that
clubs are protected and are not run into the ground by owners as football clubs are part
of local communities.