Sink or Swim: Bolton Wanderers in Administration
If relegation from the 2018/19 EFL Championship wasn’t bad enough for Bolton Wanderers’ fans, then starting next season in League One with a 12-point deduction will be.
That is the consequence Wanderers will have to face though, having appointed administrators on Monday 13 May 2019 following the presentation of a Winding-Up Petition by HMRC. However, there is light at the end of the tunnel for the Football Club.
The processes set out in the Insolvency Act 1986 can be categorized in two ways; terminal and non-terminal. Had Bolton not appointed administrators in February, the High Court would have likely ordered that the Club be wound-up and a Liquidator appointed.
Terminal and Non-Terminal Processes
Liquidation is a terminal insolvency process because the purpose of liquidation is for the assets of a club to be realised and distributed among its creditors. Following that, a club would be dissolved and effectively cease to exist.
In comparison, Administration is a non-terminal process with the Administrator’s primary objective being to rescue the company in distress as a going concern.
The directors of Bolton will have been attracted by a number of advantages the administration process provides, with the two most compelling being:
- A Winding-Up Petition will be suspended while the Club is in Administration following an appointment, and
- There will be a Moratorium on insolvency proceedings and other legal proceedings
The Statutory Moratorium
One of the main reasons Winding-Up Petition’s are so detrimental to football clubs is because creditors who present a Petition to the Court are required to advertise the Petition in the London Gazette. When a club is already under severe financial pressure, that pressure doubles once the Petition is advertised and all of a Club’s other creditors become aware of the financial crisis.
On entering into Administration, a club is given some breathing space by virtue of a Statutory Moratorium which provides that no order for the winding-up of the Club can be made (unless in very special circumstances) and no legal proceedings can be brought or continued against the Club without permission of the Court or the Administrator.
This enables administrators to restructure and reorganise a Club’s finances without having to immediately deal with creditor pressure.
The Purposes of Administration
Once appointed, the Administrator is required to achieve one of the three purposes of Administration:
- Rescue the Club as a going concern, and if that is not possible
- Achieve a better result for the Club’s creditors as a whole (than would be likely if the Club were to be wound up), and if that is not possible
- Realise the Club’s assets in order to make a distribution to one or more secured or preferential creditors
There have been numerous examples of football clubs that have successfully navigated their way through administration.
Huddersfield Town entered into Administration in 2003 and Southampton FC in 2009. Both clubs recovered and made it to the ‘promise land’ of the Premier League.
However, Rangers will provide a stark warning for Bolton’s fans.
Having been forced into Administration under similar circumstances, their Administrators were unable to rescue Rangers and the Club was Liquidated (ending their 140 year existence). However, the assets of the Glaswegian Club were sold by the Administrator to a new company and the Club reformed (restarting from the lowest tier in Scottish football).
What Next for Bolton?
The Joint Administrators appointed by Bolton will have their work cut out with staff and players having not been paid their wages for some months, and a significant £1m+ tax bill.
There were several adjournments of HMRC’s Winding-Up Petition, most likely to enable Bolton’s Chairman, Ken Anderson, to find someone willing to purchase the Club and deal with its debt. That however, unfortunately failed to materialise.
If Bolton are unable to successfully navigate their way out of administration, it seems likely that the Club (or at least its assets) will be sold, bringing an end to their 124 year existence.