A landmark ruling could lead to changes in Premier League rules – but Everton’s position will be boosted if takeover goes ahead
Everton could avoid any potential problems caused by a landmark judgement around Premier League financial regulations if the club’s takeover goes through. A specialist panel has ruled it “unlawful” that interest-free loans from club shareholders fall outside the scope of rules on Associated Party Transactions (APT).
The Blues have benefited from around £450m of such lending from current owner Farhad Moshiri. Any rule changes that follow the judgement could, in theory, impact the club – particularly if they were to fall within calculations around the Profitability and Sustainability Regulations (PSR) that have already led to two points deductions.
Such changes could be rendered irrelevant, however, should the prospective takeover by The Friedkin Group be signed off and thus remove any commitment from Everton to Moshiri.
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Football finance expert and co-host of The Price of Football Podcast Kieran Maguire said: “This ruling effectively means the rules in their present form are not fit for purpose and a perfect example of decide in haste and repent in leisure. The Premier League will have to go back to the drawing board to draft new amendments and getting a majority of clubs to agree on any changes will be difficult and take time. That should mean Everton have little to worry about if the takeover of the club by The Friedkin Group goes ahead without issue.”
The Premier League’s financial rules were thrown back into the spotlight on Monday with the release of the judgement in a complex case fought between the league and Manchester City over APT.
The regulations are designed to prevent clubs from signing deals that are exaggerated beyond ‘fair market value’ with businesses linked to their owners, a process that could boost efforts to operate within league financial restrictions.
City challenged those rules after the club had lucrative sponsorship deals blocked by the Premier League.
The findings of the arbitration panel led to both sides claiming victory, with the league stating the outcome “endorsed the overall objectives, framework and decision-making of the APT system”. Yet City did clinch success on several points, most notably its challenge to the approach to shareholder loans, which are often interest-free.
City argued shareholder loans should be included within the APT rules because if the borrowing carried no, or little, interest then they were not of fair market value. The league disputed this, claiming such lending represented “transparent investment by owners”.
The panel ruled in City’s favour, however, finding the process unlawful and concluding: “The exclusion of shareholder loans from the APT rules distorts competition in permitting one form of subsidy, namely a non-commercial loan but not another, namely a non-commercial sponsorship agreement.”
The impact of that judgement could carry huge significance given a host of Premier League clubs have received such support from their owners. Everton’s most recent set of accounts, for the financial year that ended on June 30, 2023, stated: “The balance of interest free shareholder loan outstanding at year end was £450,751,000.”
Arsenal, Brighton and Hove Albion, Chelsea, Leicester City, Bournemouth and Liverpool are thought to be among a group of other clubs that have used similar arrangements.
The judgement is now set to lead to attempts to amend the rules surrounding APT. They could lead to changes, for instance the application of commercial interest rates to the shareholder loans, that make it tougher for clubs to comply with PSR. Everton were deducted a combined eight points across two PSR breaches last season.
The threat of further regulatory action hitting Everton currently appears limited, however. That is because any attempt to redraft the rules is likely to be a complex affair. Changes would need to be put to a vote by Premier League clubs with a minimum of 14 falling into agreement for alterations to be passed. Given the number of clubs that benefit from the existing rules, and the wide scope of views on the topic, that may not be straightforward.
Meanwhile, Moshiri’s ownership of Everton looks set to end soon. The businessman has agreed to sell his 94% share in the Blues to US organisation The Friedkin Group. That deal is now undergoing regulatory scrutiny from authorities including the Premier League. With the group’s track record in football – it already owns Italian giants Roma – and the strength of its finances that process is not expected to hit any problems and Everton could therefore have new ownership signed off by Christmas, freeing the club of any burden to Moshiri and potentially removing any regulatory changes that stem from the judgement from the club’s concern.