Premier League Strengthens Rules on Associated Party Transactions

Premier League clubs will now face sanctions if they are found to have inflated their deals with ‘associated parties’. The league’s teams recently voted to strengthen rules on associated party transactions, which include deals with other football teams within a multi-club group or with companies that have the same ownership group as the club. The updated Premier League handbook now outlines the new guidance and the potential penalties that clubs could face.

Previously, the handbook did not mention any possible sanctions for associated party transactions. Instead, it stated that if the Premier League determined a transaction to not be fair market value, the club would be informed of the fair market value and either prevented from signing the deal or required to undo it if it had already been completed.

In cases where clubs breach these rules, the Premier League has confirmed that there is no fixed policy or sanctions in place. The decision on penalties will be left to the discretion of an independent commission. The burden of proof for determining fair market value now falls on the clubs, with the Premier League board having the final say on whether a deal has been accurately reported.

The updated handbook emphasizes that the associated party transaction rules are essential for maintaining the effectiveness of the profitability and sustainability rules. These rules ensure the accuracy of the costs and revenues reported by clubs for compliance purposes. Additionally, the handbook stipulates that a director of the relevant associated party must submit a declaration confirming that the transaction is at fair market value.

The Premier League defines associated party transactions based on the substance of the relationship rather than just the legal form. This includes situations where a club and an entity are directly or indirectly controlled, jointly controlled, or materially influenced by the same government, public or state-funded body, or by the same party.

One club, believed to be Manchester City, has raised concerns that the new rules may violate competition law. However, the Premier League asserts that the rules are fully compatible with such laws.

In 2021, new regulations were introduced requiring club sponsorship deals worth over £1 million to be submitted to the Premier League for scrutiny to ensure they are not associated party transactions. Despite opposition from Newcastle United and Manchester City, the clubs agreed to these regulations.

Under the previous rules, if the Premier League suspected a transaction to be an associated party deal, it would conduct a fair market value assessment to determine if the value had been inflated.

Last year, proposals to block loan deals between associated clubs and wider affiliate transactions were put forward but fell short of the required votes to pass.