Legal News

Is It The End Of The Road For Portsmouth FC? Mark Briegal comments
Wed 10th Feb 10 - 12:23

Portsmouth FC faces the end of its 112-year history at the High Court today after eleventh hour talks with the taxman failed.

Sources at Sky Sports have revealed that the HMRC will push for a winding-up order for Pompey, signalling the death knell for the club.

It owes £7.5m to the taxman and a winding-up order will take the club into liquidation, effectively the end of the line for any business.

Sources said last minute negotiations had broken down over a deal to pay a portion of the money back and reschedule further debt. The Barclays Premier League's bottom club is expected to ask for an extra 28 days to put together their case.

It is a traditional English club and in these circumstances I am doing everything to keep this club alive, but I cannot do it alone.

But if the club fails in its bid for a stay of execution, Pompey could go into liquidation.

The case will be heard this afternoon.

Manager Avram Grant made an impassioned plea to the courts after last night's last-gasp 1-1 draw against Sunderland.

He said: "Football is not one plus one is two, it is a passionate game.

"It is not a clear business where there are no feelings - there are feelings of fans, players and my own. There are problems, but football is more than this."

He added: "This club needs to stay alive. That is more important that football. It is 112 years old.

"It is a traditional English club and in these circumstances I am doing everything to keep this club alive, but I cannot do it alone."

Grant added: "I don't know about the financial situation but we are trying to fight and keep it."

If Portsmouth, who won the FA Cup in 2008, go into liquidation it will be the first time that a Premier League club has done so.

The court would not have the power to put the club into administration, which would have allowed the club to continue trading and protect it from its creditors. Instead, what we are talking about is the wholesale destruction of Portsmouth as a football club.

Sky's Business Correspondent Joel Hills said: "In theory the difference between adminsitration and liquidation is the difference between intensive care and burial.

"Liquidation would mean the immediate end to Portsmouth's season, the death of the club (formed in 1898) and the immediate termination of the contracts of all players and staff."

Sky's Enda Brady, at the High Court, said: "Portsmouth may be hoping for some last minute adjournment, some stay of execution for them to get their house in order."

Portsmouth owner Balram Chainrai has said that more than 600 jobs could be lost if the club goes into liquidation.

Chainrai is the club's fourth owner this year, following Alaxandre Gaydamak, Sulaiman Al Fahim and Ali Al Faraj.

In the same court, after Portsmouth, will be League One club Southend United and Championship outfit Cardiff City, also both face winding-up petitions.

It is the second time Cardiff, who lost to Pompey in the 2008 FA Cup final, have faced a winding-up order over an unpaid debt to the taxman.

The Bluebirds have been in discussions with HMRC over a reported £2.7m tax bill in an effort to reach an agreement before the court action.

Mark Briegal, Partner at Ralli comments:

"This is a sad state of affairs. In many ways, football clubs do not follow the usual rules of business.  In most markets if a competitor offers a better product or cheaper prices the consumer will switch. But I can't imagine a Manchester United supporter buying a Manchester City season ticket next year just because it was cheaper and the stadium newer.  Sentiment and loyalty affect the clubs.  However they are businesses and must act like businesses.  And businesses have to pay their creditors, including the tax man.  Just because the fans are loyal doesn't mean that the government will allow the clubs to get away with not paying tax.

I would imagine that HMRC has looked at the numbers and decided they will get more cash out of a liquidation than out of an administration and more quickly.  Creditors tend to prefer administration because, if it is successful, they will get back more of their money.  HMRC doesn't want to be the fifth owner in a year.  The underlying problem may be that small clubs at the bottom of the Premiership just can't afford to belong to a very expensive club.  The clubs needs money and it needs it fast.  Perhaps the fans could have a whip round?"