PL charge City for alleged breaches of financial rules

[Chris in London]

Might be a bit pedantic but the PL (or UEFA) have some jurisdiction over City but they have none whatsoever over Etihad Airways. Just supposing SM did decide to purchase £50m of equity (through one of his investment vehicles unrelated to CFG) in Etihad Airways each year - a totally above board purchase of equity - how can the FA or UEFA challenge that? It’s a legitimate business investment. It could bring into play an issue of a related party but that could only mean a ‘fair value’ test. I think at UEFA and at the PL there’s a bunch of shisters so intent on nailing us they are in danger of losing their perspective and thinking that they can bully Etihad and other sponsors when in reality they absolutely cannot.

That is the problem as I see it. There's nothing fundamentally wrong with related party transactions in themselves, provided you say in the accounts 'by the way guys, this is a related party transaction.' That then means the PL/UEFA can make adjustments to the amount actually received in their notional assessment of whether we cross the FFP threshold.

That isn't what's being alleged, as I understand it. What's being said is that our accounts do not provide a true and fair view of our financial circumstances. That is not an allegation that we've laid our cards on the table, but under PL rules the amount we are claiming as sponsorship should be adjusted because they think Etihad (say) have paid too much. This is an allegation that the accounts are bent.

For my part, I don't see how they can seriously argue that the sponsorship revenues were disguised equity investments if the sponsoring company's audited accounts marry up with the receiving company's audited accounts - which they do - UNLESS they have some first hand evidence that Etihad was in on this conspiracy as well, eg someone saying "I was in the meeting where Khaldoon told the accountants at Etihad and City that we needed to disguise the funding coming from Sheikh Mansour to make it look like commercial sponsorship."

If they have nothing more than the Der Spiegel emails, I think this is going nowhere.

There are other charges that do not relate to the general accusation that our accounts do not give a true and fair view of our financial circumstances, but this is the most serious of the charges we face, and i think it is no more likely to succeed than at CAS.

 

[KS55]

That is the problem as I see it. There's nothing fundamentally wrong with related party transactions in themselves, provided you say in the accounts 'by the way guys, this is a related party transaction.' That then means the PL/UEFA can make adjustments to the amount actually received in their notional assessment of whether we cross the FFP threshold.

That isn't what's being alleged, as I understand it. What's being said is that our accounts do not provide a true and fair view of our financial circumstances. That is not an allegation that we've laid our cards on the table, but under PL rules the amount we are claiming as sponsorship should be adjusted because they think Etihad (say) have paid too much. This is an allegation that the accounts are bent.

For my part, I don't see how they can seriously argue that the sponsorship revenues were disguised equity investments if the sponsoring company's audited accounts marry up with the receiving company's audited accounts - which they do - UNLESS they have some first hand evidence, eg someone saying "I was in the meeting where Khaldoon told the accountants at Etihad and City that we needed to disguise the funding coming from Sheikh Mansour to make it look like commercial sponsorship."

If they have nothing more than the Der Spiegel emails, I think this is going nowhere.

There are other charges that do not relate to the general accusation that our accounts do not give a true and fair view of our financial circumstances, but this is the most serious of the charges we face, and i think it is no more likely to succeed than at CAS.

Related party transactions are defined in IAS24. None of our sponsorships fall within that definition, otherwise our accounts would have said so. There was some argument with UEFA in 2014 as to the interpretation of IAS24, but eventually UEFA accepted that we had no related party sponsorships.
The new PL rules talk about ‘associated’ sponsorships as a way of getting round IAS24. As far as I can see ‘associated’ means anything the PL want it to. It is aimed squarely at City. The PL cannot block such sponsorships but they can be referred to their expert panel and limited to a value the panel ascribed to it. The PL would lose any court challenge to this rule, which Pannick advises is illegal. We voted against these rules or abstained, I forget which.

 

[Centurions]

Related party transactions are defined in IAS24. None of our sponsorships fall within that definition, otherwise our accounts would have said so. There was some argument with UEFA in 2014 as to the interpretation of IAS24, but eventually UEFA accepted that we had no related party sponsorships.
The new PL rules talk about ‘associated’ sponsorships as a way of getting round IAS24. As far as I can see ‘associated’ means anything the PL want it to. It is aimed squarely at City. The PL cannot block such sponsorships but they can be referred to their expert panel and limited to a value the panel ascribed to it. The PL would lose any court challenge to this rule, which Pannick advises is illegal. We voted against these rules or abstained, I forget which.

Did we not agree with UEFA not to increase the Etisalat & Aabar deals back in 2014 as part of the settlement?

 

[Chris in London]

Related party transactions are defined in IAS24. None of our sponsorships fall within that definition, otherwise our accounts would have said so. There was some argument with UEFA in 2014 as to the interpretation of IAS24, but eventually UEFA accepted that we had no related party sponsorships.
The new PL rules talk about ‘associated’ sponsorships as a way of getting round IAS24. As far as I can see ‘associated’ means anything the PL want it to. It is aimed squarely at City. The PL cannot block such sponsorships but they can be referred to their expert panel and limited to a value the panel ascribed to it. The PL would lose any court challenge to this rule, which Pannick advises is illegal. We voted against these rules or abstained, I forget which.

Agree with all of that. IIRC UEFA tried to argue that RPT meant something different for the purposes of FFP than it meant in other circles. It would certainly have been open to them to include an autonomous definition of related party transactions in the FFP rules, but what they actually did was cut and paste IAS 24 into their rules. So they were fucked on that.

As to the new rules, we cannot be (and have not been) charged by the PL for alleged breaches of regulations that weren't in place at the relevant time. So for instance they can allege that what we said was not a related party transaction in (say) the 13/14 season actually was - though that would be hard to prove because as you say what is a RPT is pretty well understood - but they cannot say that in season 13/14 we were in breach of a regulation that did not come in until 2021.

I think the new rules are essentially irrelevant to the charges we are currently facing.

Given that the PL's press release specifically stated that the charges included matters relating to related party transactions, I am genuinely perplexed as to what they are alleging.

 

[halfcenturyup]

That is the problem as I see it. There's nothing fundamentally wrong with related party transactions in themselves, provided you say in the accounts 'by the way guys, this is a related party transaction.' That then means the PL/UEFA can make adjustments to the amount actually received in their notional assessment of whether we cross the FFP threshold.

That isn't what's being alleged, as I understand it. What's being said is that our accounts do not provide a true and fair view of our financial circumstances. That is not an allegation that we've laid our cards on the table, but under PL rules the amount we are claiming as sponsorship should be adjusted because they think Etihad (say) have paid too much. This is an allegation that the accounts are bent.

For my part, I don't see how they can seriously argue that the sponsorship revenues were disguised equity investments if the sponsoring company's audited accounts marry up with the receiving company's audited accounts - which they do - UNLESS they have some first hand evidence that Etihad was in on this conspiracy as well, eg someone saying "I was in the meeting where Khaldoon told the accountants at Etihad and City that we needed to disguise the funding coming from Sheikh Mansour to make it look like commercial sponsorship."

If they have nothing more than the Der Spiegel emails, I think this is going nowhere.

There are other charges that do not relate to the general accusation that our accounts do not give a true and fair view of our financial circumstances, but this is the most serious of the charges we face, and i think it is no more likely to succeed than at CAS.

:) I really want to.

But a deal is a deal. A bit like sponsorship really.

 

[Chris in London]

:) I really want to.

But a deal is a deal. A bit like sponsorship really.

Oh go on...

 

[Norman kneejerk]

It must matter when owner funding is limited. SM Direct to City is owner funding; SM To Etihad to City is legit sponsorship.

Yes that's a clear concept to help follow it but if I followed the arguments city were saying it wasn't even SM to the sponsor, it was HH someone different entirely.

 

[halfcenturyup]

Oh go on...

If you insist. :)

Naah.

 

[hammocity]

The PL will attempt to prove the sponsorships were "disguised equity funding" by the owner and therefore invalid. So if our sponsors were invalid then all our accounts are implicitly invalid. That's the whole thing in a nutshell.

Why would equity funding, regardless where it comes from, be illegal and invalidate the accounts outwith of the poxy Premier League made up rules? Any company Director can put whatever funds they want into a business which could make up for losses, the Tax implication would be positive for the club as far as HMRC us concerned IE make a loss, don’t pay tax on profits.

 

[Chris in London]

Why would equity funding, regardless where it comes from, be illegal and invalidate the accounts outwith of the poxy Premier League made up rules? Any company Director can put whatever funds they want into a business which could make up for losses, the Tax implication would be positive for the club as far as HMRC us concerned IE make a loss, don’t pay tax on profits.

Equity funding isn't illegal.

Filing dodgy accounts is.