The Forced Sale and the Limits of the Ownership Test

Sporting competitions have detailed procedures for admitting owners and almost none for removing them. That asymmetry is not an oversight. It reflects a century of assuming that ownership change happens through sale, inheritance or insolvency — all processes initiated by the owner or by creditors, and all of which the competition can regulate at the point of entry of the successor.

What no framework anticipated was a scenario in which a solvent owner, in undisputed legal possession of a valuable asset, becomes prohibited from receiving proceeds from its sale, while the asset itself must continue to operate — fulfilling fixtures, paying wages, honouring broadcast obligations — throughout.

Licence as leverage

The instrument that emerged was the special operating licence: a narrow governmental authorisation permitting a club to continue trading in defined ways while its proprietor is restricted. It was not designed for this. It is essentially an emergency carve-out from a sanctions regime, and it was adapted in real time to keep a football club solvent.

The licence proved to be extraordinarily powerful, because its conditions could be adjusted. Restrictions on ticket sales, merchandise, transfers and contract renewals could each be tightened or relaxed, and every adjustment altered the value of the asset and the urgency of the sale. A governmental authority with the ability to vary those terms weekly had, in practice, effective control over the timetable and structure of a private transaction.

A licence written to permit trading became the mechanism for compelling a sale. That was improvisation, not design.

The auction that had to be quick and clean

The sale process that followed operated under constraints that would be considered disqualifying in any ordinary transaction. The vendor could not receive proceeds. The timetable was set by licence expiry rather than by market conditions. The buyer had to satisfy the league’s ownership test, the government’s sanctions requirements, and a public expectation about the disposition of the proceeds.

Under those conditions, price ceased to be the primary selection criterion and deliverability became one. Bidders were assessed substantially on their ability to close quickly, to fund without leverage that would require lender consent, and to satisfy multiple regulators concurrently. That favoured consortia with immediately available equity and disadvantaged bidders with more conventional financing structures, regardless of headline value.

What has now been established

Several precedents were set, and none of them were deliberated in advance.

• A national government can, through sanctions and licensing, effectively compel the sale of a sporting asset without expropriating it.
• A league can condition continued participation on ownership change, using competition rules as an enforcement mechanism for a policy decision taken elsewhere.
• Proceeds from a forced sale can be ring-fenced and directed toward purposes unrelated to the asset, with the vendor’s consent obtained under duress that everyone acknowledges.
• A club can operate normally for months under an ownership structure that would fail the league’s own entry test, because the alternative — suspension — harms parties the regulator is trying to protect.

The drafting that follows

Leagues across Europe and North America have opened reviews of their ownership rules in the months since, and the provisions now being drafted are notably more interventionist than anything previously in force. The common features are a continuing suitability requirement rather than a one-time test, an express power to direct a sale on defined triggers, a pre-agreed mechanism for appointing an independent board during a forced transfer, and a requirement that owners maintain an escrow sufficient to fund a season of operations.

That last provision is the most consequential and the least discussed. A standing operating reserve changes the economics of ownership for every proprietor, not just the ones a regulator might eventually want to remove. It converts club ownership from an asset that can be acquired with leverage into one requiring locked-up working capital, which narrows the buyer pool and, over time, pushes ownership further toward exactly the class of purchaser whose arrival prompted the review in the first place.