Unless you've been living under a rock for the past couple of days, you will have known of the various struggles at Portsmouth F.C. and their finances (or, rather, lack of them). One possible scenario is liquidation.
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Alexandre "Sacha" Gaydamak previously owned Portsmouth F.C. from 2006 onwards, but was looking to sell. In August 2009, he did so, to Sulaiman Al-Fahim. Sulaiman Al-Fahim may be more familiar to some as the head of the group that was involved with the Manchester City F.C. takeover.
However, things turned sour as Sulaiman Al-Fahim failed to pour enough money into the club leading to first signs of cracks in the ownership, with the players failing to be paid. Eventually, another investor, Ali Al-Faraj, took over from Al-Fahim; however, money continued to be a problem, with more unpaid wages.
Portsmouth F.C. were placed on a transfer embargo preventing them from registering players (including extending the loan of Jamie O'Hara), due to unpaid transfer fees to other clubs. The Premier League later blocked television money being sent to Portsmouth F.C., forwarding it to these clubs owed money instead. The players under question have been reported to be, amongst others, Lassana Diarra (from Arsenal), Glen Johnson (from Chelsea), Tommy Smith (from Watford) as well as missed loan payments for Aruna Dindane (from Lens).
The first real signs of liquidation appeared when Her Majesty's Revenue and Customs (HMRC) filed a winding-up petition against Portsmouth F.C.
Portsmouth F.C. had their transfer embargo partially lifted on 26th January allowing them to sign players on free transfers or on loans.
On the 4th of February, Ali Al-Faraj defaulted on loan payments to a creditor, Balram Chainrai, triggering a clause allowing him to take over the club. Chainrai, however, has no intention of putting more money into the club and is solely there to collect as much money as possible from his investment, willing to sell the club to a new owner as soon as possible.
Portsmouth, however, failed to block the winding-up petition but were granted a 7-day stay of execution (which was later extended to 1st of March). Portsmouth tried to apply to sell players outside the transfer window but this was rejected by the Premier League.
On 23rd of February, Chainrai confirmed that the club would go into administration by Friday (26th February) if no buyer had been found. Andrew Andronikou of accountancy firm UHY Hacker Young later confirmed this would happen.
On 1st of March, HMRC challenged the decision to go into administration.
Liquidation is the process in which a company, or part of a company, is ended. In the case of Portsmouth F.C., this would mean that Portsmouth F.C. would, to be brief, cease to exist.
Plenty of teams in the past have gone into liquidation — the term folded may be more familiar. For example, Aldershot F.C. went into bankruptcy and was forced to fold. A supporters' group then set up Aldershot Town F.C. and entered the footballing pyramid in the Isthmian League Division Three. As of 2009, they are now in Football League Two.
Put shortly, administration allows an administrator to continue running the club as a growing concern. However, HMRC, who have submitted a winding-up petition, believe Portsmouth F.C. are insolvent — i.e. they do not have the funds to pay its debts. Administration in this case would be useless. Creditors, i.e. people owed money by Portsmouth F.C., would be better off if Portsmouth F.C. were liquidated as they would get more money back.
However, administration, if it does happen, will deduct 9 points from Portsmouth F.C.'s points tally. Still better than going insolvent, of course.
Portsmouth F.C. later confirmed they would voluntarily enter administration. This has yet to be ratified by the Premier League, however. HMRC indicated they would challenge the decision to go into administration.
Manchester United F.C. and Liverpool F.C. are amongst the largest, if not the largest, clubs in the country. Both have relatively substantial turnovers and assets compared with Portsmouth F.C. In some ways, they can afford to be in debt — akin to a millionaire being able to pay off a debt of £100k much easier than a homeless man can.
It should be noted of course that this scenario is not ideal from the clubs' points-of-view — nor the fans. The Manchester United Supporters Trust and Spirit of Shankly are supporters' trusts/organisations which actively campaign against the ownership of their respective clubs.
According to BBC Sport, around £60m.
They are currently in dispute with HMRC — they have until 1st March to show the High Court they have sufficient funds to be solvent.
The latest attempt by the club was to ask FIFA and the Premier League to allow them so sell players outside of the transfer window. This is to attempt to pay wages for February (which begs the question how the club are going to do so for the next few months). The Premier League, however, has rejected this plea.
Two schools of thought exist: The first being that the Premier League/FA/UEFA/FIFA should not be involved with messing around with clubs as they are run as businesses. The second being that since they oversee things, they should act to protect the clubs themselves as it keeps leagues' integrities intact and continues to allow football clubs to exist.
There are decent arguments from both sides but a debate on what's best will not be discussed here. Join a forum if you wish to do so.
It has been reported that John Utaka is on a contract worth £80,000 per week. He has denied this, however.
By comparison, Arsenal's Andrei Arshavin earns roughly the same amount. And the difference in ability between Arshavin and Utaka should be clear, of course.
By entering administration the winding-up petition will be halted, saving the club from liquidation. The problem with administration, aside from administration itself of course, is that it's difficult to get out of it. Leeds United F.C. demonstrated this by failing to obtain a CVA which docked them further points a league down.
Relegation seems all but confirmed now that Portsmouth are in administration, sadly.
Ah, the question. Assuming Portsmouth F.C. are liquidated, I believe the Premier League will simply void all of Portsmouth F.C.'s results and remove them from the table. I don't know how promotion and relegation will work, however. Relegating two to the Championship and promoting three to the Premier League would leave the Championship one team short, requiring another promotion from League One — and so on. A ripple effect, if you will.
Another possibility is that Portsmouth F.C. will forfeit all remaining fixtures and therefore the Premier League will give out 3-0 losses to all of their remaining fixtures. This is slightly less fair as it means that teams in the relegation scrap who have yet to play Portsmouth F.C. get a free 3 points while others who did play (and got worse results than 3-0) are penalised. The first option above penalises those who have already played, but 3-0 is arguably not a fair result for every single case. Even at the top, if Manchester United win the league title by a goal difference of one, Chelsea will be aggreived as Manchester United beat Portsmouth 5-0, meaning Chelsea never had the chance to improve their goal difference against a lost fixture.
As I thought the former was fairer, I only put that one at the top of the page. The table assuming the forfeited results is on the right.
While the Scottish Premier League could afford to run Gretna F.C., Portsmouth F.C. are in much worse debt with much higher wages. Arguably the Premier League cannot afford to run Portsmouth F.C. They may be able to pay some money in advance, such as forwarding parachute payments (if they are relegated) and future television money. However, will this be enough?
A Manchester United fan.
There doesn't seem to be much condensed information about right now. Matt Slater of the BBC has written a quick Q&A summary of some facts. In addition, the usual news outlets apply: BBC Sport, Sky Sports, Guardian Football, and so on.
The Portsmouth F.C. official site is devoid of anything meaningful information related to this, predictably.
Here's all figures collated:
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