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What does it mean when a football club goes into administration?

Coventry City was placed into administration this week Photo: PA

WHAT IS ADMINISTRATION?

Administration is a way to rescue a business and prevent it from going into liquidation (when a company is closed and all their assets are redistributed).

This means a club can stay in existence and continues playing.

WHY DO CLUBS GO INTO ADMINISTRATION?

Simply put, clubs go into administration because they are spending more than the amount of money they are earning.

The tipping point is when debtors demand to be paid the money they are owed (whether it is the taxman or creditors etc) and the club simply do not have the money to pay up.

In football many clubs budget for a certain level of income which is not always reached. This can be an assumption that stadiums will be full, they will remain in the same league or will perform to a certain level throughout the season. When this happens it is difficult for clubs to reduce their spending quickly as a large amount of money is spent on players' wages which cannot be changed.

WHAT DO ADMINISTRATORS DO?

Administrators are accountants whose job is to get get the best deal for the club and those they owe money to by either finding a buyer or minimising losses.

They are responsible for the running of club and will try and increase revenue. This is generally done by selling off assets (normally the best players) and using contacts to find investment. They may also try and seek a deal with creditors to reduce the amount of debt they have to pay.

In short, administrators are in charge of everything except what happens on the pitch.

WHAT ARE THE PUNISHMENTS FOR ENTERING ADMINISTRATION?

If a club in the Football League enters administration they are automatically deducted ten points. In the Premier League the figure is nine points due to eight less games being played.

The League also introduced a rule that prevents a side from being in administration for either two successive seasons of eighteen consecutive months.

WHICH OTHER MIDLANDS CLUBS HAVE BEEN AFFECTED?

  • Walsall - 1990
  • Northampton Town - 1995
  • Notts County - 2002
  • Leicester City - 2002
  • Port Vale - 2002
  • Derby County - 2003
  • Boston United - 2007
  • Port Vale - 2012
  • Coventry City - 2013

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