Clause 27 - Duties to notify IFR of prospective new owner or officer

Football Governance Bill – in a Public Bill Committee am 11:00 am ar 21 Mai 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Virendra Sharma Virendra Sharma Llafur, Ealing, Southall

With this it will be convenient to discuss the following:

Clauses 28 to 31 stand part.

New clause 3—Owner’s commitment to future use of a club’s football ground—

“(1) A person may not become or continue to be an owner of a regulated club unless they provide to the IFR a commitment to maintain long-term use of the football club’s grounds as a mandatory licensing condition.

(2) The IFR must codify the commitment.

(3) The IFR may only determine a person to be or remain a suitable owner of a club if the person has made a commitment under subsection (1).”

This new clause introduces a new licensing condition requiring an owner to provide a commitment to the future ongoing use of a football ground by a club.

Photo of Stuart Andrew Stuart Andrew Assistant Whip, Parliamentary Under Secretary of State (Department for Culture, Media and Sport), Parliamentary Under Secretary of State (Department for Business and Trade) (Minister for Equalities)

Clearly we have got to the bit that everyone is itching to speak to. Ensuring that new owners and officers of clubs have passed the regulator’s owners and directors tests is a key tenet of the new regime, and is designed to prevent unsuitable custodians from running or owning clubs. The regulator therefore needs to know who a club’s prospective new owners and officers are before they buy or join the club, so that they can be tested for suitability.

Clause 27 will place duties on a person to notify the regulator where there is a reasonable prospect of that person’s becoming a new owner or officer of a regulated club. The clause will ensure that the regulator receives advance notice of an application from a prospective new owner or officer, and will help the regulator to prepare to act quickly when it receives the application. The clause will place the same duty on regulated clubs themselves, as another means of ensuring that the regulator will be notified.

The regulator needs to know a person’s role at the club so that it can prepare to assess whether they are suitable to be an owner or an officer of that club. That is why, where the notification relates to an officer, it must state their proposed job title or job description, as well as any senior management functions that they will carry out. Enforcement measures such as censure statements or financial penalties are also available to the regulator if it determines that this requirement has not been complied with without a reasonable excuse. This will deter those who do not wish to comply with the regime.

Clause 28 will prohibit a person from becoming a new owner of a club unless the regulator has determined beforehand that they are suitable to own that club. It requires prospective new owners to provide an application containing information about how they propose to run the club, the estimated costs, how those costs will be funded and where that funding comes from. This will better ensure that prospective new owners are clear from the outset about their plans for the club and how they will deliver the resources to fund those plans.

Once a complete application has been provided, the regulator can pass the individual owner only if they meet the individual ownership fitness criteria, as defined in clause 26; they have the requisite honesty and integrity and are financially sound; they have sufficient financial resources; and the regulator does not have grounds to suspect that the individual has any source of wealth that is connected to serious criminal conduct, which is defined in the Bill by reference to part 1 of schedule 1 to the Serious Crime Act 2007, which includes crimes such as drug trafficking and fraud. This will mitigate illicit finance in the game.

Registered societies are one vehicle by which fans can collectively own clubs. They must be run in accordance with specific legal requirements regulated by the Financial Conduct Authority. Registered society owners are not assessed against the fitness criteria or the source of wealth test, but they still need to complete an application, including providing a plan for running and funding the club.

Photo of Tracey Crouch Tracey Crouch Ceidwadwyr, Chatham and Aylesford

The Minister is setting out clearly the purpose of these clauses of the Bill. It is clear that the regulator has been designed to be as agile and as future-proof as possible. If a crime that we have not yet imagined is added to the Serious Crime Act, how will the regulator assess a potential owner who has committed that crime?

Photo of Stuart Andrew Stuart Andrew Assistant Whip, Parliamentary Under Secretary of State (Department for Culture, Media and Sport), Parliamentary Under Secretary of State (Department for Business and Trade) (Minister for Equalities)

My understanding is that if the 2007 Act is updated with a new crime, it will still be relevant to the Bill. However, I want to be absolutely sure, so I will write to my hon. Friend, and if I am wrong I will correct my homework.

By requiring new owners to undergo the regulator’s test, clause 28 will better mitigate harm to clubs by stopping unsuitable custodians.

Photo of Ian Byrne Ian Byrne Llafur, Liverpool, West Derby

Further to the point made by the hon. Member for Chatham and Aylesford, what happens if the ownership is a nation state that does something falling within the remit of potential international criminality?

Photo of Stuart Andrew Stuart Andrew Assistant Whip, Parliamentary Under Secretary of State (Department for Culture, Media and Sport), Parliamentary Under Secretary of State (Department for Business and Trade) (Minister for Equalities) 11:15, 21 Mai 2024

Well, the Bill identifies an individual as the owner, not a state, but we will come on to some of those points. I have heard some of these representations as we have been preparing the Bill. It would not be right for the regulator to be getting into foreign policy—I do not think any party would want a regulator of any sort to be setting the nation’s foreign policy—but I get that it is an area of interest, and we will come on to it later in our proceedings.

Football clubs hold unique importance to their fans and local communities, who are the ones who lose out when clubs are exploited or mismanaged by unsuitable officers. Clause 29 will prohibit individuals from becoming a new officer of a regulated club unless the regulator has determined beforehand that they are suitable to be an officer.

Once the prospective officer has provided a complete application to the regulator, it will assess them to ensure that they meet the individual officer fitness criteria, as defined in clause 26. They must possess the requisite honesty and integrity and the requisite competence and must be financially sound. If the regulator is satisfied that the individual meets these requirements, it must find them suitable to be an officer of the club; otherwise, it must find them unsuitable. When the regulator is making this determination, it will take into account the matters listed in clause 37. By requiring new officers to undergo the regulator’s tests, the clause will better mitigate harm to clubs by stopping unsuitable individuals from becoming officers.

The Bill requires prospective new owners and officers to pass the regulator’s owners and directors test before they join or buy a club. However, it is possible that someone might take up a position at a club without first having undergone those tests. This may be a blatant and deliberate breach of the requirement to undergo tests before joining the club. A prospective owner may act in bad faith, hoping that once they are in, the regulator will be more hesitant to fail them, but in some circumstances a person may fall into the definition inadvertently or have some other relatively innocent reason for the breach. This may occur, for example, if a person inherits significant equity in a football club or if a person disputes in good faith whether or not their actions bring them within the Bill’s definition of an owner.

Clause 30 will therefore provide the regulator with the powers that it needs to respond decisively but flexibly when a person has become a new owner or officer of a club without the regulator having first determined whether that person is suitable. When the regulator becomes aware that this has happened, it must either notify the new owner or officer that they are being treated as unsuitable automatically or require them to provide an application, treating them as though they were a prospective applicant. When deciding which option to take, we expect the regulator to assess the circumstances of each case carefully and consider whether the new owner or officer has an innocent explanation or whether they have deliberately breached the regime.

The regime cannot be allowed to be abused. The regulator must have the discretion and the teeth that it needs to address harm to the sector. Clause 30 is an important step towards achieving that aim.

When the regulator is minded to fail a new or prospective owner or officer, clause 31 will require the regulator to give that person and the relevant club an opportunity to make representations before the regulator makes its final decision. Affected persons can also require an internal review of the regulator’s decision and then can appeal the outcome of that review to the Competition Appeal Tribunal. The purpose of clause 31 is to allow a new owner or officer, or the relevant club, an opportunity to argue their case before the regulator finds them unsuitable, which will ensure that the regulator has all relevant information available to it, allowing it to make better decisions and ensuring the regime is more effective.

The Government recognise the intent behind new clause 3, which is to ensure that football continues to be played in a club’s home ground. The Bill takes account of a variety of ownership structures relating to home grounds that exist across the football pyramid. The new clause would capture only one type of ownership structure. Owners may not necessarily directly own the rights to the club’s ground; in fact, only about 40% of clubs own their stadium outright. The new clause would require owners to make a commitment about something over which they do not necessarily have complete control or influence.

Let me be clear: the intent of the new clause will already largely be achieved by the Bill as drafted. The Bill places duties on the club itself regarding selling the club’s home ground or relocating from it; clauses 46 and 48 will require clubs to obtain approval from the regulator before a home ground is sold or relocated. If that requirement is breached, the regulator can exercise its enforcement powers.

Photo of Clive Betts Clive Betts Chair, Levelling Up, Housing and Communities Committee, Chair, Levelling Up, Housing and Communities Committee, Chairman of the House of Commons Members' Fund

The Minister refers to what the Bill will do in regard to future sale, but the new clause does not deal with future sale; it deals with something that has already happened. The Minister says that it does not cover all eventualities, which may be true, but surely there are eventualities that need to be covered. If the Minister does not think that the new clause goes far enough, is he prepared to table another new clause that goes further to ensure a sustainable future for a club with a ground to play on?

Photo of Stuart Andrew Stuart Andrew Assistant Whip, Parliamentary Under Secretary of State (Department for Culture, Media and Sport), Parliamentary Under Secretary of State (Department for Business and Trade) (Minister for Equalities)

The hon. Gentleman makes an interesting point. I will not commit to introducing a new clause, but I will commit to going away and having another look at the points that he has raised, if that will satisfy him.

The Bill also allows for senior managers to be held accountable if they are responsible for the club breaching the requirements. That means that enforcement action could be taken against an owner of a club who was also a senior manager of the club and responsible for the club failing to comply with clauses 46 and 48.

Photo of Matt Rodda Matt Rodda Shadow Minister (AI and Intellectual Property)

Further to the point made by my hon. Friend the Member for Sheffield South East, in some cases there may also be an issue with training grounds being separated from the main organisation of the club. The current owner of Reading was trying to sell the training ground separately from the ground itself and from the club. Can the Minister write to me on that matter? It does not currently appear to be covered by the Bill, and I would be very grateful if he could reassure local fans.

Photo of Stuart Andrew Stuart Andrew Assistant Whip, Parliamentary Under Secretary of State (Department for Culture, Media and Sport), Parliamentary Under Secretary of State (Department for Business and Trade) (Minister for Equalities)

I am happy to commit to writing to the hon. Gentleman. He is right that it is really the perimeter of the stadium, the car park and so on. I will happily give him further details.

When the regulator is testing the fitness of prospective new or incumbent owners of clubs, it must have regard to any action of a regulatory or disciplinary nature that is being or has been taken in relation to the individual. The regulator already has the power to consider that as part of an owner’s suitability termination. For those reasons, I cannot accept new clause 3, and I hope that the hon. Member for Sheffield South East will not press it.

Photo of Stephanie Peacock Stephanie Peacock Shadow Minister (Digital, Culture, Media and Sport)

This group of clauses begins to set out how the new tests for prospective owners and directors will work in practice. I broadly welcome the clauses and will begin—I am conscious of time—to speak to each of them in turn, addressing new clause 3 last.

Clause 27 will require prospective owners and officers, as well as the club, to notify the regulator. This is an important first step that will allow the regulator to start the work of conducting the test itself.

Clause 28 will ensure that a person cannot become an owner unless the regulator has decided that they are suitable. This decision is called a positive determination and will be given to a candidate based on their ability to meet three main standards.

First, the candidate must pass the ownership fitness criteria, which are based on the idea that an owner must have the requisite honesty and integrity and be financially sound. I understand that those criteria have been based on the work of the Financial Conduct Authority; I hope that there will be an opportunity to share learnings and best practice across regulatory organisations as the regulator finds its feet.

Secondly, a candidate must show that they have sufficient financial resources, judged on the basis of an application that must include proposals on running the club. As with the regulator’s enforcement of financial sustainability more broadly, it is important that this process does not deter investment or require clubs to break even. Rather, I trust that the test will seek to ensure that good practice and long-term planning are embedded in owners’ plans from the very beginning.

Finally, there must be no grounds to suspect that the candidate’s wealth is connected to serious criminal conduct. That will prompt a welcome due diligence search on an owner’s wealth sources with the backing of institutions such as the National Crime Agency. Taken together, those standards will provide a comprehensive analysis of a potential owner.

For applications made by registered societies, the regulator will have a slightly different process, making a determination on the basis of sufficient financial resources alone. I am pleased that this recognised route to fan ownership will be treated with a tailored, yet proper, process.

Clause 29 covers officers. As I have mentioned, it is right that officers face a slightly different set of crafted criteria—

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at Two o’clock.