24 Mar 22
The extraordinary turn of events at Chelsea football club (Chelsea) has dominated the news front and back pages over the last few weeks. Chelsea’s owner, Roman Abramovich, has been sanctioned by the UK Government meaning that his assets here are frozen, including Chelsea. Chelsea is currently operating under a special licence issued by the UK Government under the Russia Regulations [1] to continue “football-related activities” (Licence) whilst a new buyer for Chelsea is found.
- The Licence severely restricts Chelsea’s day-to-day operations and means that any sale of the club will have to effectively be approved by the UK Government (as the Licence does not currently mention/permit any sale) as well as relevant stakeholders such as the leagues. The Licence was amended on 12 March 2022 and again on 23 March 2022 following negotiations between Chelsea and the UK Government and further amendments may come as the UK Government has confirmed that it does not want to punish the fans. A copy of the Licence can be accessed by clicking here.
- The Licence applies equally to Chelsea Women and the women’s professional football team it operates. Whilst plenty has been written about the men’s team given what is at stake, this note sets out some of the issues Chelsea women may navigate in the coming weeks and months.
- Until a few years ago, Chelsea Football Club Women Limited (Chelsea Women) was owned by the Chelsea FC Foundation but is now a wholly owned subsidiary of Chelsea Football Plc (Chelsea Men) to comply with the Competition Rules. Six groups have made formal offers to buy Chelsea and we will have to wait and see if any sale process formally includes Chelsea Women.
- Whether as part of a Chelsea group sale or an individual sale (in each case on a solvent basis), Chelsea Women will need approval from the FA’s WSL Board[2] and meet various requirements including, amongst other things, that all creditors are paid in full. This process will need to be worked through with the FA, given the current restrictions affecting Chelsea Women under the Licence.
- Over recent years, Roman Abramovich invested heavily in Chelsea Women. Chelsea Women capitalised by signing players such as Pernille Harder in 2020 for a fee reported to be more than £250,000 (a new transfer record for a female player at the time) and enjoying major on-field success. Chelsea Women are the current holders of the top domestic league, the FA Women’s Super League (WSL).
- However, the latest filed accounts for the period ending 30 June 2021 show that Chelsea Women is loss-making and is reliant on its parent undertaking Chelsea Football Plc for continued financial support.
- Chelsea Women will be hoping that any buyer will have the same appetite to invest in Chelsea Women going forward to help ensure the financial stability of the women’s team.
- Earlier this month, the English Premier League disqualified Roman Abramovich as a director of Chelsea Men under rule F1 of the Premier League handbook. However, Roman Abramovich is not an appointed director of Chelsea Women.
- Any additional or replacement director of Chelsea Women will need to comply with the FA’s Owners’ and Directors’ Test Regulations (this is similar but operates separately from the owners’ and directors’ tests administered by the Premier League and English Football League). This will need to be kept under review as Nigel Huddleston MP confirmed last week that the current owners’ and directors’ tests will be reformed and made more robust in the wake of the independent fan-led review.
- Chelsea Women’s principal income streams – broadcast, matchday revenue and commercial activities will all be negatively impacted by the terms of the Licence. Whilst Chelsea may still receive this income (as set out below), it must be frozen and cannot be accessed by the club even to make payments permitted under the Licence. This means that it is reliant on existing reserves to fulfil its obligations, together with permitted payments from Chelsea’s parent to avoid liquidity issues (see further below).
- Broadcasters can still broadcast Chelsea Women fixtures and make payments due under contracts agreed before 10 March 2022. BBC and Sky are in their first season of covering the WSL in a landmark deal, resulting in more broadcast revenue across elite women’s football than ever before. More information about the opportunities the deal created for women’s football is set out in our note The New WSL Broadcasting Deal: a “Perfect Marriage” available here.
- Another key income stream is sponsors. There are common sponsors across Chelsea Men and Chelsea Women, such as shirt sponsor Three, who announced it was suspending its sponsorship of Chelsea. Chelsea Women also have individual deals, such as their 2021 three-year exclusive short sponsorship with Singer Capital Markets.
- Just like Chelsea Men, Chelsea Women were originally unable to sell new tickets for the rest of the season, including clashes with Tottenham Hotspur and Manchester United at its 4,850-capacity Kingsmeadow ground in what is set to be a neck and neck race title race. Season ticket holders (understood to be around 1,500 in number, which sold out for the first time for this season) were an exception to this, but Chelsea Women is one of the most-well attended in the WSL and recent top of the table clashes have sold out. In the latest amendment to the Licence, Chelsea is now permitted to sell certain tickets, including home games in the WSL.
- Chelsea Women will not be able to sign new players under the Licence and out of contract players and staff will become free agents in the summer. Existing player loan and sale arrangements are payable but will be frozen.
- It is widely reported that Chelsea will not be able to fund its liabilities (including a significant wage bill) for too long given its current trading restrictions. The 23 March amendment to the licence permits Chelsea’s parent company to pay it up to £30 million in respect of cashflow or liquidity issues faced by the club. Whilst this will go some way alleviating stress, it will be split across the whole club and the different teams. If Women suffer an insolvency event, they would be subject to a 10-point deduction in the WSL.[3]
