Impact assessment

Fact sheet - the Independent Football Regulator (IFR)

Updated 25 March 2024

Applies to England and Wales

The Football Governance Bill will establish a new Independent Football Regulator (IFR) for English men’s elite football. The IFR will be set up as a new public body to ensure its operational independence and accountability.

The IFR will have 3 primary objectives. They are:

1. Club financial soundness - to protect and promote financial sustainability of individual clubs, ensuring that clubs take sensible financial decisions and consider the long-term when taking risks

2. Systemic financial resilience - to protect and promote the financial resilience of English football as a whole, ensuring that systemic risks and structural issues like the distribution of revenue through the pyramid are managed appropriately

3. Heritage - to safeguard the traditional features of English football that matter most to the fans and local communities of clubs

The IFR will not legally be able to act outside of these objectives and every action it takes must, so far as is reasonably practicable, advance one or more of these 3 objectives.

The IFR has a duty to consider several ‘secondary’ outcomes that are important in the football industry but are not the direct responsibility of the IFR:

• sporting competition
• the competitiveness of regulated clubs (including against international rivals)
• investment into English football

The IFR will not act to directly influence these outcomes. While some indirect impacts will be unavoidable, the IFR will seek to avoid them where possible. This recognises that sustainability should not be pursued at the expense of all else.

In addition, the IFR must have regard to 7 “regulatory principles” when operating.

These principles are based on best practice from existing regulators, tailored to the unique nature and issues of the football industry:

1. efficient and expedient - using its resources in the most time and cost-effective way
2. participative - proactively coordinating, cooperating, and constructively engaging with clubs, individuals at clubs, and competition organisers
3. proportionate - any requirement or restriction imposed on a person should be proportionate to the benefits which are expected to result from that requirement or restriction
4. football context-specific - acting in a way that recognises the specific context of association football and the fact that clubs are already subject to rules, restrictions and burdens by virtue of their membership of competitions
5. tailored but consistent - applying regulation consistently, while still ensuring requirements are appropriately tailored to a club’s specific circumstances
6. senior management responsibility - where appropriate, recognising that the individuals responsible for making decisions at a club (senior managers, other directors, and owners) should be accountable for the actions of the club and its compliance with regulatory requirements
7. transparent - acting as transparently as reasonably practicable

The IFR will operate a licensing system where all clubs in scope will require a licence to operate. The intention is for the scope to cover all clubs in the top 5 tiers of men’s English football.

The IFR will have powers to monitor and enforce requirements related to financial regulation, club ownership, fan engagement, and protection of club heritage. As well as setting a corporate governance code of practice for clubs to apply, having the power to prohibit clubs from joining breakaway competitions, and a backstop mechanism to make sure there is sufficient distribution of finances across the professional game if football can’t reach an agreement on this itself.

The IFR will have the following powers, as set out in the Bill:

Statutory, strengthened owners’ and directors’ tests to make sure a club’s custodians are suitable and protect fans from irresponsible owners.

The tests will consist of 3 key elements: a fitness test (owners and directors), a source of wealth test (owners only), and a requirement for financial plans and resources (owners only).

Prospective owners and directors of clubs will have to undertake and pass tests before buying or joining a club. Incumbent owners and directors will not automatically be tested, but the IFR will have powers to test and remove incumbents should they be found to be unsuitable. This allows the IFR to tackle concerns about unsuitable owners and directors responsible for the financial mismanagement of clubs.

Enhanced financial regulation to improve the financial resilience of clubs across the football pyramid, ensuring that clubs take sensible financial decisions and risks are mitigated so they do not jeopardise the club’s future.

The Bill will give the IFR powers to oversee financial plans and step in where it has concerns.

Clubs will be required to demonstrate sound basic financial practices; have appropriate financial resources to enable the club to meet cash flows, including in the event of a financial shock; and protect the core assets and value of the club - such as the stadium. This will prevent clubs facing cliff-edge situations.

If there is a concerning level of financial risk, either at club or systemic level, the IFR will be able to place bespoke conditions on clubs to mitigate it.

Placing fan engagement requirements on clubs and requiring clubs to comply with heritage protections.

This will require clubs to have a framework in place to regularly meet a representative group of fans to discuss key strategic matters at the club, and other issues of interest to supporters (including club heritage).

Most clubs have a strong relationship with their fans, consciously engaging them in decisions about the club’s heritage. However there have been some notable exceptions.

Regulated clubs will be required to establish that the majority of their fanbase in England and Wales are in support of any proposed material changes to club crests and home shirt colours, as well as seeking the approval of the FA if they wish to change the club’s name.

This will ensure rules introduced by the FA which are already in place for clubs in the top 5 leagues are maintained and adhered to.

Require clubs to seek approval if they propose a sale or relocation of their home ground.

The stadium a club plays in not only has significant value to fans but is often a club’s most valuable asset. The recent administration at Derby County highlighted the issues caused by the decision to sell the club’s stadium to a separate company owned by the club’s owner.

Approval of a stadium sale will be determined on the basis of financial considerations, whilst any relocation must also not significantly undermine the heritage of a club.

Prevent English clubs from joining breakaway or unlicensed leagues.

Fans will no longer face the prospect of their clubs signing up to damaging breakaway competitions such as the European Super League, which several Premier League clubs tried to join in 2021. The proposals for the new competition were not meritocratic, did not have the support of the fans, and threatened the heritage and financial stability of English football.

Introduce a backstop power to intervene in the distribution of broadcast revenue where necessary (subject to certain thresholds being met).

All parties accept the current distribution of revenue across the top 5 divisions is not sufficient, contributing to problems of financial unsustainability and having a destabilising effect on English football.

The government’s strong preference is for an industry-led solution that works for all of football. However,  given the importance of distributions to financial sustainability, the IFR will have targeted powers to intervene if football fails to reach an agreement, subject to certain thresholds being met.

Establish a ‘Football Club Corporate Governance Code’.

Clubs will be required to report on corporate governance, setting out how they are applying the code.

The IFR will prepare and publish a State of the Game report assessing the industry, guidance on its regulatory regime, and an annual report on its activities over the past year:

• State of the Game report - the IFR will need to publish a ‘State of the Game’ report within 3 years of it becoming operational (and within every 3 years after). The report will include a broad assessment of the financial health, market structure and economic issues in the football industry.

• Guidance published by the IFR - the IFR will publish detailed and practical guidance on its regulatory regime, to support industry understanding and compliance. This will ensure clubs, owners, directors, and competition organisers know what to expect and what is expected of them. For example, it is expected that guidance would include detail on how clubs should apply for a licence and how the IFR will reach a decision on a licence application.

• Annual report - the IFR will need to submit to the Secretary of State a report outlining all of the activities it has undertaken in a year. The report will be laid in Parliament and available for the public to see. This is standard practice for all public bodies.

The IFR’s approach to regulation will be proportionate and adaptive. Rather than take a ‘one size fits all’ approach, the requirements on clubs will be tailored to their unique circumstances and the risks they face. Where clubs are lower risk or already well run, the IFR will not look to intervene unless necessary.

The IFR will also take a participative approach to regulation. This means it will aim to work constructively with the industry to improve standards. This also includes taking an advocacy-first approach to enforcement wherever possible. Only where this has proven ineffective, or in more urgent or serious cases of non-compliance, will the IFR intervene more directly, up to and including the use of its sanction powers. Where appropriate, these sanctions will target the individuals making the decisions at clubs. This will better align the incentives of these decision makers with the best interests of clubs and their fans.

Shadow Regulator

The government is establishing the regulator in shadow form now so that the IFR is ready to operate as soon as possible once legislation is passed.

The shadow regulator is undertaking preparatory activity, including:

• designing an agile and efficient organisation with the right governance, skills and expertise to enable effective and transparent regulation
• engaging clubs in early decision making about the operation and implementation of the regime
• developing the scope of the State of the Game report in consultation with the football industry and fans
• working with football authorities on sharing information and existing best practices within the industry.

An interim chief operating officer was appointed in November 2023 to head up the shadow regulator. Further appointments, including an independent chair and chief executive officer, will be made in due course.