Impact assessment

Fact sheet - licensing regime

Updated 25 March 2024

This was published under the 2022 to 2024 Sunak Conservative government

Applies to England and Wales

The Football Governance Bill will establish a licensing regime with all clubs required to obtain a licence to continue competing in competitions specified by the Secretary of State.

There will be 2 types of operating licence: provisional and full. This structure recognises the importance of a transition period for clubs to familiarise themselves with the requirements and raise standards where necessary.

Clubs will first apply for a provisional operating licence where they will need to provide some basic documentation, including a business plan complete with financial information, and a personnel statement informing the Independent Football Regulator (IFR) who is making the decisions at a club. 

To obtain a provisional licence, clubs will need to demonstrate they are complying with some core requirements (duties on all regulated clubs) and are ready, willing, and able to comply with the mandatory licence conditions (see below). The provisional licence will allow a club to continue operating while making progress towards meeting the IFR’s thresholds for a full licence.

In order to obtain a full operating licence, a club will need to satisfy the statutory test for a full licence. This includes continuing to meet the freestanding duties, meeting the mandatory licence conditions, and meeting the threshold requirements. In addition, if any of the club’s existing owners and directors have been found unsuitable by the IFR, the club cannot obtain a full licence.

Clubs will only need to initially apply for their provisional operating licence. Then, before the end of the provisional period, the IFR will assess a club for its full operating licence - the club will not need to actively apply for this. The ongoing approach to real-time monitoring and supervision of clubs will mean that once clubs are granted a full operating licence, they will not need to re-apply for or renew their licence periodically. This should reduce the regulatory burden on clubs.

Provisional licence

Clubs must meet the following criteria to obtain a provisional operating licence:

• Satisfy the IFR that it would meet the “duties on regulated clubs”. This includes:    - not playing in breakaway competitions that have been prohibited by the IFR    - notifying and obtaining the IFR’s approval before going ahead with the relocation or sale of their home ground or using their ground as collateral for a loan    - establishing the support of a majority of a club’s fans in England and Wales for changes to the crest and home shirt colours, as well as FA approval for any changes to club names    - providing an up-to-date personnel statement to the IFR identifying a club’s owners, directors and senior managers and their roles and responsibilities within the club    - informing the IFR of any material change in circumstances affecting the club that is relevant to the IFR’s functions

• Satisfy the IFR that it will meet the “mandatory licence conditions”. This includes:    - submitting a financial plan to the IFR, detailing funding, revenues as well as financial risk and mitigation for the club    - consulting fans on issues of importance to the club such as club heritage, and business priorities    - publishing a corporate governance statement showing how is it applying the Corporate Governance Code of Practice (this will set out corporate governance best practice in the sport and will be published by the IFR following consultation with industry)

A provisional licence will allow the club to continue playing in the specified competitions for a fixed period of up to 3 years initially, with the possibility for the IFR to extend beyond this where necessary. Before the end of the provisional period, a club should reach the standard required to pass the test for a full licence.

Full licence

Clubs must meet the following criteria to obtain a full operating licence:

• Continue to meet the duties on regulated clubs and the mandatory licence conditions (described above).

• Meet the “Threshold Requirements” (these principles are set in statute but the IFR will provide further detail in guidance following consultation):    - having 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.    - having appropriate non-financial resources - this could include internal structures, plans or policies that the club maintains, for example to manage risk.    - fan engagement - regularly consulting with fans on relevant matters, including the club’s strategic direction and objectives, the club’s business priorities, operational and match-day issues, the club’s heritage, and plans relating to further/ongoing fan engagement.

• None of the club’s existing owners and directors have been found unsuitable by the IFR.

If the IFR is satisfied that all elements of this test are met, it will grant the club a full operating licence. A full licence would have no expiry date. However, clubs will be monitored and supervised on an ongoing basis to ensure they are complying with their requirements and to determine whether any changes are needed in response to a change in the club’s circumstances.

Discretionary licence conditions

If the IFR does not think that: i) a provisionally licensed club will meet the threshold requirements by the end of its provisional period, or ii) a fully licensed club is meeting the threshold requirements, it will be able to intervene by placing bespoke licence conditions on a club - known as “discretionary licence conditions”. These conditions should always be proportionate to the issue a club is experiencing and the individual club’s circumstances to minimise the regulatory burden. The aim of a discretionary licence condition will be to raise, or contribute to raising, a club’s standards to the threshold level the IFR deems appropriate given the club’s circumstances and risk profile.

Aside from addressing systemic financial risks (see below), the IFR may only impose discretionary licence conditions that relate to one of the 3 threshold requirements. 

For the financial resources threshold requirement, the IFR can only impose discretionary licence conditions relating to:

i) overall cost reduction,
ii) debt management, or
iii) liquidity requirements. 

For the non-financial resources threshold requirement, the IFR can only impose discretionary licence conditions relating to:

i) internal financial controls,
ii) risk management (including a contingency, or ‘wind back’, plan formulated by the club), or
iii) financial reporting.

The IFR will also be able to take action to mitigate systemic risks and structural issues in the game, in line with its systemic financial resilience objective. Certain financial risks may arise that are a concern when the aggregated, correlated, or multiplied effects are considered. These risks may threaten groups of clubs, entire divisions, or even the entire English football pyramid. For example, this might include risks to common credit markets, the global transfer market, or the football broadcasting market on which all clubs are reliant for revenue. 

As such, the IFR will also be able to apply discretionary licence conditions to individual or multiple clubs to advance the IFR’s systemic financial resilience objective. Again, discretionary licence condition(s) set in relation to systemic financial resilience can only relate to:

i) debt management,
ii) liquidity requirements, or
iii) overall cost reduction.

Commitments in lieu of financial discretionary licence conditions

Before the IFR can impose discretionary licence conditions on a club relating to the financial resources threshold requirement or to advance the IFR’s systemic financial resilience objective, it will inform the club and the relevant league of its concerns and proposed action.

The club can make representations to the IFR over the proposed discretionary licence condition while the league can attempt to resolve this issue first, without the need for regulatory intervention, by offering a commitment in lieu of a financial discretionary condition.

If the IFR is satisfied that the commitment from the league will resolve the issue and achieve the same outcome as the proposed discretionary licence condition, it can accept it, and the league is then in charge of ensuring the commitment is fulfilled, including any action required by the club. If the IFR does not think the league’s proposal would work, or that a commitment in force does not appear to be working, the IFR could step in and attach the original proposed discretionary licence condition, or a new condition that looks to resolve the issue.

Suspension and revocation of a licence

The IFR will be able to revoke or temporarily suspend a club’s operating licence under certain circumstances. The most likely reason for the revocation of an operating licence would be because the club has been relegated from a specified competition, and so will no longer be in scope of the IFR. 

However, a revocation of a licence may also occur because a club is persistently and/or seriously non-compliant with its regulatory requirements or, in the case of a provisional licence specifically, if a club persistently fails to meet the test for a full licence and there is no reasonable prospect of it doing so even if given more time to do so. This is considered a last resort and will only be used in the most extreme circumstances. Full details of the IFR’s enforcement procedures can be found in the investigations, enforcement and appeals fact sheet.