Debt Restructuring for Italian Football Clubs

In recent years, increasing financial needs are representing one of the most difficult challenges for the European football system.

With no exception, Italian clubs are facing the same hurdles, exacerbated by historical infrastructural issues (ie, availability of new stadiums), the lower size of broadcasting rights, and by a general difficulty in attracting key long-term investors. This has generated a critical financial situation widespread amongst most clubs (even top-tier ones) with only few exceptions.

To face the above, in 2023 the Italian Football Association (FIGC) amended its Internal Organisational Rules (NOIF) to facilitate the adoption by clubs of debt restructuring procedures in accordance with the new Legislative Decree No 14/2019 on corporate crisis and insolvency (CCII), with the aim to safeguard the running of national competitions and allow business continuity for clubs facing financial difficulties.

Before the 2023 NOIF amendments, a football club affiliation with FIGC could be revoked in the event of bankruptcy and winding-up procedures (Article 16.6 of the FIGC NOIF).

Said provision would not leave much room to insolvent clubs for debt restructuring plans aiming at business continuity and it did not clarify what clubs could do/not do to resolve a financial crisis. This generated uncertainty for clubs in terms of options available and a possibility for intervention by sport authorities later in the process when the crisis was irreversible, with specific remedies and measures on a case-by-case basis.

The first set of amendments to the NOIF concerning debt restructuring were introduced on 19 April 2023, with the introduction of a new Article 16 of the NOIF directed to clubs facing a financial crisis, allowing them to maintain their FIGC affiliation in case of insolvency, insofar as the restructuring does not impact the business continuity.

The current version of Article 16 states that the revocation of the FIGC affiliation is resolved only for clubs undertaking a judicial liquidation or winding-up procedure under the CCII or for clubs undergoing transactions for the transfer of the business in the framework of a corporate insolvency event (Article 16.6 and following NOIF).

In light of the new Article 16 mentioned above, Italian football clubs are allowed to choose between multiple debt restructuring procedures under the CCII (eg, debt restructuring agreements, composition with creditors, restructuring and reorganisation plans, and private settlement agreements) to ensure business continuity and a reduction and/or rescheduling of outstanding liabilities.

Some of said procedures require the filing of an application before the competent court to decide on the feasibility of the proposed restructuring plan and may also entail the granting of protective measures to prevent creditors from initiating or continuing enforcement actions against the club.

In certain instances, clubs entering a debt restructuring agreement are also entitled to benefit from a settlement with tax authorities by which the club may propose a partial and/or deferred payment of outstanding taxes and statutory contributions.

Clubs entering debt restructuring procedures are required to inform FIGC and the national authority monitoring compliance of financial obligations by football clubs (Co.Vi.So.C.) by filing a business plan, certified by a qualified expert, confirming the company’s ability to operate at least until the end of the football season, as well as a copy of the petition made to competent courts to access the restructuring procedure.

Any final decision of the court authorising repayment plans, debt reductions and waivers has to be submitted to FIGC and Co.Vi.So.C. Clubs remain subject to all the obligations prescribed by the FIGC regulations, until a court decision concerning the approval of the restructuring procedure becomes final.

The undertaking of a restructuring plan implies, however, an important consequence: clubs filing a petition to access restructuring procedures are prevented from registering new players (ie, a transfer ban) until the end of the second transfer window after the final approval of the restructuring by the court. Until 1 July 2024, clubs will still be allowed to avoid the transfer ban if certain exceptions apply and if any financial imbalance is promptly cured (eg, positive balance between the proceeds deriving from the sale of players against the costs for the acquisition of new players for that season; and equity contributions made by shareholders).

Leveraging on the above provisions, just a few Italian clubs undertook debt restructuring procedures in 2023 (eg, Reggina 1914 and U.C. Sampdoria), which began amidst the uncertainty deriving from the effectiveness and interpretation of the new rules.

For instance, for Reggina 1914 the outcome was not positive, as – following the execution of a debt restructuring agreement approved by the court – it was indeed excluded from competitions and saw its sport title and affiliation revoked, due to the fact that the court approval was challenged by creditors and therefore it could not relieve the club from fulfilling its obligations towards FIGC and sport authorities.

On the contrary, U.C. Sampdoria was able to go through the debt restructuring with the support of an investor granting the fulfilment of main obligations towards FIGC and the league, avoiding major disruptions.

In December 2023, the FIGC decided to further amend the NOIF with the purpose of harshening consequences for clubs entering restructuring procedures and discouraging clubs to piggyback on debt restructuring to elude outstanding obligations.

In particular, from 1 July 2024, clubs entering into restructuring procedures will still be subject to the ban from registering new players, however, differently from the current provisions, such transfer ban can neither be lifted nor cured and it will not be subject to any exceptions.