Regulatory Framework for Investors in Sports Societies

On the same day, March 7th, another webinar was held under the theme "Sports Societies and Investors". The second panel brought together Sónia Carneiro, Coordinating Executive Director at Liga Portugal; Joaquim Evangelista, President of the Players' Union; Paulo Meneses, President of FC P. Ferreira; and José Maria Montenegro, member of Liga Portugal's Audit Committee.

The topic "Licensing Manual - New requirements" was addressed during a session moderated by journalist António Barroso, from O Jogo.

NEW DEVELOPMENTS AND REQUIREMENTS

Sónia Carneiro, Coordinating Executive Director at Liga Portugal

"Liga Portugal, in recent years, together with the Sports Societies, has been consolidating the terms for the participation of the Clubs in the professional competitions. This year, the main focus will be on the reporting of accounts, namely through the introduction of a new period for Sports Societies to prove their compliance with their obligations. In addition, only debts to players were taken into account before, but now, debts to coaches are also included in the requirements.

"Another major innovation is related to the conditions of the infrastructures, since a Sports Society could risk losing its licence if its stadium does not meet the requirements, which, for now, include the pitch conditions and, in the near future, will also cover stadium lighting. We cannot have cases of Sport Societies making substantial investments to comply with these requirements and then have others that do not meet these conditions or are unable to make such investments."

"Only debts to players were considered at this point, since debts to coaches have now been included. The transparency principle, both in the identity of the shareholders, and in their role, as in the case of bookmakers who are not allowed to participate. From 2015, the rules have been changing and getting more and more strict and demanding."

THE IMPORTANCE OF THE COMPETITIONS MANUAL

Joaquim Evangelista, President of the Players' Union

"A lot has changed for the better. The Union is proud to be part of that change. It is undeniable that the credibility of a competition depends essentially on its transparency."

"I have never had anything against the clubs and we have never wanted to act as agents that oversee and monitor Portuguese football. The Union never replaces the players and only intervenes when they ask, and the truth is that we always fight for better conditions. We all remember Estrela da Amadora, União de Leiria and Beira-Mar, where a set of situations jeopardised players as well as the sport integrity."

"Even before 2013, we presented several proposals to avoid such situations. It was a huge battle, but we managed to ensure that the players would no longer have the burden of proof of compliance. And today, and rightly so, Statutory Auditors are responsible for this, as well as for financial control throughout the season. I therefore highlight the role of Liga Portugal in restructuring the clubs, in what is a professional management model. We have already managed to provide an adequate response during the season and thus avoid the sporting integrity of the competition being jeopardised."

"We managed to find solutions in Portugal that other countries could not. Nevertheless, in the midst of a pandemic, we managed to provide a reasonable solution despite the scale of the problems we were faced with.

COMMUNICATION BETWEEN THE UNION AND THE CLUBS DURING THE PANDEMIC

Paulo Meneses, President of FC P. Ferreira

"I think the Union and the League have played a key role. I was very critical in relation to several situations - and when I say critical, it is in the sense of thinking of solutions - and I recognise the great solidarity capacity of both the League and the Union. At the time, we found solutions that would allow clubs not to default on players."

"FC P. Ferreira are proud of having cut wages by 50% under those circumstances. The players contacted the Union and an agreement was reached that 50% would be paid in the following season, with 25% being paid in September and 25% in the remaining months. We have already paid everything, when the obligations were due to be fulfilled by June. With this, we received feedback from a player who congratulated us because he knew we were different."

"With regard to the Licensing Manual, it is undeniable that the football integrity is far greater now. Nevertheless, we know that there are still ways of bypassing the regulations and it was important to find ways of controlling the situation, because clubs still find ways of persuading players by failing to comply with the payment agreements. To address this, payment agreements should have a two-fold renewal validity, at most."

"But the League is to be congratulated for having the courage to take strong political decisions, partly because taking responsibility is very important."

EVOLUTION OF THE LICENSING MANUAL

José Maria Montenegro, member of Liga Portugal's Audit Committee

"There has been a very considerable improvement. If we compare the current manual with the 2013 standards, the changes are truly significant. This is mainly related to monitoring sporting trasparency, which then impacts on the professionalisation of the Sports Societies. When talking about requirements, the intention is to ensure that clubs do not have debts to players, the Tax Authority, Social Security, and that they have balanced budgets. In other words, that expenses do not exceed revenues."

"We can confirm, in fact, we have accomplished this goal. It was necessary to include an independent agent, namely the Statutory Auditor and, in addition, the debts between clubs were also added. We all stand for stricter standards, and the truth is that progress has been made and successfully, as compliance has been achieved."

"And it is precisely for anyone who does not meet these requirements that it makes sense to have them, because they will rush to comply and thus avoid unfavourable situations in the competition. As it happened last year, the Sport Society involved did not have the conditions to participate in professional competitions this season. Vitória FC were excluded due to non-compliance with several requirements, including the fact that their tax situation was not in order. Without these stringent requirements, they would eventually have been able to enroll in previous years."

INCREASING DEMAND FOR REQUIREMENTS

Sónia Carneiro

"There is a lot of convergence between the Audit Committee and the Sports Societies.  Regarding the possibility of strengthening demands, these measures have to be considered and applied in the right way. We have made considerable changes regard the demands here, but we have to bear in mind that if we set the requirements too high, professional competitions may cease to exist."

"We want to maintain this steady path of gradually adding requirements, which are possible to control. Today, Sports Societies not only have to prove that they have paid their salaries, but also everything that involves other entities."

"And the truth is that these requirements are increasingly resembling the demands of the big leagues. It is certain that, for the time being, it is strongly centred on the financial aspect, but soon they will cover other areas, such as the clubs' infrastructures.

Paulo Meneses

"There has been reasonableness thanks to the gradual way in which things have been done. You have to leave room and time for these conditions to be created without any kind of "refurbishment", so that we can go even further in the future."

"In relation to the past, we all remember that around the licensing period, there was an unusual amount of PERS going into the courts. I was sure that something should have been done about this and be able to go further, as I understood this to be a foul way of bypassing the law. So I think we have progressed so much that nowadays we forget how situations like this were a constant reality."

PROPOSALS FOR THE NEXT SEASON

Joaquim Evangelista

"There are still some loose ends and we know that the Liga understands our criticism. For example, the deferred payment of salaries is still accepted. This also means that salary defaults can still exist, so we believe that this must be avoided. Another issue involves the fact that a club coming from the Campeonato de Portugal can register the team freely, regardless of the regularisation of the judicially confirmed debts."

"It is legitimate for clubs to resort to PER or layoffs, but then it is inconceivable for the club to act as if they have no debts. Worse yet is the fact that, in case of non-compliance with the PER, there are no sporting penalties."

"It would be important to make an appeal, especially as we are nearing the end of the season. In this period, faced with non-compliance, it was important for clubs to be able to anticipate these problems. The situation with Aves was dramatic and we can't always walk along the razor's edge. The clubs that have difficulties must have the courage to address the League and the Union in order to seek solutions in a timely manner, and this message is very important, even more so in a pandemic context."

José Maria Montenegro

"When it comes to PER, it is foreseen in the manual as an last resource when it comes to social debts. The PER itself must be demonstrated and be in compliance because otherwise, neither that last resource is any use. It should be noted that currently all clubs have their tax situation in order."

"That said, here are the proposals: we always want to move forward within the logic of sporting integrity and fairness. Sports Societies often reach the end of the season without paying the salaries of the last two months, but eventually coming to a payment agreement. And that agreement is beyond our control."

"In addition, the subject regarding debts among Sports Societies has to move forward, given that we only make demands to the Sports Societies participating in the Liga's competitions at the moment. If a club signs a player from a foreign club, or one that is not in professional competitions, that is not under our control. And that should be naturally associated, but it's not that easy. The Audit Committee is not a criminal investigation body and we know that the debt control that emerges from this scope is more difficult. But everything we have achieved so far is only possible because Liga Portugal has done a fantastic job."

Sónia Carneiro

"Some of the issues raised here are already solved. Regarding the teams that come from the Campeonato de Portugal, these are already covered in the debt control, given that if the Sports Society has not participated in professional competitions, it already covers players registered in the FPF. In the competition regulations, Sports Societies are also required to show by September 15th that there has been compliance with salary obligations from May to August."

"Regarding foreign debts, I doubt whether the Audit Committee has the legal competence to be able to check those kinds of issues. As a final point, reasonableness is absolutely crucial, because we cannot make unreasonable demands. We are licensing 34 Sports Societies, which are treated in the exact same way. Naturally, the budgets are different for the Liga Portugal bwin and the Liga Portugal SABSEG. The compliance reality of Portuguese Football cannot afford to pay salaries with money they don't have. Obviously, I believe that all Sports Societies are aware that they can go one step further and we are convinced that it is possible."

FINANCIAL ASSUMPTIONS DURING THE PANDEMIC

Paulo Meneses

"The issue is critical in the context of compliance with the assumptions. I believe that, as far as football is concerned, there is a lack of restructuring. I say this conscious that I am not the best of the lot. But the truth is that governance has to be renewed. This implies that you can have a different way of seeing things, with someone who will add value and change the vision in the respective structures.

"If clubs had the capacity during the pandemic to make huge investments, then they do not deserve to be protected under the assumptions that exist. In Football, fanaticism still exists and the Liga is completely oblivious to it. However, if a certain norm needs to be approved, it will always be based on the opinion of those who have the greatest influence. And this often happens without some leaders even being aware of it."

Click here to access the summary of the firstwebinar session