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Investing in football: UEFA multi-club ownership rules
UEFA’s rules on multi-club ownership (MCO) prohibit two clubs under common “control or influence” from competing in the same UEFA club competition in a given season.
On 14 May 2024, the UEFA Club Financial Control Body (CFCB) issued a circular clarifying their interpretation of the MCO rules. A few weeks later, the CFCB confirmed that Manchester City, Girona, Manchester United and Nice would be allowed to compete in the 2024/25 Champions League and Europa League competitions, based on changes made to comply with UEFA’s MCO rules.
The CFCB’s circular and their approach to this summer’s MCO cases has important implications for existing MCO structures and investors considering MCO structures as part of their European football investment strategy.
Background to UEFA's MCO Rules
UEFA, the governing body of football in Europe, has regulations in place for each of the Champions League, Europa League and Conference League competitions (the Competition Regulations). Clubs that qualify for these competitions must comply with the Competition Regulations, including their provisions designed to protect sporting integrity.
In summary, under Article 5 of the Competition Regulations (the MCO Rules):
No club in a UEFA competition may have any interest or involvement in the management of any other UEFA competition club.
No one can be involved in the management of more than one UEFA club (directly or indirectly).
No individual or entity can have "control or influence" over more than one UEFA club.
The criteria for “control or influence” includes “being able to exercise by any means a decisive influence in the decision-making of the club”.
The MCO Rules are engaged when two or more related clubs qualify to compete in a UEFA club competition in the same season (Multiple Qualification). In the event of a breach, only one of those clubs will be admitted to the relevant UEFA competition.
Under the latest version of the Competition Regulations, which entered into force on 1 May 2024, a club that is prohibited from playing in the same competition as a related club may now be admitted to a lower-tiered UEFA competition (in descending order: Champions League, Europa League and Conference League). This is a change from the previous MCO Rules, under which ineligible clubs were replaced by the next best team from their domestic league.
UEFA's New Guidance on "Decisive Influence"
The Competition Regulations prohibit an individual or legal entity having control or influence over more than one club participating in a UEFA club competition, such control or influence being defined to include, inter alia, "decisive influence".
In a circular provided to clubs on 14 May 2024, the CFCB provided guidance on the interpretation of "decisive influence" (the Circular).
The CFCB noted that the following indicators would be applied when assessing whether a party, either alone or in aggregate together with a related party, directly or indirectly, has the capacity to exercise a decisive influence in the decision-making of a club:
Shareholders' rights
If a party holds 30% or more of the club's total shares (being voting or economic rights), or 10% or more of the club's total shares and is also the largest shareholder of the club.
Financial support
If a party provides 30% or more of the club's total operating revenue; lends an amount equivalent to 30% or more of the club's total borrowings from related parties; provides financial support to the club up to an amount equivalent to 30% or more of the share premium reserve, financial security over the club's borrowings or if a party (excluding banks) provides financing which is secured on club's shares or assets.
Governance
If a party holds a position in the club's governing bodies or a key executive position (such as President, CEO, CFO or sporting director); has the ability to appoint or remove 30% or more of the members, or holds 30% or more of the voting rights, in the club's governing bodies; has the ability to appoint or remove the club's key executives or first team head coach; or has the ability to influence key executive decisions such as player transfers, budget approval and key commercial contracts (including through veto rights).
Player transfers
If a club has transferred, permanently or temporarily, three or more players to the other club during the season, or if they enter into a contract to share the same scouting or scouting database arrangements. Clubs subject to MCO proceedings before the CFCB First Chamber are also prohibited from transferring, permanently or temporarily, any new players between each other, during the competition season and the first transfer window immediately thereafter.
If one or more of the above indicators are triggered, the CFCB will consider that a party has the capacity to exercise a decisive influence in the decision-making of a club. Where such indicators are not triggered, a detailed multi-criteria assessment will still be performed to determine whether or not a party still has the capacity to exercise a decisive influence (taking into account the substance of any arrangement and not merely the legal form).
The CFCB also provided clubs with a temporary alternative for the 2024/2025 season, consisting of the “transfer or the assignment of all its shares in a club to an independent third party, such as a blind trust, whereby all of the decision-making of the club will solely rest under the control of the third party / trustee who will be bound by the fiduciary duty to act in the best interest of the club exclusively”.
The Circular clarifies that this alternative is being offered on an “exceptional basis for the 2024/2025 UEFA competitions” and that the CFCB “will not be bound by this alternative when assessing clubs’ compliance with the MCO rule for participation in UEFA competitions in subsequent seasons”.
The Circular further states that the above indicators may be revised in subsequent seasons in line with the “potential evolution” of the MCO Rules in the next editions of the Competition Regulations. As such, stakeholders should be aware of potential changes to the MCO Rules and relevant UEFA guidance in the near future.
Manchester United / Nice and Manchester City / Girona
UEFA’s MCO Rules have been engaged this summer through Manchester United and Nice’s qualification for the upcoming 2024/2025 Europa League and Manchester City and Girona’s qualification for the 2024/2025 Champions League.
The CFCB First Chamber initially opened proceedings against the concerned clubs due to a potential conflict with the MCO Rules, given their respective ownership structures:
- Trawlers Limited (an entity owned and controlled by Sir Jim Ratcliffe, Chairman and Founder of petrochemicals manufacturer INEOS), reportedly holds 27.7% of the voting rights in Manchester United, while INEOS have also assumed responsibility for the club's football operations. INEOS acquired a 100% stake in Nice on 26 August 2019.
- The City Football Group (CFG) currently owns 100% of Manchester City. CFG reportedly acquired a 44.3% stake in Girona in 2017, with its ownership reportedly increasing to 47% in 2020.
On Friday 5 July 2024, the CFCB First Chamber accepted the admission of Manchester City and Girona to the 2024/25 Champions League as well as Manchester United and Nice to the 2024/25 Europa League. This followed the implementation of significant changes by the investors in Girona and Nice (CFG and INEOS, respectively) to the ownership, governance and financial support of the concerned clubs, which the CFCB confirmed substantially restricted the investors’ influence and decision-making power over more than one club and ensured compliance with the MCO Rules.
In particular, the relevant investors have transferred a proportion of their shares in Girona and Nice to independent trustees through a blind trust structure established under the supervision of the CFCB, which was accepted by the CFCB on an “exceptional basis” for the 2024/25 UEFA competitions, in line with the Circular. This means, inter alia, that the effective control and decision-making of Girona and Nice rests solely under trustee control and the investors have no ability to influence sporting related decisions for the 2024/25 season.
In a divergence from the approach it took in Summer 2023, the CFCB have clarified that this is a temporary measure and that, from 1 July 2025, the shares in Girona and Nice will be transferred back to their respective investor.
The clubs have also committed not to:
Transfer players to each other (permanently or on loan) from July 2024 until September 2025.
Conclude any kind of cooperation, joint technical or commercial agreements between each other.
Use any joint scouting or player database.
Previous Key Cases on MCO and "Decisive Influence"
2023
Aston Villa / Vitória Sport Clube
Brighton / Royal Union Saint-Gilloise
AC Milan / Toulouse
After the conclusion of the 2022/23 season, the CFCB opened proceedings against the following clubs due to a potential breach of the MCO Rules: (i) Aston Villa and Vitória Sport Clube; (ii) Brighton & Hove Albion and Royal Union Saint-Gilloise; (iii) AC Milan and Toulouse FC.
Following the implementation of significant changes by the clubs and their investors, all of the clubs were admitted into UEFA club competitions for the 2023/2024 season.
The required changes included: (i) a reduction of the investors' shareholding in the ‘secondary’ clubs; (ii) the transfer of effective control / all decision-making ability (with no control permitted through veto rights or shareholder arrangements); (iii) no shared directors or personnel; and (iv) no right to participate in decision-making processes.
The CFCB required these changes to be made on a permanent basis; they were unwilling to accept temporary solutions which could be reversed in later seasons (a position the CFCB reconsidered in 2024, as set out above).
The clubs also accepted the following conditions as additional evidence of their independence: (i) no transfer of players between clubs, whether permanently or on loan, directly or indirectly, until September 2024; (ii) no cooperation, joint technical or commercial agreements between clubs; and (iii) no joint scouting or player databases. These commitments are identical to those made by CFG and INEOS this summer (discussed above).
2017
Red Bull
RB Leipzig and Red Bull Salzburg both qualified for the 2017/2018 Champions League. The CFCB initially opened an investigation due to concerns with the links between the clubs and Red Bull, including: (i) control over the ‘ordinary’ membership of the clubs’ owners; (ii) high levels of income from Red Bull sponsorships; (iii) favourable loan financing from Red Bull; (iv) stadium rental from a Red Bull entity; and (v) a formal cooperation agreement between the clubs.
Changes were proposed by the clubs and Red Bull to address concerns regarding “decisive influence”, including: (i) the clubs’ cooperation agreements were terminated; (ii) certain loan agreements were terminated; (iii) any people with Red Bull links resigned from roles affiliated with the clubs; and (iv) sponsorship deals were amended.
Subsequently, the CFCB Adjudicatory Chamber (now known as the Appeals Chamber) decided that Red Bull did not have “decisive influence” over the clubs and the relationship “resembles only a standard sponsorship relationship”.
The CFCB took the view that “it is necessary to limit the nature of the decision making under scrutiny to decisions that impact on the integrity of a competition. It is implicit therefore that such decisions must necessarily relate to matters that affect the performance of a club in a competition and not simply generic corporate, commercial, financial or other business activities which do not directly affect sporting performance”.
It is notable that the CFCB's interpretation of the scope of "decisive influence" in the Red Bull case was considerably narrower than the approach subsequently taken in the 2023 and 2024 cases, and as set out in the Circular.
Key Takeaways
It is important for investors to ensure that any proposed MCO model is structured from the outset to comply with relevant UEFA (and relevant national association) regulations.
Appropriate safeguards should be put in place and sufficient flexibility established to enable a restructuring to take place in the event of Multiple Qualification, in order to avoid a potential breach of the MCO Rules.
Considering the approach adopted by the CFCB, as informed in particular by the Circular and the summer 2024 cases, the following measures are likely to ensure compliance with the current MCO Rules:
Mechanisms to reduce direct or indirect shareholding in clubs to below 30%.
Ability to remove personnel from executive positions and sporting roles.
Ability to give up any decision-making ability, including approval or veto rights.
Ability to end any cooperation, joint technical or commercial agreements between clubs.
Ability to end any joint scouting or player database between clubs.
Ability to prohibit inter-club transfers (including loans).
However, UEFA has clearly flagged that the MCO Rules are expected to change in the near term. Stakeholders should therefore continue to monitor any potential changes, as well as the CFCB's approach to enforcement, and calibrate their approach accordingly.
Find out more
To find out more about how Northridge can help on investments in football, get in touch with Northridge corporate partners Ian Lynam or Mike Herbert.
