UEFA CLUB LICENSING & FINANCIAL FAIR PLAY

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1 UEFA CLUB LICENSING & FINANCIAL FAIR PLAY

2 Club Licensing /Financial Fair Play Introduction European wide introduction Mandatory license to enter UEFA club competitions Minimum standards set in 5 areas: Sporting Infrastructure Personnel Administrative & legal Financial NA (not UEFA!) acts as licensor

3 Club Licensing / Financial Fair Play Overall objectives Promoting youth football education. Giving continued priority to the training and care of young players. Improving sporting infrastructure like stadiums to provide players/spectators and media representative with suitable, well equipped and safe facilities. Improving and ensure an adequate level of club management & organisation Improving economic stability & sustainability Monitoring FFP in UEFA competitions Increase transparency Improve confidence in the football market for investors and commercial partners Allow development of benchmarking for clubs in financial, sporting, legal, personnel, administrative and infrastructure-related criteria throughout Europe.

4 Club Licensing / Financial Fair Play FFP objectives Furthermore, they aim to achieve financial fair play in UEFA club competitions and in particular: to improve the economic and financial capability of the clubs, increasing their transparency and credibility; to place the necessary importance on the protection of creditors and to ensure that clubs settle their liabilities with employees, social/tax authorities and other clubs punctually; to introduce more discipline and rationality in club football finances; to encourage clubs to operate on the basis of their own revenues; to encourage responsible spending for the long-term benefit of football; to protect the long-term viability and sustainability of European club football.

5 Financial Fair Play Concept Background Financial loses all time high in % clubs recording losses Long term investment not matched by spending Disruption/inflation of the market Overdue payables FFP was developed by UEFA in close cooperation with the other stakeholders in European Football, like ECA, EPFL, as well as with the European Union authorities.

6 Break-even requirement key principles Break-even requirement: A club must not repeatedly spend more than its income. Equity injection will still be possible, but within certain limits. Encourage clubs to operate within their revenues not owner/related party contributions Encourages spending on facilities for the long term benefit of the club (youth, infrastructure, CSR, etc.) Multi year assessment No overdue payables during the season (towards other clubs, employees and/or social/tax authorities). Club monitoring: apart from the licensor there is an independent body, the Club Financial Control Body, who will monitor the club s finances.

7 Clubs to which are applicable the FFP Rules All clubs which qualify for the UEFA club competitions must comply with the monitoring requirements; i.e. with the break-even requirement and with the other monitoring requirements. - Any licensee that demonstrates it has relevant income and relevant expenses below EUR 5 million in respect to each of the two reporting periods ending in the two years before commencement of the UEFA club competitions is exempt from the break-even requirements. - Exemption decision is taken by the UEFA CFCB and is final.

8 New FFP Rules in Place The first assessment took place at the 2013/14 season and covered the financial years ending in 2012 and This means that for clubs who apply a financial year from July until June the first season which felt under the new FFP rules was 2011/12. As from the second assessment, the assessment period would be three financial years. The assessments of the seasons 2013/14 and 2014/15 were part of the implementation phase with the aim of getting the clubs acknowledgment to the new FFP rules. Hence, the first real assessment was for the season 2015/16 and covered the financial years ending in 2013, 2014 and 2015.

9 Fulfilment of the Break-even Requirements The break-even requirement is fulfilled if no one of the following indicators is breached and the licensee has a break-even surplus for reporting periods T-2 and T-1. Indicator 1: Going concern The auditor s report of the AFS and/or the IFS includes an emphasis of matter or a qualified opinion in respect of going concern. Indicator 2: Negative equity The AFS and/or the IFS disclose a net liabilities position that has deteriorated relative to the comparative figure contained in the previous AFS or IFS. Indicator 3: Break-even result The licensee reports a break-even deficit for both or either T-1 and T-2.

10 Fulfilment of the Break-even Requirements The UEFA CFCB may ask the licensee break-even information for the information for period T and additional information if the AFS reflect that: employee benefit expenses exceed 70% of total revenue; or net debt exceeds 100% of total revenue.

11 Fulfilment of the Break-even Requirements The break-even requirement is fulfilled, even if an indicator is breached, if: the licensee has an aggregate break-even surplus for reporting periods T-2, T- 1 and T; or the licensee has an aggregate break-even deficit for reporting periods T-2, T-1 and T which is within the acceptable deviation having also taken into account the surplus if any in the reporting periods T-3 and T-4. The break-even requirement is not fulfilled if the licensee has an aggregate break-even deficit for T-2, T-1 and T exceeding the acceptable deviation having also taking into account the surplus, if any, in the reporting periods T-3 and T-4.

12 Break-even requirement key principles

13 Break-even requirement key principles

14 INVESTMENTS IN COMMUNITY SCHEMES EXCLUDED FROM FFP BREAK EVEN Costs of materials and services used or consumed in undertaking the community development activities; Costs of employee benefits for employees wholly involved in community development activities; Donations to other entities for which the purpose is to promote participation in sport and/or advance social development.

15 INVESTMENTS IN YOUTH FOOTBALL EXCLUDED FROM FFP BREAK-EVEN Costs of materials and services used or consumed, such as accommodation costs, medical fees, educational fees, travel and subsistence, kit and clothing, facility hire; Costs of employee benefits for employees wholly involved in youth development activities if their employment by the club is wholly for the youth development activities; Costs of employee benefits for employees who are youth players under the age of 18 as at the statutory closing date of the licensee; Costs of employee benefits for employees who are youth players aged 18 or over as at the statutory closing date of the licensee cannot be excluded from relevant expenses.

16 Expenditure on Women s Football Activities excluded from FFP Break-Even Organisation of a women s football sector; Women s team taking part in official national, regional or local competitions or programmes recognised by the member association. Costs of materials and services used in undertaking women s football activities, including accomodation costs, medical fees, educational fees, travel and subsistence, kit and clothing and facility hire; Costs of employee benefits por employees wholly involved in women s football activities, such as players and thecnical staff if their employment by the licensee is wholly for the purpose of women s football activities.

17 Examples of NON-MONETARY CREDITS/INCOME Upwards revaluations of tangible fixed assets, intangible fixed assets (including player registrations) and inventories; Write-backs of depreciation/amortisation or impairment of tangible fixed assets and intangible fixed assets (including player registrations); and Foreign exchange gains on non-monetary items.

18 Examples of NON-MONETARY DEBITS/CHARGES Downwards revaluations of inventories; Foreign exchange losses on non-monetary items.

19 Break-even requirement key principles

20 Break-even requirement key principles Acceptable deviation of EUR 5m (maximum aggregate break-even deficit allowed) Acceptable deviation is over three monitoring periods Clubs may exceed this level up to the amounts listed in the table below if covered by share holder contributions or 3 rd parties

21 Contributions from equity participants and/or related party(ies) Contributions from equity participants are: Share capital increase: payments for shares through the share capital or share premium reserve accounts less capital reductions. Contributions from a related party include: Monies received from a related party as a donation: that is an unconditional gift made to the reporting entity by a related party which increase the reporting entity s equity without any obligation for repayment or to do anything in consideration for receiving them. Income transactions from a related party: the amount to be considered as a contribution will be no more than an amount equivalent to the difference between the actual income in a reporting period and the fair value of the transaction(s) in a reporting period as already recognised in the calculation of the break-even result.

22 Contributions from equity participants and/or related party(ies) The following types of transaction are not contributions from equity participants and/or related parties : Positive movement in net assets/liabilities arising from a revaluation; Creation, or increase in the balance, of other reserves where there is no contribution from equity participants; A transaction whereby the reporting entity has a liability in that the entity has a present obligation to act or perform in a certain way; Contributions from owners in respect of instruments classified as liabilities.

23 Break-even requirement key principles Illustrative example REPORTING PERIOD Annual Break-Even Result m Aggregate break-even result for -29 monitoring period m Covered or not covered Covered Not covered Conclusion Break-even requirements are fulfilled Break-even requirements are NOT fulfilled

24 Break-even requirement key principles Potential sanctions: Reprimand/warning Fine Deduction of points Withholding of revenue from UEFA competitions Prohibition to register new players Restriction on the number of players to be registered, including a financial limit on overall aggregate costs of employees Disqualification Withdrawal of a title

25 Effects FFP Positive effects can be seen from the CL/FFP Development in the overdue payables (from 57m to 5m in 5y) Evolution of overdue payables at 30 June (EURm) Overdue Payables meur

26 Effects FFP Continued reduction in aggregate losses of football clubs Evolution of bottom-line club losses of all European top-division clubs EUR bn

27 Effects FFP Positive effects on BE-deficits of clubs having concluded a settlement agreement

28 Settlements CFCB and clubs break even

29 Settlements CFCB and clubs - breakeven

30 Settlements CFCB and clubs - breakeven

31 UEFA CFCB decisions - overdues

32 UEFA CFCB decisions - overdues

33 UEFA CFCB decisions - overdues

34 Annex I: Overdue Payables Overdue payables towards football clubs. Overdue payables in respect of employees. Overdue payables towards social/tax authorities. Notion of overdue payables.

35 Annex I: Overdue Payables Towards FC Enhanced. The licence applicant must prove that as at 31 March preceding the licence season it has no overdue payables (as defined in Annex VIII) towards other football clubs as a result of transfers undertaken prior to the previous 31 December. As at 30 June and as at 30 September of the year in which the UEFA Club competitions commence, the licensee must not have any overdue payables towards other football clubs as a result of transfers undertaken up to June 30 and up to 30 September respectively. Payables are those amounts due to football clubs as a result of transfer activities, including training compensation and solidarity contributions as defined in the FIFA Regulations on the Status and Transfer of Players, as well as any amount due upon fulfilment of certain conditions.

36 Annex I: Overdue Payables Employees The licence applicant must prove that as at 31 March preceding the licence season it has no overdue payables in respect of its employees as a result of contractual or legal obligations that arose prior to the previous 31 December. As at 30 June and as at 30 September of the year in which the UEFA Club competitions commence, the licensee must not have any overdue payables in respect of its employees. Payables are all forms of consideration due in respect of employees as a result of contractual or legal obligations, including wages, salaries, image rights payments, bonuses and other benefits. The term employees includes the following persons: All professional players according to the applicable FIFA Regulations on the Status and Transfer of Players; and The administrative, technical, medical and security staff specified in Articles 28 to 33 and 35 to 39.

37 Annex I: Overdue Payables Authorities The licence applicant must prove that as at 31 March preceding the licence season it has no overdue payables towards social/tax authorities as a result of contractual or legal obligations in respect of its employees that arose prior to the previous 31 December. As at 30 June and as at 30 September of the year in which the UEFA Club competitions commence, the licensee must not have any overdue payables towards social/tax authorities as a result of contractual or legal obligations in respect of its employees. The licence applicant must submit to the auditor and/or the licensor a social/tax table showing: the amount payable (if any) to the competent social/tax authorities as at 31 December of the year preceding the licence season; any claim/proceedings pending.

38 Annex I: Notion of Overdue Payables Payables are considered as overdue if they are not paid according to the agreed terms. Payables are not considered as overdue, within the meaning of these regulations, if the licence applicant/licensee is able to prove by 31 March and by 30 June and 30 September respectively that: it has paid the relevant amount in full; or it has concluded an agreement which has been accepted in writing by the creditor to extend the deadline for payment beyond the applicable deadline or;

39 Annex I: Notion of Overdue Payables it has brought a legal claim which has been deemed admissible by the competent authority under national law or has opened proceedings with the national or international football authorities or relevant arbitration tribunal contesting liability in relation to the overdue payables; however, if the decision-making bodies consider that such claim has been brought or such proceedings have been opened for the sole purpose of avoiding the applicable deadlines set out in these regulations, the relevant amount will still be considered as an overdue payable; or

40 Annex I: Notion of Overdue Payables it has contested to the competent authority under national law, the national or international football authorities or the relevant arbitration tribunal, a claim which has been brought or proceedings which have been opened against it by a creditor in respect of overdue payables and is able to demonstrate to the reasonable satisfaction of the relevant decision-making bodies that it has established reasons for contesting the claim or proceedings which have been opened; however, if the decision-making bodies consider the reasons for contesting the claim or proceedings which have been opened as manifestly unfounded the amount will still be considered as an overdue payable; or

41 Annex I: Notion of Overdue Payables it is able to demonstrate to the reasonable satisfaction of the relevant decision-making bodies that it has taken all reasonable measures to identify and pay the creditor club(s) in respect of training compensation and solidarity contributions

42 Annex II: Future Financial Information The licence applicant must prepare and submit future financial information in order to demonstrate to the licensor its ability to continue as a going concern until the end of the licence season if it has breached any of the indicators defined in paragraph 2 below. If a licence applicant exhibits any of the conditions described by indicator 1 or 2, it is considered in breach of the indicator: Indicator 1: Going concern The auditor s report in respect of the annual or interim financial statements includes an emphasis of matter or a qualified opinion/conclusion in respect of going concern. Indicator 2: Negative equity The annual financial statements disclose a net liabilities position (negative equity) that has deteriorated relative to the comparative figure contained in the previous year s annual financial statements.

43 Annex II: Future Financial Information Future financial information must cover the period commencing immediately after the later of the statutory closing date of the annual financial statements or, if applicable, the balance sheet date of the interim financial statements, and it must cover at least the entire licence season. Future financial information consists of: a budgeted profit and loss account, with comparative figures for the immediately preceding financial year and interim period (if applicable); a budgeted cash flow, with comparative figures for the immediately preceding financial year and interim period (if applicable); explanatory notes, including a brief description of each of the significant assumptions (with reference to the relevant aspects of historic financial and other information) that have been used to prepare the budgeted profit and loss account and cash flow statement, as well as of the key risks that may affect the future financial results.

44 Annex III: Other factors to be considered in respect of the monitoring requirements If one of the monitoring requirements is not fulfilled, the UEFA CFCB makes a decision, including the possibility to conclude a settlement agreement with the licensee, taking into account some of these factors: a) The quantum and trend of the break-even result. b) Projected aggregated break-even result. c) Impact of conversion of accounts in local reporting currency into euros. d) Debt situation. e) Force majeure. f) Major and unforeseen changes in the economic environment. g) Operating in a structurally inefficient market. h) Squad size limit.

45 Annex IV: Club Financial Control Body After the licensing process, there is the monitoring process: the clubs who received their licence and effectively qualify for a European Competition will have to submit financial information (e.g. break-even information of the last financial years, payables information as at 30 June and 30 September) to the Club Financial Control Body (CFCB) via the licensor. The CFCB will then check, based on the information received from the club, if this club is in breach of certain warning indicators. If so, the club will be asked to give additional financial information (between July and September).

46 Annex IV: Club Financial Control Body The Club Financial Control Body was established in 2009 by UEFA, with the aim to ensure a major development in increasing and improving the transparency and integrity of the club system (Formerly Club Financial Control Panel). The Club Financial Control Body comprises members independent financial and legal experts who are independent of national associations, leagues or clubs and whose tasks are to ensure that the UEFA club licensing system is applied correctly across all 53 UEFA member associations (Investigatory and Adjudicatory chambers).

47 Annex IV: Club Financial Control Body The UEFA Club Financial Control Body has been set up to monitor and ensure that clubs across UEFA's member association adhere to the financial fair play requirements included in the regulations. The CFCB (i) governs the club monitoring process and assesses the information prepared by the licensee and submitted by the licensor, (ii) considers whether this is appropriate and determines whether each monitoring requirement has been met and what further information, if any, is needed.

48 Annex IV: Club Financial Control Body The CFCB reserves the right to ask additional information in the following cases: The licence applicant auditor s report includes an emphasis of matter or a qualified/opinion in respect of going concern Club s financial statements disclose a net liabilities position that has deteriorated towards previous year figures Present overdue payables as of 30 June and/or 30 September of the year under assessment. The licensee reports a Break Even deficit for the reporting periods under assessment.

49 Annex IV: Club Financial Control Body The CFCB can ask for prospective financial information such as budget and P&L account/budget cash flow prepared, as a minimum on a quarterly, basis. This will enable the Club Financial Control Body to check club sustainability.