Mr Dunham, who has first-hand knowledge of the problems faced by clubs who are forced to go into administration, works for RSM Robson Rhodes, part of the sixth largest network of accountants and consultants in the world. He explains to TheFA.com what the process of administration involves...

How do you become involved with a club in financial trouble?

Well, the first thing that happens is that the club identifies they have a problem. They have got a cash-hole and can't afford to pay their bills. They will come to talk to us and we try to work with them to deal with their problems.

The initial drive is to try to avoid formal insolvency because it is expensive and the outcome is always uncertain. You are taking the club out of the control of the directors and placing it into the hands of the administrator, whose duty it is not to necessarily maintain football at the club, but to realise the assets at the best possible price.

We try and find alternative solutions, such as raising additional money through selling assets, making the assets work hard, and just to try and bring some money in or reduce the costs. The difficulty with football clubs, especially in the Football League, is that while income has reduced onsiderably over the last year, they can't reduce the majority of the costs, such as the players and the stadium, in the short-term.

What if the problems cannot be solved?

If the club has difficulties that can't be dealt with outside formal insolvency, then we will have to put the club into administration. This process involves the club having to petition the court to request to be put it into administration.

I also have to produce a report to the court. This explains why I think the club should go into administration, such as it has costs which can't be paid, or that the ground is about to be repossessed. What the potential benefits are, for example, the creditors are likely to get more money as the club will be sold. And, what the plan is during administration. It also focuses everyone's attention that the problem is urgent and gives everyone a time-scale to solve it.

There must be a lot of uncertainty...
 
Yes there is, so we to talk to everyone who works at the club, the players, the groundsmen and the office staff, so they know what is going on. People want to know whether they still have a job and whether they are going to be paid this month.

You will also have a lot of fans wanting to know what is going on, so we try to arrange a press conference as soon as possible. We also need to advertise the club for sale in the press and produce a sales pack to inform anyone how they can buy the club.

We have to talk to The FA and the Football League to get their permission to keep playing and assure them we can continue to comply with their rules. We also need to know what the assets are worth, such as the players, stadium, office computers, merchandise stock and even the lawnmowers - everything gets valued.

When do you open talks with interested parties?

 

Once the club is stabilised, we can continue trading. We'll start talking to interested parties and try to sell the whole club to them. We will set a deadline for offers and hopefully all the interested parties will comply with it.

The club is worth what someone is willing to pay. The agents will value it and declare what they think we can get for it. My duty is not to protect the football club. I am a football fan, but I have to be independent. I have a duty to get the best possible deal for all of the creditors. That would normally be done through selling the club as a going concern. But it may be that the ground or some other asset at the club is particularly valuable.

The worst case scenario would be for somebody to buy the assets to break the club up, for example to develop the ground into a housing estate. We would do our best to make sure that does not happen, but it is always a possibility. I will then negotiate final terms with whoever is offering the best price. We will agree a contract and the club will be sold. They will then take over the running of the club.

What is a voluntary arrangement?

As the club has gone bust they can't afford to pay everybody. It will have to go through a formal insolvency process to bring it out of administration, which is why most clubs go into what is called a voluntary arrangement. This shows which creditors will be paid and which will not and that can only be done with the approval of all the creditors.

Football League rules require all football creditors to be paid in full and a full settlement is agreed with preferential creditors, such as the VAT and PAYE. Sometimes the unsecured creditors will get a percentage of what is owed to them, sometimes they get nothing, it depends on the circumstances.

The process is completely different from any other business because there is no such thing as football creditors, or the equivalent. Football is a very unique system. It is designed so all clubs have a level playing field.

It takes a long time to get a voluntary arrangement together because we have to have the agreement of the Inland Revenue, Customs and Excise, The FA and the Football League.

We then send it out to the shareholders and the creditors for them to agree to it or not. If they do, the transfer embargo is lifted and the club moves forward.

Matthew Dunham was speaking to Steve Hutton