New Brighton AFC and Getting Around FA Rule 34 - The start of a trend?...

a little known piece of football history which tells a story about how a small football club in Liverpool called New Brighton AFC may have had a significant impact on how modern day clubs operate...

Whenever we look at the business of football, and its hyper commercialisation and its ever more complex ownership arrangements involving holding companies and multiple subsidiaries, we tend to think of this as a modern phenomenon, but club owners were performing these types of legal shenanigans at least 50 years ago or more. Many experts in the field believe that Tottenham Hotspur, then owned by Irving Scholar, were the first to engage in such tactics back in 1983, but the controversy surrounding the ownership of New Brighton AFC back in 1973, suggests that for that not for the first time, Spurs were second…

Regulation of Football Club Ownership – A Short History Lesson

While football club ownership was not regulated to the same extent that it is now in terms of prescriptive regulations such as Owners and Directors Tests, but there was some form of regulation which attempted to influence the way Directors behaved, rather than deciding can and not own clubs. This was through FA Rule 34 which was introduced in 1899, which limited the size of the dividend in which a shareholder could take to a maximum of 5% of the face value of the share, as well as preventing directors from selling stadiums belonging to the club for personal profit. Another less discussed aspect of Rule 34 was to ensure that upon the dissolution of a club, that their assets would be distributed to other clubs and ensure that those assets continue to be used for the purposes of football.

The effect of this was to make football club ownership more of an altruistic activity, rather than as a financial investment for return. This was reflective of the wider approach in governance of the time, which viewed the game through a more amateur lens, and intended to encourage those who owned clubs to act in the best interests of the game. This was broadly effective in regulating the behaviour of directors, but it was not perfect.

New Brighton AFC – Who are they?

Anyway, back to New Brighton AFC (NBAFC). They were a club based around the Liverpool area formed in 1921 and played in Football League from 1923 until 1951. Our story starts in 1973, by which time the club had been relegated out of the Football League and had fallen on hard times. At this time, due to the severe financial issues the club were facing, they were looking to sell a portion of the land around their stadium, the Tower Athletic Ground to help repay debts.

Tower Athletic Ground, with New Brighton Tower in the background. Photo Credit: Cheshire Live

The club eventually folded in 1983, but was reformed in 1993 in the Birkenhead and Wirral League, but folded again in 2012, before another phoenix club was formed in 2023 as a Sunday league in the Wallasey and District Sunday league.

What happened?

One of those seeking to buy the land around the club was a gentleman named Peter Catchpoole, who also owned shares in the club, and for a short period was also Club Chairman. During his time at the club, Mr Catchpoole attempted several legal manoeuvres to deceive the board into selling the stadium to him for the purposes of a property development. At the time, they were negotiating the sale with multiple parties, including the local council. These manoeuvres were the subject of an investigation by the Department of Trade (DoT), a copy of which I was able to access at the National Archives.

One of the manoeuvres he attempted, was to create a holding company of which the football club would be a subsidiary of. During this time, he attempted to trick the board of directors into exchanging their shares in the football club, for shares in the holding company, which would then run the club. In addition, he also amended the clubs Articles of Association to remove the cap on dividends and the dissolution provisions, both of which were previously aligned with the requirements of Rule 34. His intention was to ensure that he would be able to personally profit from the sale of the club’s land, as the holding company would sit outside of the remit of FA Rule 34. The DoT investigation found that he deliberately concealed this fact from the NBAFC board.

Thankfully he ultimately failed in this quest, through by what the investigation suggests was more through his own incompetence, rather than any great vigilance by the board of directors. The DoT thought his behaviour was so serious that it warranted criminal prosecution, which Catchpoole and his associates only escaped through feeling the country and moving to Australia. The investigation report also recommended that the original provisions in the Articles of Association be restored to align them with the requirements of the FA Rules, and also recommended that that the club be wound up so that any creditors could be repaid.

Why is this important?

This shows that holding company concept as a way of circumventing the reach of Rule 34 was going on for much longer than first thought. As stated previously, many credit Irving Scholar at Spurs in 1983 as being the first to implement this idea, but the DoT report shows that this is not the case. What it perhaps shows, is that Scholar was the first to successfully implement the idea to get around Rule 34. His success effectively neutered the power of Rule 34, and the FA refused to update their rulebook to close this loophole, and eventually gave up trying to enforce the rule. In 1998, they eventually scrapped Rule 34 as the commercial forces began to run rampant within the game in the early years following the creation of the Premier League.

Ever since we have seen the creation of ever more intricate company structures at football clubs where, especially at the elite end of the game, you see individual subsidiary companies for each aspect of the business. For example, at Manchester United, the structure looks something like this:

• Manchester United plc (Parent): The publicly traded holding company (NYSE: MANU).

• Red Football Shareholder Limited: A holding company holding the majority of shares in the club, situated under the PLC.

• Manchester United Football Club Limited: The main entity responsible for the football operations, which issues secured notes.

• Key Subsidiaries & Group Companies:

This is but one example, and others clubs of United’s stature in England and around the world follow this type of structure. Notably, Barcelona has engaged in the selling off of a variety of rights and shares in various arms of the club’s commercial side as part of the pulling of ‘financial levers’ to get them out of their debt issues and allow them to comply with Spanish financial regulations.

It may well be a circuitous route that connects NBAFC and Barcelona, but its fair to say that Peter Catchpoole was ahead of his time.