In a blow to Manchester City, Premier League clubs have approved changes to sponsorship rules

LONDON, Nov 22 – Premier League clubs have approved changes to associate party transactions (APT) rules, the English top-flight competition said today, in a blow to reigning champions Manchester City who had been reluctant to see the rules changed.

The APT rules are designed to ensure that clubs do not benefit from commercial transactions or cost reductions that do not correspond to fair market value (FMV) due to related party relationships.

The rules are designed to keep the Premier League competitive by preventing clubs from inflating the cost of sponsorship deals with companies linked to their owners.

A two-thirds majority (14 clubs) was required to approve the changes, and the BBC reported that 16 clubs voted in favor.

Reuters has contacted Manchester City for comment.

The Premier League said in a statement that the rule changes relate to the arbitration panel’s findings last month following a legal challenge brought by City.

“The Premier League has consulted extensively with clubs, drawing on numerous expert opinions and independent senior legal counsel, to develop rule changes to address the amendments required to the system,” it said.

“This is due to the integration of the assessment of shareholder loans, the reversal of some amendments made to the APT rules earlier this year and changes to the process by which relevant information from the League’s data bank is transmitted to club advisers.”

Loans to shareholders

City claimed partial victory over the Premier League last month after an arbitration panel ruled under the APT that the Abu Dhabi-owned club was barred from completing construction.

But at the time, the League said the commission’s redacted document reaffirmed the overall goals and decision-making of the APT system.

The commission found that some of the league’s APT rules breached UK competition law and were also unlawful because clubs could not comment on the types of historical transaction data the league would take into account when assessing FMV.

City said the rules were found to be discriminatory in the way they worked because they “deliberately excluded” shareholder loans, which the club said favored certain clubs and could distort the market.

“The new rules aim to ensure appropriate parity between the treatment of shareholder loans and other APTs going forward, with transition rules clarifying the treatment of existing shareholder loans under this structure,” the league said in a statement Friday.

Any shareholder loans issued after the rule takes effect will now be required to be reported as APT, which will be subject to FMV assessment.

If the Premier League Council finds that the loan does not meet the FMV, the club must either terminate the loan or amend it to reflect the FMV and pay any shortfall in interest. — Reuters