INVESTMENTS IN FRENCH FOOTBALL

CLUBSBy Patricia Moyersoen

UIASport CommissionFirenze 30/10/2014

Contents

• What an investor must know before acquiring stakes in a French professional sport club• The two entities of a professional sport club• Special rules for sports companies• The economic and financial control by federal instances• The split of TV rights• Special rules set out by French Football League• Taxes and social contributions

What an investor must know• In France, sport is under the State’s auspices, which delegates its prescriptive

and disciplinary powers to the sports federations.• These federations can sub-delegate these powers to a professional League. • Leagues and federations have a significant prescriptive power for everything

concerning the organization of competitions.• More particularly, the French legislature has given them the power to edify

economic and financial rules, as well as the power to monitor the compliance with these regulations.

All French professional sport clubs must have two entities

• According to article L.122-1 of the French Sports Code a sport club has to be created under a form of an association and is obliged to create a commercial company for administrating its professional activities. • According to article L.122-14 of the Sports Code, the Association and the

commercial company have to define, through a special contract, their relationship. This contract shall not exceed 5 years,• The affiliation to the federation is owned by the Association• Obligation to run a youth training academy

Special rules for sports companies

Public quotation of sports companies is authorized, but :

• Some special Informations have to be disclosed about their assets, specially the ownership of the stadiums

• The multi-ownership of sportive companies pertaining to the same sport is prohibited (Article L122-7),

• The loans and guarantee deposits between clubs pertaining to the same sport are prohibited (Article L122-9)

The two entities can not be run by the same people (Article L122-14)

The economic & financial control by federations

Article L.132-2 of the sports code:• “The federations that have constituted a professional league are creating a body

endowed with an independent discretionary power, ensuring the administrative, legal and financial control of the associations and sport commercial companies that are participating in the competitions they organize.• This body aims to ensure the sustainability of the associations and sport

commercial companies, to encourage the respect and sporting fairness and to contribute to an economic regulation of the competitions”.

Financial control of professional football clubs• Article 108 of the French Football league regulation

• “The financial situation of clubs needs to be compatible with their administrative and sportive organisation”. “

• The situation is appreciated according to the competition for which the clubs are sportively qualified, with regards to the documents produced by the club when asked by the national monitoring directorate”.

• Powers of the commission (DNCG)• Administrative measures like limitation of payroll, prohibition to engage new players, loss

of points, relegation to a lower division, denial of access to the upper division, etc …• Disciplinary sanctions if the clubs do not comply with the obligations to disclose all

financial information and accounting

• The Federations own the right to exploit the competitions they organize. • Each Federation may, if it has created a professional League, gratuitously assign the

ownership of these rights to the sportive companies (clubs) that take part in the professional competitions (Article L.333-1) • Professional clubs shall entrust the marketing of the TV rights to the League (Article

L.333-2)• Solidarity : 5% tax for the development of sport• Split between the amateur and professional sectors (Article L333-3)• Principle of sharing between the clubs taking into account criteria established by the

league and in particular based on the solidarity existing amongst the companies as well as by their sportive performances and notoriety.

TV rights

Special rules set out by football authorities

• Prohibition of third party ownership • Prohibition to get money against a loan of a player• A very restrictive collective bargaining agreement

(Charte du football professionnel)

Income Tax in France• Progressive tax rate:

Between 5 964 and 11 896€: 5.5 %Between 11 897 and 26 420€: 14 %Between 26 421 and 70 830 €: 30 %Between 70 831 and 150 000 €: 41%More than 150 000 €: 45 %

+ FILLON surtax on high incomes beyond 500 000€: 4%+ special social contribution : 8%Total : 45 + 4 + 8 = 57% on the highest bracket

• Special treatment for foreigners or French players returning after 5 years (30% of the income exempt during 5 years)

Holland Special Tax on very high salaries for 2013 § 2014• 50% on any amount paid to an employee up to 1ME• Paid by the employer• Impact for the main football clubs in 2013

• Paris Saint Germain: 20 000 000€• Olympique de Marseille: 4 500 000 €• Olympique Lyonnais: 4 000 000 €

Very high social contributions in France• Social contribution payable by the employee : 12%• Social contribution payable by the employer : 40%

• For an annual salary of 600 K Euros a french club will pay 100 K Euros more than an english club• For an annual salary of 3000 K Euros a french club will pay 50% more than a

spanish or italian or german club

The case of AS MONACO

• 21/03/2013: LFP changes its administrative regulations from 1st June 2014Any Club that wishes to participate in the League 1 and League 2 championship must set

their effective management’s headquarters on French territory• AS MONACO argues that by taking such a decision, LFP has gone beyond its powers. It

initiated a procedure before the Supreme Court (Conseil d’Etat)• The LFP argues that the French law has given them the power to determine the legal,

administrative and financial conditions clubs must fulfil to participate in its competitions• AS MONACO and LFP reached an agreement by which the Club has agreed to pay 50

million to the League in two years

UIASport CommissionFirenze 30/10/2014

Thank you for your attention