Harrison Drury’s James Dickinson looks at what the Premier League can teach other companies about the need to have bespoke articles of association to govern the relationship between shareholders and the company itself.
The Premier League was established as a business in 1992 and at the same time The Football Association Premier League Limited, which is the company that manages the Premier League, was also established.
The company is particularly crucial for the negotiating of the lucrative broadcasting rights which have attracted many column inches over the recent past.
How does the Premier League’s shareholding structure work?
The company operates on a very similar basis to any other limited company but with an extremely bespoke set of articles of association to govern the relationship between the shareholders of the company and the company itself.
The shareholders of the company are the 20 Premier League clubs and the Football Association. Each shareholder has one share in the company to ensure that no one club has a majority shareholding which could ultimately result in a club being able to force through decisions.
When clubs are relegated from the Premier League at the end of each season they are obliged, pursuant to the articles of the company, to transfer its one share to one of the teams promoted into the Premier League.
The shareholders in the company, i.e. the 20 premier league clubs for that particular season, each have the right to an equal share of the profits that the company makes. It is for this reason that being promoted to and staying in the Premier League is as lucrative as it is.
What can other limited companies learn from the Premier League?
Companies that are limited by shares should have regard for the provisions of the transfer of shares within their articles of association as the Premier League does.
There are no provisions within the model articles of association that companies can utilise for an automatic transfer of shares upon the happening of certain events. As set out above, the Premier League has amended its articles so that an automatic transfer occurs when a club is relegated from the division.
For instance, often the directors and shareholders of companies are one and the same. Should a director resign from a company there would be no obligation upon him to relinquish his shares within the company, which may not be a particularly appealing situation for the remaining directors of the company.
Provisions can be made within the articles of association of the company that, for instance, upon a director leaving his position, for whatever reason, he must also transfer his shares back to the company, either at a pre-determined value or at a value to be agreed.
What other circumstances may lead to an automatic transfer of shares?
There are other instances in which companies may want an automatic transfer of shares to occur; a non-exhaustive list is set out below:
- The bankruptcy of a shareholder (or insolvency of a corporate member);
- The death of a shareholder to ensure shares pass back to the company as opposed to through the shareholder’s estate;
- The creation (or attempted creation) of a charge over the shares by a third party; or
- The attempt to dispose of shares in any other way not in accordance with the articles of the company by the shareholder.
There are many other reasons which a company can highlight within its articles which would cause an automatic transfer of shares, and these can be as bespoke as necessary, as highlighted above with the Premier League.
It is an important consideration for all companies at whatever stage, whether start-up or fully established, to continue to review their articles to ensure they are fit for purpose, particularly with regard to the shareholders.
James Dickinson is a member of Harrison Drury’s corporate team and joint head of the firm’s sports law team.
Harrison Drury can assist your business with creating and amending articles of association. For more information contact James Dickinson on 01772 258321.