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This article examines several cases involving the English Football League (EFL) and two of its clubs: Sheffield Wednesday FC and Derby County FC. The Sheffield Wednesday matters relate to the accounting practices applied to the purchase of their stadium and the non-payment of player wages. The Derby County matters relate to, among other things, the amortisation policy applied to their transfer fees and the non-payment of player wages.

The decisions are reviewed in light of the EFL’s financial fair play rules, before reflecting on public criticisms about the process, including the wide-ranging impact of financial allegations, investigations and sanctions on clubs; the EFL’s position within the process; and the time taken to complete the hearings. Specifically, this article looks at:

  • Derby and Sheffield Wednesday’s financial woes
  • The EFL’s profitability and sustainability rules
  • Sheffield Wednesday’s stadium purchase
  • Derby’s transfer fee amortisation policy
  • Is it time for an independent football regulator? 

Derby And Sheffield Wednesday’s Financial Woes

Little about Derby County FC’s preparations for their 2021-22 campaign has been auspicious. With a transfer embargo hanging over them for breaches relating to the club’s submission of its annual accounts and defaults in payments to HMRC,[1] the Rams were forced to field five players who did not even have a contract with the club in their pre-season friendly against Manchester United FC on 18 July 2021.

Shortly after that episode, the EFL agreed to relax the restrictions in place to allow the club to sign out-of-contract players to fill out its squad.[2] But those at Pride Park will need to take care over their recruitment, not least because the club received a suspended three-point deduction earlier on in July, which will be activated if they fail to pay their players before 30 June 2022[3]. This was yet another punishment for Derby County, reached by mutual agreement between the club and the EFL, for failing to pay player wages in last December.

On the plus side, Derby’s hierarchy will, perhaps, be relieved – because it could have been so much worse. Also in July, Derby were finally told that they would be competing in this year’s Championship, when the EFL revealed that it would not challenge the decision of an independent disciplinary commission[4], which had ruled[5] that it would be disproportionate to impose a points deduction on the club for its idiosyncratic amortisation policy which dictated the value recorded in its financial accounts for incoming player transfers[6], instead imposing a £100,000 fine (see full discussion below). A deduction of more than one point would have seen Derby relegated to League One. Given the state that the club appears now to find itself in, though, that victory may well prove pyrrhic: as things stand, many suspect that nothing short of a minor miracle will enable Wayne Rooney’s side to avoid relegation this season.

No Hoot For The Owls Either

Fans of Sheffield Wednesday FC might be able to relate. They were docked 12 points last summer, later reduced to six on appeal, due to financial irregularities resulting from their owner’s purchase of the Hillsborough Stadium from the club.[7] The acquisition had been backdated so as to turn a £35.4m loss in the account book for 2017-18, as if by magic, into a £2.6m profit.

Wednesday are not out of the woods yet: like Derby, they failed to pay their players last season; unlike Derby, they did so for four consecutive months. As a result, they are now subject to a suspended six-point deduction until 30 June 2022.[8] The Owls will not want that punishment to be activated: the six-point deduction they faced last season was the difference between relegation and a tenth successive season in the Championship.

For Derby and Sheffield Wednesday supporters, the line-up of recent punishments does not make for easy reading, to say the least. Fans are unlikely to take much solace from the other side of this particular coin: Bury FC’s 134-year story, which slammed shut overnight when the club went under in 2019, might have had several more chapters if its owner Steve Dale had been called out six or 12 or 18 months sooner.[9] It is one thing handing out points deductions to clubs that are already on the brink of administration or worse; quite another anticipating where problems might lie, and trying to grasp the nettle.

Bury’s fate left its fans, and the wider football community, stunned. The question was, as ever, whether anything would change. As fans start to trickle back to their seats ahead of the 2021-22 season, is there reason to think that financial fair play has finally taken the field in the EFL?

The EFL’s Financial Fair Play Rules

The EFL’s Financial Fair Play rules were first introduced in 2014, the latest iteration of which are the Profitability and Sustainability (P&S) Rules[10]. In effect, for Championship clubs, the P&S Rules mean that losses must be limited to £39m over a rolling three-year period. An average of £13m in the red per year may sound extraordinary, but it pales in comparison to the Premier League’s limit of £105m over three seasons[11]. Lower limits are in place for League One and League Two.

Potential sanctions for breaching that limit, which are listed at Regulation 92 of the EFL Regulations[12], are wide-ranging. At the least serious end, a warning or reprimand may be issued. Middle-range punishments include fines and transfer embargos. Points deductions and expulsion from league membership tend to be reserved for only the most serious cases. There is a residual power to impose “any other sanction” that is considered appropriate. This assortment of available punishments broadly mirrors those that appear in UEFA’s financial fair play rules[13].

Since September 2018, points deductions in the EFL have been subject to the Sanctioning Guidelines discussed in several recent cases including Sheffield Wednesday’s[14], which suggest that the sanction for breaching the P&S Rules should be a deduction of between three and 12 points, depending on the level of the breach. If the breach is worth less than £2m, the Sanctioning Guidelines indicate that a three-point deduction would suffice. At the other end of the extreme, where the breach exceeds £15m in value, a 12-point deduction would be appropriate.

In the event of a breach, clubs are brought before an independent disciplinary commission which determines their fate. That is precisely what has happened to Derby County and Sheffield Wednesday over the last couple of years.

Sheffield Wednesday’s Stadium Purchase

The Owls were hauled before the commission over a practice that has been employed by several owners of Championship clubs as a way of keeping within the rules.[15] The practice is straightforward: an owner buys their own club’s stadium for a multi-million figure sum, which is then plugged into the accounts for the relevant financial year, potentially transforming a heavy loss into a healthy profit and allowing the club to spend more money on transfers and player wages, whilst remaining compliant with the P&S Rules. This is a loophole that, for now, the EFL seems content to allow.

Where Dejphon Chansiri, Sheffield Wednesday’s owner since 2015, went wrong was in backdating his £60m acquisition of the Hillsborough Stadium. That meant that the windfall was recorded in the accounts for 2017-18 rather than for 2018-19, expunging what would otherwise have been a huge loss for 2017-18 and a breach of the P&S limit. The Owls were charged in November 2019 and attended a hearing over four days in June 2020.

Ultimately, Wednesday’s ownership was not found to have been dishonest and a six-point deduction was deemed to be a proportionate sanction, to be imposed in the coming season (2020-21) rather than the previous one (2019-20). Charlton Athletic FC were left incensed by that decision.[16] If the points deduction had taken effect in relation to the season just ended, Sheffield Wednesday would have replaced Charlton in the relegation zone. The decision nonetheless stood, and the Owls staved off relegation until 2021 instead.

The first key charge levelled against Derby in January 2020 was centred around the same practice, but had a different twist. Pride Park had been sold to owner Mel Morris for £80m despite a previous valuation of the stadium at £41m. The EFL argued that price had been inflated in order to keep the Rams within P&S limits, enabling the club to record a profit of £14.6m for 2017-18. In the end, the charge was dismissed, with an independent disciplinary committee finding that the value of Pride Park was in fact higher than £80m.[17] It was Middlesbrough FC’s turn to feel hard done by[18], as they had missed out on a playoff place to Derby by a single point in May 2019.

Derby County’s Transfer Fee Accountancy

The second charge faced by Derby was much more complicated. New signings have to be recorded in a club’s annual accounts, but the transfer fee is not recorded as a single lump-sum figure. In accordance with standard accounting rules, the fee is usually amortised in a ‘straight line’ over the length of the contract, such that the player’s value is gradually written off over time: a £5m transfer fee for a player signed up to a five-year contract will be written off at a rate of £1m per year and will appear in the club’s accounts as such.

Derby had come up with a different method for the financial years ending 2016, 2017 and 2018. Instead of adopting a ‘straight line’ approach, they had catered for some players’ “residual value” each year when amortising the transfer fee. They did not do this for all players, but only for those they thought might have “residual value” in a given year. For the £5m signing, for example, they did not automatically write off the fee at a rate of £1m per year, but instead asked themselves how much that player might fetch on the market as his contract progressed. After the first year, that might be £4.5m; after the second, £3.9m; and so on, until the final year when all players’ values would be amortised down to zero in line with the end of their contracts.

The effect of this was to temper Derby’s losses in the short term. On the £5m player, £500,000 of amortisation after a year is easier to stomach than £1m.   

When this was initially reviewed by the disciplinary commission in the summer of 2020, most of the EFL’s allegations were rejected because the policy was deemed compliant with the standard accounting practices required by the EFL’s rules, as the club had taken a “systematic” approach, managing to reflect “the pattern in which [Derby] expects to consume the asset’s future economic benefits”.[19] The EFL appealed.

Partially overturning the original decision on 7 May 2021, the League Arbitration Panel determined that Derby’s amortisation policy was impermissible and remitted the case to the disciplinary commission to determine the appropriate sanction.[20] In an almost poetic twist of fate, the decision was handed down the day before Derby faced none other than Sheffield Wednesday in the final match of the league season, with their survival in the Championship in the balance.

At the end of June 2021, after Derby’s final-day draw had consigned Wycombe Wanderers FC to relegation, their sanction was handed down[21]. To Wycombe’s dismay, there was no points deduction.[22] Instead, the Rams received a £100,000 fine and were ordered to resubmit their accounts for the relevant period. If those resubmitted accounts reveal that Derby in fact exceeded the P&S limit for 2016-18, they may find themselves in line for further punishment.

In delivering its verdict, the independent commission highlighted that the purposes of the sanction were to punish the club for its breaches, to vindicate other clubs that had not breached the rules, to deter future breaches, and to preserve and restore public confidence in the competition’s fairness. A points deduction, the commission decided, would have been disproportionate in Derby’s case, particularly given that there was “no basis on which to conclude that the Club knew or even suspected that the policy was non-compliant during the relevant seasons”[23].

Initially, it was thought that the EFL would appeal the sanction and seek a points deduction. In an unprecedented move, an interchangeable fixture list had been announced for the 2021-22 season: one set of fixtures had Wycombe competing in the Championship; the other, Derby.[24] But the EFL has since decided that it will not appeal.[25] With the deadline for Derby’s resubmission of its accounts fast approaching on 18 August, the new season is in full swing, and there is no prospect that Wycombe and Derby will swap divisions even if breaches are found.

Counting The Change: Is It Time For An Independent Football Regulator?

Stepping back from all the charges, hearings, sanctions and appeals, the reality is that two of England’s most historic clubs find themselves in a parlous state. At the very least, it now feels as though those who are caught out under the EFL’s P&S system can expect to feel the impact on the field and in the public eye, not just around the boardroom table.

However, that is not the only story there is to tell: Derby’s owners in particular have made it clear that they feel as though the EFL has singled them out unfairly. In its judgment, the commission considered that this suggestion was unfounded.[26] Yet the mere fact that Mel Morris was prepared to describe himself in evidence as an “enemy of the EFL state”, and that clubs like Middlesbrough, Charlton and even Barnsley FC have been reported to have considered taking legal action against the EFL on these issues[27], indicates how difficult it might be for the governing body of the Championship, League One and League Two to maintain authority and the trust of its members at the same time as deciding whether and how far to pursue them for weighty fines, points deductions or worse.

What is more, the process has not been quite quick enough. Clubs finishing above or below Sheffield Wednesday and Derby in the seasons to which the EFL’s complaints relate have been left aggrieved and without any recourse. From charge sheet to final sanction, the Sheffield Wednesday case went on for about a season; the Derby case, roughly a season and a half. Of course, the very nature of financial wrongdoing means that the balance between a fair, careful investigation and a speedy, effective resolution will always be fraught.

Notably, the disciplinary commission that fined the Rams £100,000 found that, if it had seen fit to impose a points deduction, it would have had no difficulty in doing so in respect of a season that had already finished, as had occurred in Macclesfield Town FC’s case in August 2020[28]. The alternative, it remarked, would result in outcomes that were “unfair and absurd”. That finding may set a crucial precedent for the future.

But for the likes of Charlton, Middlesbrough and Wycombe, that is no consolation: it was all too little and too late for them. Indeed, as far as the Premier League is concerned, Lord Justice Males in the Court of Appeal recently criticised the body’s investigatory and disciplinary process with respect to Manchester City FC’s financial dealings, which began as long ago as December 2018, describing it as “a matter of legitimate public concern, that so little progress has been made after two and a half years – during which, it may be noted, the Club has twice been crowned as Premier League champions”[29].

These three factors – the wide-ranging impacts of allegation, investigation and sanction; the EFL’s position within the process; and time – may lend yet more support to the growing demand for an independent football regulator. Tracey Crouch MP, in charge of the ongoing fan-led review of football’s governance, is the latest name to lend her backing to the idea.[30]

That may be one of the directions in which financial regulation in the EFL is slowly heading. But looking back on what the EFL has done since Bury’s collapse, one thing seems almost certain: as Sheffield Wednesday start to get used to life in League One and Derby stare down the barrel of what is likely to be a gruelling campaign in the Championship, it is not too difficult to imagine that their rivals might be crunching the numbers just that little bit harder.

In EFL v Sheffield Wednesday FC James Segan QC acted for the EFL and Nick De Marco QC for the Club. In EFL v Derby County FC, Adam Lewis QC and James Segan QC acted for the EFL, with Nick De Marco QC and Tom Richards acting for the club. All are members of Blackstone Chambers along with the author.

This article was written by Will Bordell and was originally published by Law In Sport.


[1] ‘Derby Country, Reading & Hull City among eight clubs under EFL transfer embargoes’, BBC Sport, published on 8 July 2021, viewed on 18 August 2021,

[2] Simon Stone, ‘Derby County: EFL to allow Wayne Rooney's side to sign out-of-contract players’, BBC Sport, published on 20 July 2021, viewed on 24 August 2021,

[3] The Football League v Derby County Football Club, EFL, published on 8 July 2021, viewed on 18 August 2021,

[4] ‘EFL statement: Derby County sanction (written reasons)’, EFL, published on 2 July 2021, viewed on 18 August 2021,

[5] The Football League Limited v Derby County Football Limited, ‘Decision and written reasons of the disciplinary commission on sanction’, EFL, published on 18 June 2020, viewed on 18 August 2021,

[6] For an explanation of the Club’s amortisation policy see: The English Football League Limited v Derby County Football Club, paragraph 22, ‘Decision of the League Arbitration Panel’, EFL, published on 7 May 2021, viewed on 18 August 2021,

[7] ‘Sheffield Wednesday: Points deduction for breaking spending rules reduced from 12 to six’, BBC Sport, published on 4 November 2020, viewed on 12 August 2021,

[8] Ibid, see footnote 3

[9] Josh Halliday, ‘Bury FC: despair as club is expelled from Football League after 125 years’, The Guardian, published on 28 August 2018, viewed on 18 August 2021,

[10] ‘Appendix 5 Financial Fair Play Rules’, EFL, viewed on 18 August 2021,

[11] Premier League Handbook 2020/21, Premier League, viewed on 18 August 2021,

[12] Investigations & Disciplinary Proceedings, Section 8, EFL, viewed on 18 August 2021,

[13] ‘Financial fair play: all you need to know’, UEFA, published on 30 June 2015, viewed on 18 August 2021,

[14] Ibid, see footnote 5

[15] The English Football League v Sheffield Wednesday Football Club, ‘Decision’, EFL, viewed on 18 August 2021,

[16] Simon Stone, ‘Charlton Athletic legal challenge against Sheffield Wednesday penalty gets rivals’ support’ BBC Sport, published on 4 August 2020, viewed on 18 August 2021,

[17] The English Football League Limited v Derby County Football Club, ‘Decision’, EFL, published on 24 August 2020, viewed on 18 August 2021,

[18] Dan Roan, ‘Middlesbrough set to sue EFL over Pride Park sale to Derby County owner’, BBC Sport, published on 13 September 2019, viewed on 18 August 2021,

[19] Ibid. See footnote 17

[20] See footnote 6

[21] See footnote 5

[22] Steve Nicholson, ‘Wycombe owner makes Derby County threat as he breaks his silence on sanctions’, Derbyshire Live, published on 25 June 2021, viewed on 18 August 2021,

[23] See footnote 5, paragraph 60 (2)

[24] PA Media, ‘Derby could still face Championship relegation as two EFL fixture lists released’, The Guardian, published on 24 June 2021, viewed on 18 August 2021,

[25] See footnote 4

[26] The English Football League Limited v Derby County Football Club Limited, ‘Decision’, dated 24 August 2020,

[27] Matt Slater & Nancy Frostick, ‘Championship clubs to sue EFL if rivals aren’t punished this season over FFP’, The Athletic, published on 20 May 2020, viewed on 18 August 2021,

[28] The English Football League v Macclesfield Town Football Club, ‘Decision of the League Arbitration Panel’, EFL, published on 18 August 2020, viewed on 18 August 2021,

[29] Manchester City Football Club v The Football Association, Premier League Ltd & others, paragraph 66, Bailii, published on 20 July 2021, viewed on 18 August 2021,

[30] David Conn, ‘English football needs independent regulator, says chair of fan-led review’, The Guardian, published on 22 July 2021, viewed on 18 August 2021,

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