"When a company, such as a sports club, becomes insolvent - meaning it can no longer pay its debts - directors can choose to appoint administrators to assess whether it can carry on operating, or if it needs to be sold. Administrators are accountants licensed in insolvency cases, and can also be appointed by a court if it is proven a club is insolvent."
"As well as meaning the future of the club is assessed, being placed into administration protects the club by enforcing something called a statutory moratorium. This temporarily shields the club from legal action by debtors while financial restructuring plans are prepared by administrators. The most immediate impact for a football club of entering administration is a large points deduction. Sheffield Wednesday have been docked 12 points, which is the penalty set by the EFL for clubs entering administration."
Appointment of administrators occurs when a club cannot pay its debts and may be made by directors or by a court. Administrators are licensed insolvency accountants who take responsibility for running non-playing aspects of the club for an automatic 12-month administration period that can be shortened or extended. Administration enforces a statutory moratorium that temporarily prevents legal action by creditors while restructuring plans are prepared. Common outcomes after administration are rescue, liquidation, or dissolution. Football-specific consequences include significant points deductions, possible sale of players or facilities to raise funds, and an ordered hierarchy for repaying football-related creditors.
Read at www.bbc.com
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