Administration happens when a company cannot pay the debts that it owes. What this means is if Birmingham City got to a point where they owed so many people and companies so much money, they would have to call in a special kind of accountant to run the company.
How could BCFC go into administration?
- Directors could decide at a board meeting that there is no way out of debt and that administration is the only answer
- Shareholders can hold a meeting and decide that administration is needed. This might need to be approved by someone the club owes money to.
- If one person or company the club owes money to has something called a “debenture”, they can force administration on the club.
- If one person or company the club owes money to files a statutory debt notice with no response in three weeks, and the debt is more than £750 they can file a winding up petition to be heard in court. This is a very expensive method and is normally done by the taxman.
- If the club is already in something called a Company Voluntary Arrangement (CVA) then administrators can be called in.
As it stands, there is no debenture and no CVA so options 3 and 5 can’t happen.
Because putting the club into administation would massively affect BSHL being on the Hong Kong Stock Exchange, and BSHL own 75% of the club, option 2 is very unlikely to happen. Similarly, because the directors of BCFC work on behalf of BSHL, option 1 is very unlikely. The only way this could change is if Oriental Rainbow Investments (or another company) bought at least 25% more of the club.
This means that the only current likely method for administration to happen is if someone like HMRC (the taxman) was not being paid on time. This almost happened in December 2019, but the club paid the taxman before it went to court. As long as Blues keep paying the taxman, this won’t happen.
You can read more about administration at almajir.net at this link.