Some thoughts on why Player Signings are delayed.
These are just some thoughts that apply to player announcements in general and do not necessarily apply to anyone in particular at Leeds United.
Any player on a standard contract with a football club has a contract that runs until 30th June each year. His new contract, either with a new club or his existing club, starts on 1st July or later but always runs until 30th June. This is an FA regulation.
Even if a player signs a contract to move clubs in May his contract of employment doesn’t start with his new club until 1st July and his old club will still pay him during May and June, unless his new club agrees to take over these payments.
Financial accounts for many clubs run to the end of June each year. Leeds United are one example. A few clubs, such as Sheffield Wednesday have financial accounts that end at the end of May.
All clubs, despite their actual financial year end, must produce accounts for FFP based upon an end date of 30th June.
Players shown as Assets on accounts
We hear a lot of talk nowadays about players’ transfer fees being amortised as an average, yearly cost on club accounts.
It is easy to assume that it is the player’s employment contract that this refers to but this is wrong. No Club, and indeed no company, can treat a person as an asset.
The asset being claimed is the player’s registration papers with the EFL so he can play for the club. These registration papers can be sold as an asset – a player himself cannot be sold as asset since this would be slavery, a person can no longer be owned by a person or company.
The transfer window defines the dates that the EFL will allow registration papers to be transferred between clubs.
It has nothing to do with when employment contracts can be signed.
Note well that when a registration is transferred the first agreed transfer payment must be sent in cash with it.
Why does this matter?
Well, a few reasons. Firstly a player can sign a contract, or pre-contract, of employment with a club that says he will play for the club from 1st July, in line with the FA regulations, at any time (well after 1st January, I think)
Just signing the employment contract doesn’t mean that he is allowed to switch clubs, since his old club still own his registration. His new club agree an employment contract with a player but then has to buy his registration papers from his old club.
Since the transfer fee must be sent with the change of registration papars, clubs often leave this as late as possible. With all the contracts signed neither the player nor his old club can back out and the later registration is safe.
When a new club signs an agreement to buy a players’ registration any transfer fee that must be paid becomes a debt on that club, or a liability to use the financial term. If the new club does this before 30th June then this liability will show on it’s old financial accounts and give an impression of higher debts than is a true picture.
Similarly, if two clubs transfer the registration papers then the selling club will register this as a player sale in the old season’s accounts and claim profit from it. This can obviously help with FFP after the season has ended and is something some selling clubs might want to do.
However, if the buying club allows the transfer, this transaction would go onto its own accounts as a cost and increase its losses for FFP. Also, by having to pay cash on the nail with the transfer of registration, the buying club’s accounts will show less cash in the bank.
So, an early transfer of the registration papers can make a selling club’s accounts look better and a buying club’s accounts look worse.
So it only matters because of cash and FFP?
Not quite. Shirt sponsorship and other club partnerships come into it too.
How does Sponsorship affect Player announcements?
In general, sponsorship and advertising contracts are signed to coincide with the financial year.
This means that new sponsors are normally revealed around 1st July and they expect a full 12 months of advertising of their name.
A club cannot announce a new sponsor much earlier without effectively ending their old sponsorships. Granted, most sponsors would be hard pressed to go to court to argue a material loss occurred if a new sponsor was announced a few weeks after the season ended, given that their exposure from that time onwards is limited.
However, a club announcing a change of sponsor early would likely get away with a slight breach of contract but a club that starts to actively promote a new sponsor early is on very shaky ground and could well be sued.
So, clubs tend not to reveal their new shirts with new sponsors until the start of their new financial year, give or take a few days.
For Leeds United that means we normally reveal these changes from 1st July onwards.
This doesn’t stop announcing a new player though!
Well, it does really, because obviously a new sponsor wants his logo and name seen as much as possible and new player announcements are eagerly awaited, so they get plenty of the exposure sponsors want.
Therefore, it often gets written into contracts that new sponsors name and logo must appear when major signings are announced.
A new sponsor doesn’t want a new, big-money signing being pictured wearing last season’s shirt with an old sponsor, so player announcements are often held back until new kit can be shown.
Is that all?
Just about, except, of course, sometimes player announcements are held up to allow a scheduled flow of signings to be announced or to coincide with other events, such as manager changes. And sometimes we just haven’t signed anybody!
Mike Thornton 23rd June 2018