How to take money out of a football club…………

Sometimes simple facts are overlooked………. I think we need to look at some of them!!!!! Here I send an email to a mate of mine after we’ve had a few chats down the pub about the clubs finances.

Dear Krem,

I obviously speak with a lot of Swans fans and many echo the concerns which you have raised when we’ve been on the piss in the pub but I’m increasingly confused with the conspiracy theories and think it is vital that as a fan base, we realise that they are untrue.

At the heart of these theories (which have become facts with many fans) is that the American owners are ‘bleeding the club’. Here is a brief look at how they could potentially do such a thing (remember the shares were bought for £100 million):

Swansea City Football Club is a Limited Company. As a Limited Company there are four ways which you can withdraw money from your company’s account into your own:
1. Salary
2. Dividend payments
3. Director’s loan
4. Reimbursement of expenses

Salary:
Taking a salary from your business bank to your personal account is a straightforward process. It’s unlikely that the majority of your income will come from a salary, but it can be a useful method to provide yourself with a monthly pay packet.. You will be required to deduct all tax and National Insurance contributions and Employers National Insurance Contributions.

Huw Jenkins takes a sizable salary from the club but Kaplin and Levien and other shareholders don’t actually work for the club and so take no wage, as far as I’m aware. It’s a shit way to take money from a business anyway because of the tax involved; no chance of mass bleeding here!

Dividend payments
Once your company makes a profit, it will need to pay a percentage as corporation tax, but whatever is left can be paid to directors and shareholders in the form of dividends. Dividends are a way of dividing up the company’s profits and distributing them to directors and shareholders as a percentage based on the proportion of the company they own.

Limited companies can issue dividends at the end of the financial year, and at points throughout the year, which is common when the directors or shareholders rely on the dividends for income.
The company directors must declare dividends and a payment date agreed at a board meeting after which, the shareholders should be issued with a dividend certificate. Dividends are usually more tax efficient than paying yourself a salary, which is why most business directors choose them to make up the majority of their income.

This is the most likely way football club owners could extract money from a club. The issue for the conspiracy theorists is that we haven’t reported huge profits at any stage and the Supporters Trust hold a sizable stake in our club and would receive a large proportion of any such payouts. We’d know if there was any bleeding done here.

Director’s loan
A director’s loan allows you (as the director) or a family member to either lend money from the business, or from the business to borrow money from your own funds. This loan needs to be repaid to your business account within nine months of the end of the financial year to avoid an additional repayable tax charge (S455 charge).

If the company owes money to a director, then that sum can be withdrawn at any time without incurring any tax liabilities. All transactions must be recorded in a director’s loan account. At the end of the financial year this record must also be recorded on the balance sheet of your annual accounts. If you are a company shareholder as well as director, you may have to pay tax on your director’s loans owed to the company.

As far as I’m aware there is no loan in place either way. No Bleeding here.

Reimbursement of expenses
Any cost that you have incurred personally which has been made ‘wholly and exclusively’ for the purpose of your business can be claimed as a legitimate business cost. Therefore, not only will your business receive tax relief on these expenses, but you will also be able to reimburse yourself personally for the cost.

These costs typically include business miles, insurance and equipment but can include any cost which was necessary. Although business expenses will not make up a large portion of your overall take home pay, this is an additional and tax free method which many directors find useful.

Now I have no idea whether the Yanks pay for their flights over here or whether the club ‘fit the bill’ but I’d expect more for a hundred million investment than a few free flights a year across the Atlantic.
The reality is that for our owners to make any half decent profit from the club in a short space of time then the only viable way of doing this would be through dividends payments. But they would need to release around £200 million in dividends in order to get £136 million themselves (owning 68% of the company) surely this could never have been the plan? And the club can’t ever get near this sum and so the ‘asset strip’ theory is completely and utterly bull shit.

THE REALITY

The reality (as mental as it may seem) is that we have generally been told the truth! The Yanks have never denied that they are here for an investment; the Financial Times did a really detailed feature on the club and our owners and said that people around Kaplin said he wanted to make twice or three times his money back. That’s not a secret. They haven’t come here pretending they wanted to do anything other than make money and that the only way they can make money is for the club to be worth more when they sell it than when they bought it; that’s simple.

What isn’t simple is running a football club and the club was run incredibly badly during the last few years of our Premier League campaign and the owners and chairman fucked up in a lot of ways! Which again, they aren’t denying. We got relegated!

Post-relegation
To be honest, I’ve been on the fence with Huw Jenkins and board for the past few seasons. But whilst our decision over the summer infuriated most fans, for me it was the time that drew me towards them. To go into this, firstly for me to explain why I was on the fence: The clubs success in getting to the Premier League was made through long term planning, we’d sell players when they wanted to go and at the right price because it made good sense, we’d buy players with a long term approach because short term fixes would fuck you up long term. We stopped doing that around the time the past board were looking to sell the club, the last few seasons we just papered over the cracks and survival was all that mattered. The £100 million plus from the premier League was more important short-term than anything after that. As against taking long-term calculated decisions which Huw Jenkins was renowned for, we suddenly got through 3 managers a season and it was painful.

And then there was relegation. I never bought into the ‘asset stripping’ bullshit for the reasons above. I never thought that was every going to happen because there simply weren’t enough assets to strip. So I’ve always come from the point of view that we all want the same thing and that is for the club to succeed but I had questions as to whether the chairman was now the right person to do that. We all want promotion, the Yanks NEED it or their money is dead. But how to do it?

West Brom and Stoke have gambled. Make no mistake about it, they have held onto their players, bought new ones, kept a high wage bill and if they don’t go up then they are in big problems. But almost more importantly is that IF they go up, they aren’t in a great shape. They have made the decisions which we have made in previous years; short-term paper covering cracks; it doesn’t work!
Undoubtedly we could have had a much better chance of going up this season if we had kept hold of a few players, Andre Ayew would piss this league but then what? If we got up with the same group that took us down then we’d be instantly looking to paper over cracks again and again and again which is what WBA and Stoke will do if they do get up or even if they don’t.

What we did was instantly get rid of our higher earners, get rid of those who didn’t want to be here, secure our long-term finances in a matter of weeks and buy us time. We’ve invested in our youth system throughout our Premier League years and we are now milking that and if we do go up next season or in three seasons time then we’ll go up with a side that has a better chance of staying up and pushing on from there (much like our one in 2011). We can add some quality where needed as the Premier League money will be additional money as against money we’d gambled on needing, we can expand the stadium and then after a few seasons, the club will be sold to a Saudi Arabian Tycoon for £250 million and the Yanks get their profit. It’s a viable business plan without an immense gamble.

Passion within our fans can distort reality and make us have tunnel vision, whether that be that we love a player so much that we fail to see when he’s going through an atrocious spell or that we despise a chairman so much that we can’t see what’s really going on. I think the Huw Jenkins witch-hunt (which I’ll call it right now!!) has gone too far and things which we’d have praised him for doing ten years ago are now things to have another pop at him for. I’ll give an example, I got told (no idea if true) a few weeks back that Fernandez had changed his mind about leaving after our first game of the season, he’d seen our side and thought we looked alright and went to the chairman and said that he didn’t want to go anymore and he wanted to stay. Huw said there is a plane waiting for him to fly to Newcastle and that he was going; end of.

Now the reaction to that was that Huw was being a twat, penny pinching, very much like him refusing to pay an extra 500k for Woods; outrageous! But I know that if the exact same things had happened ten years ago then the fans reaction would be the total opposite ‘If Fernandez isn’t fully committed then he can fuck off!, well done sir Huw, In Huw we trust!!’ ‘cheeky Brentford Chairman, we agreed on a deal, you can’t add 500k at the end of it, taking the piss out of Swansea City, fuck off!! In Huw We Trust!!’
Ultimately, if fans can get over the conspiracy and realise that the board need promotion and to push on from there in order to get their money back (and make a profit) then we realise that we want the same thing. Currently the board think that the best person to ‘steer the ship’ to what they want (and what we want) is Huw Jenkins. The decisions made over the last few months have made me slide down the fence towards agreeing with that for the moment but should a day come where he isn’t the best person to steer the ship then it’s in the boards interest to find someone else in the same way as it is in ours.