Financial Regulation under the Independent Football Regulator & Appropriate Financial Resources

Under the Football Governance Act 2025, clubs are required to satisfy threshold requirements in order to hold a licence. One of those threshold requirements relates to the financial resources of the club, and whether they are appropriate in relation to the activities of the club.

Unlike existing league frameworks, which rely on rules-based financial controls and fixed metrics such as spending caps and squad cost rules, the IFR has confirmed that it does not intend to impose fixed numerical thresholds, financial ratios or prescribed weightings in its assessment of a clubs financial resources, opting instead for a contextual assessment of a clubs financial soundness (IFR Consultation Paper 2/26).

Whilst this may appear less prescriptive, it does represent a more searching and forward-looking assessment of how clubs are funded, governed and managed.

What are “Appropriate Financial Resources”?

The statutory requirement to hold “appropriate financial resources” sits at the centre of the licensing framework, and clubs will have to be able to demonstrate compliance with this threshold requirement in order to obtain a provisional licence.

In broad terms, the IFR will seek to assess whether a club can operate on a financially sound and sustainable basis, taking into account its specific circumstances. Evidently, this will include consideration of:

• Liquidity and Solvency, in particular, whether the club can meet its obligations as they fall due along with the longer term financial position of the club.
• Funding Arrangements, including the nature, reliability and concentration of funding sources.
• Risk Management, in particular, whether key financial risks are identified and understood, and whether current financial projections have been stress tested and appropriate mitigation measures have been considered.

It is important to reiterate that the IFR has emphasised that it does not intend to impose a universal or one-size-fits-all  assessment, The concept of “appropriate” is deliberately flexible, and allows for different clubs to meet the requirements of “appropriate financial resources” in ways that are proportionate, feasible and reasonable for them depending on the size, structure and risk profile.

A Forward-Looking Assessment

The financial resources threshold requirement fundamentally operates on a forward-looking basis, requiring clubs to demonstrate their ability to remain financially sustainable over time. The IFR has made this clear in their guidance, which focuses on projections, stress testing, and the management of future risk, rather than historic compliance and performance alone.

As part of the Provisional Licence application, clubs will be required to submit a strategic business plan which must include forecast financial information extending into the end of the following season. 

Additionally, it is expected that clubs will have to undertake a financial risk assessment, including stress testing against adverse but plausible scenarios, including relegation, the loss of a main source of funding, and significant revenue shocks.

It is worthwhile noting that forecasts are inherently uncertain, particularly in the unpredictable business environment of professional football. As such, the IFR recognises that long terms forecasts ought not to be treated mechanistically and the focus on the financial forecasts is that they should be grounded in realism and proportionality as opposed to being treated as forecasts to be met.

The emphasis in assessing a club’s financial resources is therefore not on historical compliance or financial performance, but on whether a club can demonstrate that it is capable of managing its financial position sustainably over time.

Owner Funding 

Given that owner concentrated funding remains a common feature of club financing, it is understandable that some clubs may have concerns about the requirement to assess and model the impact of a hypothetical withdrawal of that funding. This is particularly relevant for clubs where such an event would have a material or potentially existential impact. This issue was expressly raised during the consultation process, with respondents noting the difficulty of modelling such scenarios and identifying realistic mitigations.

In response, the IFR has accepted that reliance on a single funding source is common and that single investor ownership will not be treated as automatically high risk. Whilst the IFR has maintained that the removal of a main source of funding will remain one of the main forms of stress testing the financial framework of a club, the purpose of the exercise is not to penalise business models which rely on committed owner support. Rather it is to ensure clubs have a clear and credible understanding of their funding dependencies and how they would response to adverse changes.

For example, clubs that are heavily dependent on owner funding or have other concentrated sources of funding should take steps to distinguish between committed funding and discretional or anticipated future funding.

Clubs should also ensure that stress testing is accompanied by clear explanatory narrative showing that the risk is understood and the response is credible. Clubs should also demonstrate realistic mitigation strategies, for example cost reduction measures, deferral or restructuring of expenditure, and access to alternative funding sources.

Where clubs are heavily reliant on owner funding, they should seek to evidence the credibility of that funding including historical funding track record, formal and informal funding commitments, and evidence of financial capacity at ownership level.

Prudent and proactive engagement with the stress testing scenarios should allow clubs to demonstrate that whilst the impact of any coming to fruition would be high, the likelihood of such is low and therefore it is a well-managed low-probability risk.

Debt, Liquidity and Financial Structures

The IFR has confirmed that neither debt or shareholder loans should be treated as inherently negative. Rather, the focus will be on whether borrowing arrangements are well managed and compatible with financial sustainability and stability.

Clubs should also be aware that uncertain income streams, such as player trading, will not be treated as a guaranteed source of funding. However, it may still form a legitimate part of a club’s business model and may be referenced within a club’s management actions or mitigation plans as part of its financial plans.

Proportionate and Supervision Led Approach

Consistent with the wider regime, the IFR intends to apply its financial framework proportionately. As set out in CP2/26, the IFR’s risk-based approach enables it to focus its attention on higher risk clubs while taking a proportionate approach to those that are financially stable. In essence this means that expectations will vary depending on the scale, complexity and risk profile of each club, but all clubs must be able to demonstrate that their arrangements are appropriate for their activities and the risks they face.

This principle-based model has significant practical implications in that financial stability must be demonstrated, not assumed. Forward planning and documentation will be critical and engagement with the IFR will be ongoing rather than event driven.

What Should Clubs Be Thinking About?

In advance of the licensing window, clubs should be focusing on taking a forward-looking approach, based on projections, stress testing and risk analysis, which can evidence appropriate financial resources.

In practice, this will mean reviewing and considering:

• Financial Plans and Forecasts, ensuring that business plans are coherent, evidence based, and capable of withstanding scrutiny.
• Funding Structures and core dependencies, demonstrating an awareness of reliance on owner/concentrated funding and being able to articulate sustainability.
• Liquidity resilience and testing the ability of the club to meet its likely obligations when they fall due, as well as its ability withstand adverse scenarios.
• Governance procedures, ensuring that financial decisions and plans are subject to appropriate board challenge. Financial plans are evidence of governance quality and not just forecasts.

In addition, clubs should also consider whether they have appropriate non-financial resources as required under the statutory threshold requirements. This includes the adequacy of internal systems, personnel, controls, and operational infrastructure necessary to run the club effectively. Weaknesses in systems or internal processes may attract regulatory scrutiny, even where financial metrics appear sound.