What does administration mean in football? What will happen to Derby County as Championship club files notice

In British football, a club enters administration when they are unable to pay off their outstanding debts.

The Football League have confirmed that the Rams will face a 12 point deduction should the formally enter administration which looks likely with owner Mel Morris, who has had the club up for sale since June 2019, apologising to their supporters.

The administration process is one that a number of clubs across the country have dealt with over the past few decades, many coming out of the other end stronger than before.

Here is what you need to know about the process:

What does it mean when a football club goes into administration?

In the United Kingdom, football clubs can choose to enter administration when they are unable to pay off outstanding debts.

Administration puts accountants in charge of the day-to-day running of the clubs finances, they will seek to solve the clubs financial problems potentially by finding a buyer for the club.

Administration, under the “football creditors rule”, requires all football related debts such as outstanding transfer fees and staff wages to be paid first.

What happens after a football club enters administration?

The accountants come in and takeover the running of the club, aside from the management of the team which is still left to the coaching staff.

The administrators will then look at how they can balance the books, securing deals that work in the best interest of both the club and the businesses/people that are owed money.

The Football League rules that ensure all transfer debts are settled first often result in small business who have provided other services, such as food suppliers and maintenance contractors, are the last to have their bills settled and find themselves not receiving the full amount they are owed.

What football clubs have been in administration?

Several British football clubs have been in administration over the past few decades including big names like Leeds United and Rangers.

The punishments, in terms of points deductions, have varied over the years but the process has benefited the long term financial stability of many of the clubs who have utilised it.

However, for some clubs it is just the first step towards an inevitable end if debts mounted high enough.

Gretna FC, who famously scaled the Scottish Leagues from Third Division to Premier League from 2005 to 2007 and reached the final of the Scottish Cup, entered administration in early 2008 and were formally liquidated by the administrators in August that same year.

What is liquidation and what does it mean for football clubs?

Liquidation is process that applies to all businesses, not just football clubs, it is the process of bringing a business to an end and distributing its assets to claimants.

For a football club, this will occur when debts have reached a stage that the administrators can find no way to settle them and is, understandably, a last resort.