The implications of a "Golden Share" in football

When Tracey Crouch MP published her report on the “fan led” review of football, I was taken by the reference (see page 4) to the intention to “develop proposals…to offer greater protection…through a ‘golden share’ for fans, giving veto powers over reserved items, to be held by a democratic legally constituted fan group”.

This article was picked up and published in full by Law in Sport and can be read here: What Is A ‘Golden Share’ In A Football Club & Should Fans Have One?.

When this was followed up by both Oliver Dowden MP visiting my football club (Brentford FC) and his successor Nadine Dorries MP referencing Brentford’s ‘golden share’, I thought – as the lawyer who advised the Brentford Supporters’ Trust on the implementation of its ‘golden share’ (or BU Special Share as that particular one is known) – that it would be worthwhile reflecting on the key points to consider in relation to such a share.

What is a ‘Golden Share’?

It’s a basic legal principle, well known to corporate lawyers, that a share is just a bundle of rights the benefit of which is held by the holder of such share. So, for this purpose, a ‘Golden Share’ is simply another share (albeit designated as a ‘Golden Share’) which is issued by a company to which certain rights as set out in the company’s articles of association attach.

Tracey Crouch MP, in her report, obviously envisages that football clubs will issue a new share (this ‘Golden Share’) to supporters’ groups. In many cases (including Brentford’s) this will be the club’s existing supporters’ trust which will thereby become the effective custodian of the ‘Golden Share’ and the rights attaching to it.

Why have a ‘Golden Share’?

Looking at Tracey Crouch MP’s report it’s clear that her focus is protecting the ownership of a club’s stadium, badge, location and colours. A ‘Golden Share’ could be used to give veto rights to a club’s supporters to protect all of these matters and so enable fans to protect their club’s heritage.

To my mind, the main benefit of a ‘Golden Share’ is that it provides fans with a say over, what is to them, some of the most important aspects of their club without an existing owner (who has invested a considerable amount in the club) having to give away valuable shares or otherwise asking fans to raise the funds to buy shares from an owner; at the top end of the football club pyramid, such shares will almost certainly be beyond most fans’ means and who’s to say whether an owner would be willing to sell in any event?

‘Golden Share’ considerations

From a purely legal perspective, creating a new class of shares and calling it a ‘Golden Share’ will be a relatively straightforward process for most companies (with a bit more complexity added in if the company is listed) but, based on my experience, there are several key considerations beyond merely creating a new share class:

• Which entity should hold the ‘Golden Share’? As mentioned above, for many clubs this may be easily addressed by using an existing supporters’ trust, but if there isn’t one then consideration would need to be given to setting one up or using some other entity to hold the share so that ownership can continue on a long-term basis via that entity. The upside as I see it is that this is an opportunity for clubs, if used correctly, to gain some real additional engagement with their fans by making the supporters’ trust clearly relevant to the club and involved in its long-term future.
• Which veto rights will be granted to the fans? As I’ve already touched on, Tracey Crouch MP talks about the stadium, club badges, location and colours but it’s crucial that, whichever rights are under consideration, they are defined and drafted precisely, so that it’s clear what is restricted, how the veto will work in practice and what happens in the event of a disagreement. In the case of Brentford, the ‘BU Special Share’ covers a veto over moving the ground unless a successor location, with a certain amount of seating and facilities at least as good as those we currently have, is found in one of the three surrounding boroughs. Any proposal to move the ground has to be put to the Brentford Supporters’ Trust which has the right to veto the move if it doesn’t comply with the specified criteria. In the event of a dispute as to whether the criteria is met then the decision will go to an independent binding arbitration panel to determine.
• What other rights could be granted to fans in relation to a club? This answer is really down to whatever the imagination can create. A ‘Golden Share’ could include a right to appoint a director to the board, a right to certain financial information to be shared, a seat on the Audit or Risk Committees, a specific fan engagement role and so on. While the ‘fan led’ review focuses on heritage assets, such as club name and colours, it’s conceivable that a ‘Golden Share’ could include any other rights and benefits for fans that the existing shareholders are prepared to accept.
• Should all aspects have the same veto rights? Some may consider that certain issues are more important to protect than others, for example, the stadium could be said to trump the club badge or colours, although many fans would consider each of these to be equally important. This lends itself to the question of whether the ‘Golden Share’ should provide differing levels of votes to veto certain actions. In the case of Brentford, only a veto over the stadium was included so that was relatively easy to address. The challenge might come in circumstances where (and I realise this will be heresy to many fans) a major company offers a huge sum of money to a club owner to, say, change the club’s nickname; it will be difficult to navigate the balance between protecting the club’s heritage, with fans having polar opposite views (some may be happy with a change if it means financial salvation or stability while some may never wish such a change to happen) and the ability for the change to be blocked against having to rely on the owner to fund the club without this financial backing.
• How will the fans use the power of veto? If a supporters’ trust is used then the veto right may be vested in the hands of the trust’s board (who are elected by the fans on a regular basis), or it may be that the supporters’ trust is the vehicle (as is the case with Brentford) which canvasses its members as to whether the veto should be used. This will take some thought to ensure that the process allows fans to have their vote and that any time periods for vetoing a decision allow for meetings to be called and votes to be cast and counted.
• Specific legislation for insolvency? Will there be a need for specific legislation to protect fans and clubs in the event of insolvency? While a ‘Golden Share’ grants rights over a company, if that company’s assets are sold then the share will end with that sale and there will be little that the fans can do about it, so I wonder if the government (or the football authorities) might need additional legislation or rules to bind a successor company or its owners.

Conclusion

As a Brentford fan I’m very proud that our owner voluntarily offered up a veto right over the sale of the stadium to the supporters’ group, to show his commitment to the club and its history (it’s well documented that he’s a fan himself); once again Brentford has seemingly led the way in its approach to football (ok – I’m a bit biased here). From a professional perspective too, as the lawyer who advised the Brentford Supporters’ Trust on the implementation of the “BU Special Share”, I’m intrigued to see how the proposals of Tracey Crouch MP are developed in relation to some of the above points and the other issues that will inevitably arise from the imposition on football club owners of a ‘Special Share’ regime.

Of course, there’s nothing to stop any football club owner implementing their own ‘Golden Share’ structure whenever they like and while I’m aware that the likes of Exeter (ownership of the club) and Wycombe (board seat) are engaged with fans at this sort of level, the Brentford ‘model’ (like the club’s on-pitch success) remains a rarity (if not a one-off, at least for now).

Stuart Hatcher is a Partner in our Corporate team.

Disclaimer

This note reflects our opinion and views as of 6 October 2021 (other than in relation to the support of Brentford FC which is definitely Stuart’s own opinion) and is a general summary of the legal position in England and Wales. It does not constitute legal advice.

Stuart Hatcher speaks to the Independent: Chelsea’s new owners could ‘set the tone’ by granting fans golden share

Corporate Partner, Stuart Hatcher, has spoken to the Independent about Brentford's golden share deal, which he drew up in 2012, and how he believes Chelsea’s new bosses should look to do something similar.