Football League: Fair Play rules don’t allow Director’s Loans

An enquiry to the Football League by OVF has clarified the Football League rules on the SCMP (Salary Management Protocol or Fair Play Ruling).

The club’s latest accounts, for the 12 months up to June 30 2015, showed £2.5m was owed to owner Norman Smurthwaite as a director’s loan and our enquiry was to ascertain whether that loan would be due to the club adding equity to boost their playing squad or because of funds added elsewhere (such as work on the Lorne Street stand, floodlight work and work on the rest of the stadium).

According to the response we received from the Football League, director’s loans can be used to fund other areas of the club but cannot be used in relation to SCMP (the Fair Play Ruling).

The ruling makes it safe to assume therefore that any money loaned to the club cannot relate to funds added to bring in additional players to the Port Vale squad.

What is the Fair Play Ruling?

Clubs operate within a Spending Constraint framework termed Salary Cost Management Protocol (SMCP). SCMP limits spending on player wages to a percentage of club Turnover. In League One, clubs can spend a maximum of 60% of their turnover on wages. Within a traditional accounting perspective, there are usually only three elements of turnover:

  • Match-day Income
  • Commercial Income (such as sponsorship)
  • TV revenue (and any ‘merit payments’ based on league position)

However, the Football League Turnover figure does allow donations from the owners to the club and injections of equity. Loans from club owners are understandably not included in the Turnover figure as these would result in growing club debt.

To clarify the situation we emailed the Football League Customer Services Department who replied to us on the 11th of December 2015 with these replies:

From: Enquiries <>
To: *****
Sent: Friday, 11 December 2015, 16:05

Equity injections for SCMP purposes are non-refundable monies injected into a club. A club can utilise this for improvements in the playing squad. Directors loans are not allowed for SCMP purposes but it doesn’t mean an owner can’t inject loans into the club to fund other areas of the business e.g. stadium.

From: Enquiries <>
To: *****
Sent: Friday, 11 December 2015, 13:28

In relation to SCMP (which is wages to turnover ratio) Director loans are not permitted. The Relevant Turnover figure used in the SCMP calculation includes cash invested into the club in the form of equity or donation but does not include money injected into the club through loans. It is, for example, 60% (for League 1) of allowable turnover on a budget/forecast basis. Equity is accepted where it is a pure cash injection into the club. We don’t allow the conversion of loans to equity in any form.

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