Out-Law News 2 min. read
13 Mar 2023, 4:14 pm
The German Football League (DFL) has proposed changes that would tighten its widely discussed ‘50+1’ rule on club ownership, aiming to dispel concerns of German competition authorities.
Dr. Markus J. Friedl, sports law expert at Pinsent Masons in Frankfurt, said: “The proposals clearly show that the DFL wants to preserve the status quo. Thus, it is worthwhile noting that foreign investors will be able in the future to obtain stakes in German football clubs despite those proposed changes, and in a limited partnership by shares-structure are even allowed to acquire up to 100% in a club.”
Since 1998, German football clubs have been able to spin off their professional players' department as a corporation in order to attract additional funds, for example from corporate investors. However, a corporation may only participate in football operations if the parent club association holds more than 50% of the voting shares or the position of general partner in case of a partnership limited by shares. This rule has been dubbed the ‘50+1’ rule and is intended to ensure decision-making power remains with the club.
However, the 50+1 rule is not applied uniformly across clubs in Germany. The DFL has been able to grant an exception to the rule if an investor has continuously and significantly promoted the football department of the club association for more than 20 years. Three clubs in the Bundesliga have been granted such exception: Bayer Leverkusen, TSG Hoffenheim and VfL Wolfsburg.
The Federal Cartel Office previously said that the exemption rule undermines the objectives of the 50+1 rule, which are to preserve the club structure, to offer club members the opportunity to participate and to ensure balanced competition between the clubs. It considered that clubs able to benefit from the exemption have greater opportunities to raise equity capital than others and that this is likely to distort the balance of sporting competition, instead of contributing to it.
Under the proposed revised rules that the DFL has present to member clubs, no further exemptions to the 50+1 rule would be able to be granted in future. The three clubs that currently benefit from an exemption would continue to benefit from their exemption and be granted a football licence, but new ‘grandfathering’ conditions would apply to those clubs.
The conditions include that the parent club association for each club must be given the right to appoint at least one representative onto the supervisory body of the corporation that has powers of control and approval. Those representatives would need to be granted the full rights of a member of the body or a shareholder – including the right to speak, the right to information and access, and the right to vote.
In addition, the representative would be able to exercise a veto over any proposed changes affecting “identity-forming characteristics of a club”, including the club’s name, its logo, colours, and reduction to safe-standing capacity in stadia. Further rule changes would oblige loss-making clubs, determined over a rolling three-year period, to pay compensation where the losses breach defined thresholds.
The new grandfathering conditions are only likely to affect Bayer Leverkusen and VfL Wolfsburg in the long-term. The owner of TSG Hoffenheim, Dietmar Hopp, has indicated that he will transfer the majority of his voting rights back to the parent club association in due course, upon which the club will be subject to the 50+1 rule like most other Bundesliga clubs – the grandfathering conditions would no longer apply to the club in that scenario.
“Although the proposals of the DFL deal mainly how to harmonise the exceptions to the 50+1 rule, they implicitly aim to keep the rule as it is. It cannot be excluded that club owners and investors contest the rule in front of German or even European courts,” Friedl said.
Out-Law News
09 Jun 2021