Ercüment Erdem Att. Tuna Colgar

Corporatization of Football Clubs

April 2019

Introduction

Many of the football clubs operating in Turkey still continue their activities under the names of associations. The budget structure and the level of income and expenditures of the football clubs, particularly the ones that operate in the Turkish Premier League and Turkey League 1, have exceeded the level of management under the structure of associations. With corporatization of football clubs having the status of association, it is aimed to strengthen the financial structure of football clubs, and to ensure that these football clubs operate in a modern and efficient manner.

The corporatization of football clubs having the status of association provides advantages in two main areas, those being economic and structural.

Economic Benefits

With joint-stock company structuring, which enables the trade to be made more flexible and effective than the commercial activities of the associations through commercial enterprises, both fields of activity may be expanded and income diversity is ensured. Due to extensive regulations of the Articles of Association of the joint stock company to be established, rather than the limitations of the association statutes which are very difficult to change, the operation of the activities regulated in the Articles of Association that are allocated to future activities will provide a great advantage in terms of income diversity and the evaluation of revenues as investments.

Other advantages of joint stock company structuring are investment and financing facilities. Unlike the structure of associations, a joint-stock company has the ability to invest and to finance its investments as it is a profit-making structure. A football club, moving from the structure of association to the corporate structure, will have the opportunity to provide greater financing to football by evaluating its diversified income as an investment, rather than strictly football, for a certain period of time.

The credibility of football clubs, which will diversify their revenues through transferring to the corporate structure, notably increases. With the diversification of revenues and the augmentation of guarantee instruments, the loan facility opportunities to be obtained from banks increase, and their conditions become more appropriate. Transparency is both one of the most important conditions of credibility, and one of the most important results. The transparency of football clubs, which increases their credibility, will also be inevitable.

Another advantage of the corporatization of football club, whose revenues, investments, credibility and transparency increase, is the increase in the sponsorship diversity at the same ratio. A huge step will be taken towards achieving the success of the football branch, which is the main goal of the football club, increases their sponsorship revenues, and provides diversity in advertising revenues.

After the completion of the corporatization, another step that will carry the club further is public offering. Since there will be no public offering in the structure of association, the first step will be taken for a public offering, which will result in substantial incomes for the clubs through the process of incorporation.

Structural Advantages

The management mechanisms of the associations governed by the charters are also structured as stated in the Law of Associations and in their charters. The faster and more efficient operation of these management mechanisms is also one of the biggest advantages of corporatization. The decision-making mechanisms of the football clubs, which fall out of the scope of the Law of Associations and enter into the scope of the Commercial Code, and which start to be managed through the articles of association and contracts rather than charters, will be accelerated, and their efficiency will increase.

When the gathering of the management, the distribution of duties, and the use of powers in the football clubs that have begun management within corporate structure, are made in accordance with the institutionalization criteria, efficiency and sustainability in management will also be able to be taken to the highest levels.

The corporatization of football clubs and the professionalization in management will also be increased. The management on a voluntary basis, which is frequently seen in football club management at the present time, will have a more efficient and sustainable management structure with the opportunity to professionalize.

The institutionalization of football clubs through corporatization, and their management by professional managers, will also reduce the responsibilities of the board members. Each manager's use of management powers and taking responsibility in their field of expertise is also one of the advantages that can be achieved with corporatization.

In the process of corporatization, instead of forming a single company, it will be possible to separate the activities and provide advantages for the balance of income and expenses by establishing a company to which the football branch will be transferred, and a separate subsidiary will be established to carry out commercial activities.

Corporatization Transactions

The transfer of a football branch to a company is regulated in Article 76/5 of the Statute of Turkish Football Federation ("Statute"), as follows: “A football club may transfer its football branch to a joint stock company established in accordance with the relevant laws and regulations. A club that restructures itself as a commercial organization may not transfer its registration to another city. In such transfers, the promotion, strengthening and interests of the football game have priority.” According to this statement, upon transfer of the football branch, all the actives and passives of the branch must be taken over together.

In addition, Article 15/2 (g) of the Regulations on the Registration of Football Clubs, issued by the Turkish Football Federation, regulates the necessity to submit "general assembly decisions on the acquisition of the association's football branch with all actives and passives, and regarding the authorization of the Board of Directors for concluding a transfer contract with the association and the trade registry gazette where these decisions are published," for the registration of the football branch on behalf of the joint stock company.

Therefore, according to the aforementioned legislative arrangements, the association that aims to corporatize its football branch should convene a general assembly, and pass the decision of corporatization with the majority specified in its charter. At this stage, the structure of the corporatization is important. In the general assembly, it is necessary to decide on whether the association will be a shareholder in the joint stock company where the football branch is to be transferred. In addition to the decision of corporatization made by the General Assembly, it should be decided to give authorization to the board of directors of the association for the execution and completion of the corporatization transactions.

The association that has decided on corporatization in its General Assembly, and the joint stock company established for this purpose, must apply to the Turkish Football Federation after signing a transfer agreement on the transfer of football branch, and attaching a transfer balance sheet, together with all of the other necessary documents.

The Turkish Football Federation will decide on the application in the meeting of the board of directors.

Following the Turkish Football Federation's consent to the corporatization, the transfer of the football branch to the joint stock company from the association is completed. Following the transfer, the football team's logo, brand, and name rights, as well as all of the contracts related to the football branch, must be transferred from the association to the company. Furthermore, in order to prevent any loss of rights, the notifications regarding the transfer of the football branch from the association to the company should be completed without delay.

Conclusion

Management of the administrative and financial structures of football clubs in a professional and coherent manner, achieving a modern and revenue-enhancing corporate structure, and having a dynamic functioning with rapid decision-making mechanisms, are the achievements that can be gained through corporatization. In today's financial structure, it is inevitable for football clubs to put corporatization on their agendas as soon as possible in order to enter into more successful processes with these achievements.