Unravelling the Red Tape – Mirandes and Lugo Pay the Price of Success

red-tape

It has been reported recently that the Spanish Second Division teams: CD Mirandes and CD Lugo, may be expelled from the Division for failing to meet financial obligations. So, exactly what have these clubs done wrong? The answer of course is nothing. Both teams have existed happily in the lower leagues for many years and have been well-run with little or no debt; they have formed good relationships with local sponsors and businesses and have enjoyed strong support form the local communities. So why are they now on the verge of being punished so harshly?

The answer is that they have become victims of their own success. The transition from part-time minnows to potential La Liga competitors is a massive one for these clubs and in order to play with the big boys they must hatchet their way through a mass of Government red-tape. To compete for a second season in the division they must first change the legal structure of their clubs.

In 1990, the Spanish authorities sought to adopt a common economic and legal model for all sporting teams competing at the highest level. The aim was to allow the clubs to participate in share trading on the stock market, establish a clear and transparent administrative control system over ownership issues, and to ensure the interests of the public and future investors are protected. To conform to these guidelines football clubs that are not already registered must convert to a Sociedad Anónima Deportiva (SAD). In order to do this the clubs must cover the administration costs for the conversion. Because Mirandes and Lugo are new to this level of football (Lugo reached the Segunda in 1992 but were relegated after one season), they have never been converted to an SAD.

For a small team like CD Mirandes, who have been operating on a budget of 500,000 euros a year, this means they have to raise nearly 2.5 million euros in order to pay for the conversion. This money is demanded by the Governments Sports Council (Consejo Superior de Deportes, CSD) and is non-negotiable – unless of course you happen to be Athletic Club Bilbao, FC Barcelona, Real Madrid or Osasuna, who were allowed to retain their non-commercial statuses for historical reasons.

The implications of non-payment are clear; the teams will be relegated from the Segunda Division. The President of Lugo, José Bouso, declared that: “The club is optimistic about completing the conversion.” However. they have received a 900,000 euro contribution from the council, and a further 600,000 euros from the City of Lugo, leaving just under one million euros to pay.

CD Mirandes are finding things a bit more difficult as they have received no regional or provincial support and need to find the money themselves. So far they have raised only 15% of the amount needed and have until 30th June to declare their status.

The situation could deter potential investors from looking at smaller non-SAD clubs, as any progress on the pitch could lead to an unwanted encounter with bureaucracy.

(The expulsion of CD Guadalajara from the Segunda Division amid doubts over their SAD status is currently in the middle of a legal process)

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