The joint-stock sports company is a type of commercial company conceived for professional sports clubs. It was introduced pursuant to the Sports Law 10/1990, of 15th October, as a solution to the high level of debt of some football clubs, by allowing for more financing options. This is the type of company formation which clubs participating in professional competitions must have, with the exception of four clubs in the first division of the Spanish football league, who have been allowed to continue to be private sports clubs on the basis of their good financial performance when this law entered into force: Real Madrid, Athletic de Bilbao, FC Barcelona and Osasuna, which today continue to be private sports clubs.
This type of company has recently generated media attention due to the delicate financial situation in which FC Barcelona finds itself, with debt of around 1,500 million Euros at the close of the 2021/2022 financial year, which paves the way to considering the possible transformation of the club into a joint-stock sports company with the aim of dealing with these debts.
The conversion of FC Barcelona into a joint-stock sports company would imply substantial changes in the club, which, following the prior agreement with the partners, would change from being a private non-profit sports association of natural persons to being a profit-making capital company, in which the partners would lose voting rights in the decisions of the company, which would be taken by the shareholders, foreseeably, new investors who would contribute the necessary capital for flushing out the debt and financially revitalising the entity to cover decisive projects such as works on the stadium and investment in players.
With regard to the financing of the entity, under the umbrella of the joint-stock sports company, the option of being listed on the stock exchange would come about, and likewise the initial entrance of a large investor via the subscription of newly issued shares could be contemplated, which is an option which is increasingly common in the world of football; this operation would imply a quick and significant financial injection which would allow the settlement of debts, and at the same time, the possibility of having a high sporting budget to compete at the highest level, examples of this being clubs such as Manchester City or Paris Saint-Germain. Normally, the transformation operation is carried out once the entry of the partner of reference or controlling partner has been negotiated. Another option would be adopting the hybrid model used by Bayern Munich, in which partners hold 51% of shares in the club, while the remaining 49% is distributed among capitalist investors with roots in the Bavaria region.
The conversion of a club into a joint-stock sports company would also mean a change in the form of directing the entity, which would be governed by a board of directors, setting aside the current system, in which the partners decide, via a General Assembly, the running of the club.
In order to avoid transformation into a joint-stock sports company, the management of FC Barcelona has attempted to improve the financial situation in the short term through the renegotiation of long-term debt, the sale of 25% of television rights, and the sale of 24.5% of “Barça Studios”, the audio-visual production company and digital business of the club.
The club has also opted for trying to reverse the current situation via an elevated investment in the transfer market, with the purpose of reinforcing the brand and obtaining higher income based upon a good sporting performance. Nevertheless, FC Barcelona is not achieving the expected sporting results, having been eliminated in the groups phase of the Champions League, which may mean a reduction in the appeal of the brand in relation to present and future advertisers and investors.
It remains to be seen if this club with a long and successful sporting history, of great international media interest, and with competitive players, will be able to overcome the current negative financial situation without changing its nature as a sporting club, or whether it will follow the path of other clubs with similar financial situations, and will eventually be converted into a joint-stock sports company.
Oscar Vilá
Vilá Abogados
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4th of November 2022
