Monday, 17 June 2013

What happen if Malaysian professional football clubs insolvent?

Questionnaires emailed by FIFPro to me. 
All answers are based on my opinion. Happy reading. 

With the effects of the world wide economic crises still palpable, professional football clubs are finding it more and more difficult to stay solvent. And while the rules regarding solvency are becoming more strict (for example, the UEFA Financial Fair Play Regulations that come into full effect in 2014), it should not be the players who suffer the consequences.

The insolvency of professional football clubs in Malaysia?

Malaysia is a federal constitutional elective monarchy. Sports is under the concurrent list of State and Federal legislation. All sports association must register to Sports Development Act 1997 to do sporting activities. The Football Association of Malaysia (FAM) is registered association under Sports Development Act 1997 that enable her to receive annual fund and financial grant from the Malaysian government. The Malaysian FA (FAM) is not a body corporation under the Companies Act 1965; does not have a corporate legal entity and thus the issue of insolvency and winding up does not arise. The president of the Association is the HRH Sultan Haji Ahmad Shah who always continuously giving high morale and financial support. As a private body, the relationship of the members (players and administrators - member affiliates / clubs) is based on contractual relationship.

However, the issues of non-payment of players’ financial welfare are seriously discussed. Most of the clubs failed to settle their debts towards players’ financial welfare totalling about RM1.2 million – RM833, 793 for EPF, RM101,526 (Socso) and RM365,895 (income tax) - 2012.

The imposition of sanction is well illustrated in the FAM Regulations, however the execution of the regulations is not strictly adhered. Since the insolvency law does not apply, the appointed sports commissioner will determine the financial status of national association through its Annual Financial Reports.

What are the possible stages of insolvency in Malaysia?

Complaint and termination of contract unilaterally by player:
In the event that clubs do not pay players' wages or failed to make contributions to the Employees Provident Fund (EPF) and Social Security Organisation (SOCSO), or fail to pay regular income tax to the Inland Revenue Board for a minimum of one (1) month or player complain to the FAM or upon investigated by FAM and found to be true, then the player may terminate the Contract unilaterally and inform in writing to the FAM.

Clubs were instructed to pay a minimum of one (1) month salary for every player or any higher amount as determined by the FAM Status Players Committee.Thefines must be paid by the club within 30 days of the date of the letter is received. If that fails, the FAM can cut financial provision, club competition entries deposits, cash prizes or any money kept by FAM to be paid directly to the players.

If clubs still fail to pay within the 30 days or the financial balance in the FAM is not enough, then the participation of the club may be disqualified from any competitions. If the 30 days is beyond the season, the club is prohibited to join the competition in the next season until the clubs fully settle the payment.

The law of insolvency does not apply here and FAM prefers to apply self-regulation method.

What are the consequences of insolvency, in accordance with the Malaysian law? 

This does not applicable to clubs– since clubs are unincorporated association registered under the Sports Act and not Companies Act 1965. However, the law allows players to sue the executive committee on the basis of representative action and not a derivative action.

For players, in ordinary insolvency cases, employees have right against the company as creditor. In the case of non-payment of wages, players may terminate their contract unilaterally and join other clubs.

Is an insolvent club allowed to remain in competition, and thus keep playing official matches?

In the FAM Transfer Regulation, clubs are restrained from participating in any competition / league organized by the FAM. If clubs fails to pay more than 25% salary, clubs will be suspended automatically for the next season. 

Is there a possibility for the federation to impose sanctions on club in case of prolonged insolvency? (for example: fines, point-deduction, transfer-bans, suspension or forced relegation)

YES. The task is given to Players Status Committee to hold any transfer from and to problematic clubs.


Are there other securities available for players of insolvent football clubs? 

No. The Executive may borrow money in his personal capacity to ensure his club / team is not suspended.

The solution: The Royal Highness normally gives his guarantee to the club to manage football. However, only the rights of club are protected and not the player. The foreign player may request the same (guarantee letter) before signing of contract.

Is there in your country a system of financial fair play, more or less similar to the UEFA Financial Fair Play Regulations, in action?

No. However in order to ensure financial stability in the transfer rules, the celling price of transfer (local) is limited to RM250,000 only.

If so, what are the results of the system?

Fair to all competing clubs - the rich club may transfer (in and out) equal number of best players. Player will receive more salary  (the offer is described in the salary appendix and not the transfer)


The price of professionalism status is still lower in community’s perception. Agent not interested to be an agent. Sports agent does not represent some foreign players. The result is worst when there is suspension and termination.

If not, are there other mechanisms in operation that stimulate clubs to have financial good governance?

In Malaysia, the transparency is the most precious solution. Everything should be documented to avoid bribery and corruption. The members must submit their Financial Reports annually in the Congress and the same to the Sports Commissioner for records. The double layers inspection is done at both national level (one with respective body with some interest to protects) and non-profit governmental body to check the balance of good governance. The Malaysian football organization is now working closely to Malaysian Anti Corruption Agency (MACA) to eradicate the corruption problem, thus ensure fair play among all competing clubs.

The second opinion is to have an independent body for auditing purposes. The report must be submitted to the Players’ representative and national (and international) association.

The position of players at insolvent clubs

When an employer becomes insolvent, it are often the employees (in this case the players) who receive their remuneration last. For us, this is not a situation we prefer.

Possibilities to improve the position of players under contract at an insolvent club? If so, which?

Yes. It is a clear breach of contract. The management observes seriously about their rights against the players. The head coach for example may recommend termination if players not perform. The same right goes to the player. In the situation the management unable to perform his duty to pay, the contract is frustrated, thus both parties are no more in relation.

However, it is very difficult to incorporated the clause ‘if the club insolvent, the players will receive this and that…”. Applying the concept of nemo dat, the player has duty to investigate (through agent) the financial status of the player before signing of the contract. If he is not sure of the financial status, what he needs is a guarantee letter of at least 6 months salary.

The player may sue in a representation action against the Executive Committee of the Association.

Is a player under contract with an insolvent club allowed to leave the club without a transfer fee?

Yes. He may terminate the contract unilaterally and choose his new club. He just needs to write / inform the national association about this.
Is that player allowed to leave without training compensation or solidarity contribution to be paid for him?

Player may apply for guarantees from the previous clubs. The compensation is based on reasonable quantum meruit depending on his previous performance and competition. The new club will pay the said amount.

Will the federation, in case of an international transfer, issue an International Transfer Certificate without problems?

Yes. The Players Status Committee may use their discretionary power to issue ITC for international transfer.

Thank you.