The Devon club, which in October entered voluntary administration to sort out its parlous finances, is suing the Nationwide Conference for “unfairly prejudicial” treatment over the onerous obligation to players and the severity of a 12-point deduction — the consequence of administration. The sporting sanction was imposed by the Conference after Exeter agreed a Corporate Voluntary Arrangement (CVA) with their creditors to repay them 10p in the pound over the next three years. The move is expected to cut the club’s debt from about £4.8 million to £750,000.

New rules agreed by the Football League over the summer will from next season dock points from clubs in administration as punishment for any competitive advantage they may have gained from clearing their debts. The Conference has adopted the rule a season early. The preliminary hearing at Bristol County Court on Thursday will also receive objections from the Inland Revenue to the rule granting players “super-creditor” status.

Until September, the taxman was granted that preferential treatment, but lost it when the Government changed the law to encourage greater entrepreneurism in the United Kingdom. Exeter’s insolvency is the first football one to be legally challenged by the Inland Revenue. The Revenue said that it did not comment on individual cases but added it would be “completely wrong to imply that we are targeting a business. All we care about is if they pay the right amount of tax.”

If successful, Exeter’s case would set an important precedent for clubs considering administration but who are worried that they would still not afford the cost of paying off their players. It could encourage more football insolvencies. Stephen Allinson, the insolvency expert handling Exeter’s case, said: “It’s more than a fight about Exeter City. It’s going to have an effect throughout football.”

However, there would be a fierce objection from the Professional Footballers’ Association, which has the power to block clubs from exiting administration. The union is adamant that clubs have to honour player contracts in full. The FA is tomorrow expected to hear an appeal by Exeter against the 12-point deduction imposed by the Conference. It is the first challenge to the new sporting sanction rule.

FOOTBALL should have a code of corporate governance after a survey of English clubs found that those floated on the London Stock Exchange had poorer standards of practice than listed companies in all business sectors, a report has concluded.

The State of the Game 2003, launched on Friday by Birkbeck’s Football Governance Research Centre, said that most football clubs are not prepared to evaluate or manage the risks facing them. Less than half admitted to their board of directors approving their three-year business plans while only 26 per cent said they carried out risk assessment studies.

Joe McLean, a partner in Grant Thornton’s corporate recovery practice, said: “The football industry, perhaps more than any other, needs to produce and adhere to a strict code of behaviour. As many clubs continue to live beyond their means, it is essential for the authorities to set some clear and unavoidable rules.” These could include a requirement to disclose accounts and prove solvency before the start of each season.

However, Kate Barker, the new chair of the FA’s financial advisory committee, cautioned against statutory regulation in football. “It would be a draconian solution and quite restrictive,” she said.

FOOTBALL will bring a smile to the face of some businessmen next year, particularly in the media industry. The European Championship finals in Portugal next summer are expected to help to generate about £1 billion in global television advertising revenues, according to Zenith Media, the media buying agency. Coupled with the Olympic Games in Athens, the company is predicting that Euro 2004 will encourage a rise of 5 per cent in consumer spending.

ashling.oconnor@thetimes.co.uk

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