A statement from the independent Club Financial Reporting Unit:
Reading Football Club will be deducted six points from the 2022/23 Championship table, after the Club admitted that it has failed to comply with the budget restrictions imposed, following a previous breach of the EFL’s Profitability and Sustainability Rules (P&S).
The points deduction is an activation of a suspended six-point penalty, which was set out in the terms of an Agreed Decision between Reading and the EFL in November 2021.
The EFL has been notified and will apply the sanction with immediate effect.
This is the first time a Club in the EFL has been subject to a review by the newly formed independent Club Financial Review Panel (CFRP), chaired by Christopher Quinlan KC, which considers matters put forward by the EFL’s independent Club Financial Reporting Unit (CFRU). The entire process is independent of the EFL Board and seeks to ensure EFL Clubs’ compliance with relevant financial regulations.
After reviewing information submitted by Reading in March 2023, it was determined the Club has breached the original Agreed Decision in two ways:
I. The Club is relying on a ‘related party transaction’ in its P&S Submissions by seeking to include profit from a proposed sale of an investment to an entity controlled by the Club’s owner. This sale was not completed at the time of the Club’s P&S submissions on 1 March 2023. This is a breach of the original Agreed Decision, which makes clear that Reading needs to be P&S compliant without relying on player sales or related party transactions conducted after 1 March 2023. The Club has agreed it would not be compliant without the proposed transaction.
II. The Club has not generated profit required from player sales in line with the budget which formed part of the original Agreed Decision.
The Club has admitted to the two breaches of the original agreement with the EFL and has agreed to this six-point points deduction by way of an Agreed Decision with the CFRU. The Panel has ratified that decision. Both decisions are available here.
In addition, the Club will be required to agree a new budget with the independent Club Financial Reporting Unit for the 2023/24 season aimed at ensuring future compliance with the regulations. This will be finalised once the Club’s full P&S Review has been completed for the current season.
Director of the independent Club Financial Reporting Unit, John Potterill-Tilney said:
“I would like to thank the Club for its transparency and cooperation during this process and the Club Financial Review Panel for helping us deliver an agreed sanction in just over one month since submissions were provided.
“This Decision and sanction, as confirmed by the Club Financial Review Panel in a short time frame, within the relevant season, will now give the Club clarity to plan for the period ahead, on and off the pitch.
“The EFL’s regulations establish the CFRP as an independent panel with the responsibility of reviewing the financial performance of EFL Clubs. This decision, the first of the Panel under the new Regulations, confirms its determination that Reading FC breached the terms of an earlier Agreed Decision, and the approval of the sanctions that follow from those breaches.”