Southampton FC was recently penalized 10 points because they had become insolvent. This is a standard penalty that the Football League imposes on clubs who cannot sustain liquidity. The impact is usually crippling – it is incredibly difficult to avoid relegation to the division below as a result of this penalty.

Normally, I would have little or no objection to this, as it is a duty of any team to ensure financial stability and the protection of long-term well being. The amount of money that is spent in football is ludicrous. This is worsened by the fact that clubs are spending money that they do not actually have. If you spend recklessly (through either transfer fees of players or salaries) and become bankrupt for it, then you get what you deserve in my opinion.

However, something about the Southampton scenario does not smell right. The club is operated by a management company. This is the subsidiary of a parent company. From what I gather, it is the parent company that has gone insolvent, NOT the subsidiary. In English law, every company is considered a separate legal entity. The general rule is that subsidiary companies are not agents of their parent companies. These rules all stem from a case that emerged some two centuries ago – Salomon v Salomon.

With this in mind, I cannot see how the Football League has come to the conclusion it has. In order to impose this penalty, it has basically circumvented the law by claiming that the management company (subsidiary company) and the parent company “are inextricably linked as one economic entity”. However there are very limited circumstances in which the ‘corporate veil’ of incorporation can be pierced and traditionally the courts view these circumstances restrictively and with much caution.

The comments from Southampton FC seem to suggest that an official appeal will be launched and I suspect it will be on the basis that the penalty is illegal for the reasons discussed above:

“We are of the opinion that an incorrect conclusion has been reached. The football regulations do not apply to the circumstances surrounding Southampton Football Club. This is a view shared by the lawyers and advisers to both the club and the administrators.”

However, it is too little too late as relegation to ‘League One’ was confirmed last weekend, meaning the club will be commencing the 2009-2010 season with a 10 point deduction.

More and more clubs are being caught by the overspending that occurs in football. Southampton join Leeds United (Champions League Semi-Finalists in 2001), Luton Town and AFC Bournemouth in the growing list of teams to go bankrupt. The only solution to this ongoing problem is that teams must stop spending beyond their means. The evidence shows that if they continue to spend money they do not have then it will come back to bite them, hard.

CAA only recently jumped into the field of representing soccer players in 2007, when David Beckham came to the U.S. CAA was in association with Beckham’s Manager, Simon Fuller, and was in charge of international marketing for Beckham.  Since Beckham came to CAA, one of the English Premiere Leagues top teams, Chelsea FC, has also become a CAA client.  Chelsea and others are looking to break into the growing American soccer scene.

Gestifute was founded in 1996 by FIFA agent Jorge Mendes.  Mendes is now in charge of the many high profile clients and coaches.  He is looking to find the talented youth players in Europe and is now expanding to America.  Gestifute also represents player and coaches like Ricardo Carvalho (Chelsea/Portuguese National team), Anderson (Manchester United/Brazilian National Team), Nani (Manchester United/Portuguese National Team), Deco (Chelsea FC/Portuguese National Team), Ricardo Quaresma (FC Porto/ Portuguese National Team), and 2002 World Cup-winning head coach Luiz Felipe Scolari (Chelsea FC).

This is a great thing for American soccer players and fans.  It shows that American soccer is finally accepted overseas and that foreign teams are looking for talented American soccer players.  Soccer is seen as a global sport that has been played all over the world for centuries, but America seemed to be late in catching on.  Football, not Futbol, has been the sport Americans are known for around the world, but that is beginning to change.  The emergence of Major League Soccer (MLS), an American soccer league, has now given domestic and foreign players an arena to play in.  Many great Americans develop in the MLS and others are now playing at great clubs overseas (Beasley, McBride, Onyewu, Donovan did but went back to the MLS).

Before the last World Cup, the USA was ranked as high as 8th in the World. The USA is now ranked 30th in the world (as of the most current FIFA rankings last month), and many young US players are playing overseas.  I witnessed this first hand as one of my Roanoke Star Premiere teammates, Danny Karbassiyoon, went abroad to London and played for Arsenal FC after high school.  Danny was nasty and had the ability to play at any level, being one of the first American born players at Arsenal.  He is now the head scout for Arsenal in the US.

The MLS may have salaries that are a lot less than foreign leagues, but the money will only increase as soccer grows in America.  The EPL and other foreign leagues pay soccer players just as much as the NFL pays its players.  It would certainly be worthwhile for American agencies to invest in soccer, however an agency would need international “connections” overseas to do so.  The partnership between CAA, one of America’s leading sports/ entertainment agencies, and Gestifute might be the spark that ignites the fire.

The merger between CAA and Gestifute proves to solidify the statement that American soccer is growing.  The international community is now starting to recognize American players and accepting them and encouraging them to play internationally.  With the arrival of Beckham, the MLS has picked up and gained fans and approval by other players.  This merger is a great sign for soccer in America.  I expect other American sports and entertainment agencies to add soccer to their sports divisions.  It is not only marketable overseas, as Americans are catching on and the amount of talented American soccer players will only increase.