Chelsea FC needs Russian oligarchRoman Abramovich to sell the club quickly.- If not, there is a risk it could fall into insolvency, a leading
sports lawyer told Insider.
Chelsea FC could be insolvent within weeks if the club isn't sold, says a top sports lawyer based in the United Kingdom.
The English Premier League club was put up for sale by current owner Roman Abramovich, a billionaire
Sanctions imposed on Abramovich and Chelsea by the UK government, however, complicated the proposed sale.
The 55-year-old owner has had his assets frozen and has been barred from making transactions with UK citizens and businesses.
Chelsea has been barred from generating from revenue through ticket and merchandise sales, cannot sign new players or extend the contract of current players, and can only pay up to $26,000 per game for travel costs.
Despite the sanctions, the UK government has said it remains open to Abramovich selling the club, so long as the profits do not go to him and a suitable buyer can be found.
Chelsea has set a deadline of Friday for interested parties to make a bid, with Swiss billionaire Hansjörg Wyss and British property magnate Nick Candy among those expected to submit offers.
Stephen Taylor Heath, Head of Sports Law at UK top 100 law firm JMW Solicitors, told Insider that securing a quick sale, though complicated, is essential for the club to avoid it falling into insolvency, which is when a company's debts are greater than the value of its assets and income.
"The club is in a situation where its got a massive wage bill, but is not allowed to enter into contracts that generate revenue," said Taylor Heath. "It's supposed to be living on the revenue that it's already accumulated.
"If the sale — which would enable any new purchasers to then inject money into the club — does not go through, then it will be in an insolvency scenario with an administrator being appointed, who would oversee the sale in the same way that an administrator is overseeing the sale of Derby County, for example."
Championship club Derby, which is managed by Manchester United and England legend Wayne Rooney, fell into administration in September 2021, resulting in it being docked 21 points by the English Football League (EFL).
Administrators are yet to find a buyer, leading to fears that the club is edging closer towards liquidation.
"It's a bit of a crazy situation," continued Taylor Heath. "Because if you have financial restrictions on you, such as if you're in an administration type situation, then normally those restrictions are only with regard to your outgoings.
"So you've got to basically tighten the purse strings in terms of money, because that money needs to be available for potential creditors. But you wouldn't have restrictions on the revenues that you can receive, so an administrator would normally do everything they possibly can to get as much money as possible."
Derby, for example, recently sold Polish international winger Kamil Jóźwiak to MLS side Charlotte FC for $2.6 million in order to raise money to help the club continue to operate.
Chelsea does not have this option right now.
"Here, you've got a situation where there's restrictions on what Chelsea can spend money and how Chelsea can generate revenue," said Taylor Heath. "And then, the club has also got the additional complicating factor of major sponsors suspending their sponsorship agreements because of the association with Abramovich."
Last week, Chelsea's shirt sponsor, Three, a UK cellular network, asked to have its branding removed over the club's association with Abramovich.
Asked how high are the chances Chelsea could become insolvent, Taylor Heath said: "If [sponsorship] revenue is suspended as well, then it's quite obvious that the club would very quickly be in a difficult financial position."