Sheffield Wednesday facing administration threat - Here’s what happened to the last 3 EFL clubs who suffered same fate | OneFootball

Sheffield Wednesday are set to enter administration, but they're not the first EFL club to do so; here's what happened to the last three who did so.

With the threat of a winding-up petition from HMRC hanging over their head, Sheffield Wednesday are set to fall into administration, so here's what happened to the last three EFL clubs to suffer this fate.

Rumours are circling that Sheffield Wednesday are set to fall into administration. HMRC have been reported as being ready to issue a winding-up petition against the club, and entering into administration is a protection against that going further. It's a tactic that has been used repeatedly by football clubs over the years, and normally with reasonably successful results.

The concept of administration is known within the industry as an 'insolvency event'. First codified by the Insolvency Act 1986, its underlying principle is to protect and renovate businesses in serious financial trouble as a going concern, either through substantial restructuring or a sale of the business.

When a club enters into administration, they are, in legal terms, making a formal admission that they are unable to meet their day-to-day financial obligations as and when they are due; it's an admission that they are formally insolvent. What administration isn't is as important as what it is. It isn't an easy route out of financial difficulties, and it isn't a magic bullet that wipes a club's debts clean.

The 'administrator' is normally a licensed insolvency practitioner, and their first obligation is to the club's creditors. They will attempt to restructure the business in such a way that makes it viable as an ongoing concern, usually while trying to seek a buyer for the club.

Under such circumstances, the club's debts will be dealt with through a Company Voluntary Arrangement (CVA). These make an offer, based on realistic forecasts of the club's future revenues, to clear their debts on a pennies-in-pound basis. A creditor's meeting is then held to discuss the offer, and a vote is taken on whether to agree the terms or not.

The strength of each vote is determined by how much a creditor is owed. Without the consent of at least 75% (by value) of the creditors included as part of the proposal, the CVA will not be able to be implemented and will be deemed to have 'failed'. An agreed CVA is the preferred option to exit administration of the game's governing bodies, and exiting administration without one in place will likely lead to further sanctions, on top of the minimum twelve-point deduction - increased from ten in 2015 - that is applied upon entering administration in the first place.

Such action is usually taken as a last resort, where the only likely alternative conclusion is liquidation of the business. It's also important to remember that some debts are excluded from the process and have to be paid in full. Secured debts - usually debts secured against property - are not normally included, and EFL rules state that football debts - those owed to players, clubs etc - are also required to be excluded.

Since December 2020, HMRC have had 'secondary preferential creditor' status. This means that they are preferred creditors in relation to certain types of taxes - in this case, the taxes collected by a club on their behalf, such as PAYE and VAT. HMRC remain unsecured creditors for corporation tax and any other taxes owed directly by a company.

To establish what this means in practice, let's take a look at the last three EFL clubs to have entered into this process and see what happened to them. It's a mixed bag, and it's unlikely that Sheffield Wednesday's path will exactly follow any of these.

Derby County

Derby entered into administration in September 2021 and exited it in June 2022 under new ownership. How the Rams came to end up in this condition is a long and complex story, but the long, tall and short of it was years over overspending by the club's then-owner Mel Morris.

The club's problems were compounded by their attempts to circumvent PSR sanction by the governing bodies. Morris sold Pride Park to himself for £80 million to try and balance the books, but the EFL charged them with breaches regardless because the stadium had been listed as worth half that - £41 million - on the club's books. Ironically, Dejphon Chansiri carried out the same manoeuvre with Sheffield Wednesday.

There was also an argument over the way in which Derby recorded the value of their players on the company accounts, which was initially found in Derby's favour before being overturned upon appeal. These protracted cases harmed the prospect of much-needed investment into the club, and with bids to buy the club having failed after they were unable to demonstrate that they had the funds to complete, the club finally collapsed into administration in September 2021, receiving a 12-point deduction for their troubles.

The sale of the club to David Clowes' property group the following June, with Clowes also having reached agreement to buy Pride Park. It was later confirmed that this had cost £55 million. Derby were relegated from the Championship at the end of the 2021-22 season in 23rd place, and remained in League One for two seasons before getting promoted back through the play-offs.

Bury

Bury's expulsion from the EFL in August 2019 sent shockwaves through the entire game. The club had been promoted from League Two off the back of completely unsustainable spending at the end of the 2018-19 season, but never got to play a single game in League One the following season.

Businessman Steve Dale bought the club for £1 from former owner Stewart Day in December 2018, but the following April Dale admitted that the club's financial problems were "far in excess" of what he'd understood when he took over, and he placed them up for sale. This came a couple of weeks after a winding-up petition was issued by a former member of the club's coaching staff over unpaid wages.

A CVA was approved that summer, offering unsecured creditors 25p in the pound for what they were owed, and the winding-up petition was dismissed. But the EFL had questions. They wanted to know where the money was coming from to actually pay this amount, and when the club were unable to substantiate it - under a threat of potential expulsion from the League - their league matches for the start of the 2019-20 season were suspended.

On the 8th August 2019, the club was given 14 days to provide a plan to pay off their creditors. There followed a flurry of activity, including a bid to buy the club that was accepted by Dale, but when this also collapsed the club was expelled from the EFL on the 27th August, the first to suffer this fate since Maidstone United in 1992.

A new club, Bury AFC, was formed, but a schism between those who wanted to try and keep the old club alive and those who felt it was best to start anew led to considerable acrimony among the fan base. Following a second spell in administration, the clubs pushed back together by a businessman who wanted to reconcile these two warring factions under one club again.

The reconciliation did finally happen, and at the end of the 2024-25 season, Bury were champions of the Premier Division of the North West Counties League Premier Division, the fifth level of the non-league game. At the time of writing, they are in second place in the Northern Premier League West Division. Their average home attendance so far this season is 3,229, higher than six clubs in League Two, which is four divisions above them.

Wigan Athletic

The case of Wigan Athletic's 2020 administration is one of the strangest in the history of the game in this country. Former benefactor Dave Whelan had sold the club at the end of the 2017-18 season to the Hong Kong-based International Entertainment Corporation (IEC) for £22 million.

On the 4th June 2020, IEC sold their majority shareholding to the Hong Kong-based Next Leader Fund for £17.5 million. So far, so normal. But what happened next was very much not normal. On the 1st July, less than a month after the sale had taken place, it was confirmed that Wigan had been put into administration after Next Leader Fund's head Au Yeung failed to put the money he'd promised into the club.

All hell broke loose. Questions were asked in parliament, as the administrators, Begbies Taylor, promised an investigation into how on earth this could possibly have happened. The EFL chairman Rick Parry, was secretly filmed talking about betting on the club being relegated that season - they were well clear of relegation in the Championship at the time of the sale, but the points deduction ended up sending them down - and without a buyer, there were serious doubts over whether the club would be allowed to start the 2020-21 season without an owner.

This was agreed, but it took a long time to get the club under new ownership. A sale of the club was finally agreed to Phoenix 2021 Ltd, led by the Bahrainian businessmen Abdulrahman Al-Jasmi and Talal Mubarak al-Hammad, in March 2021. Wigan avoided a second successive relegation by the skin of their teeth at the end of 2020-21, and won the League One title the following season. Joint administrator Gerald Krasner said afterwards: "Every administration I have been involved in had its peculiarities, but this is a first. Four weeks is a record that will stand for some time."

But the fun didn't stop there. The new owners also ran into financial difficulties following promotion. In March 2023, Wigan reported a £7.7m loss for the financial year, and wages were paid late due to ‘liquidity issues’. The club received a points deduction, and after Al-Jasmi missed a 24th May EFL deadline to put 125% of the club's forecasted monthly wage bill into an account, it was confirmed that the Latics - who'd been relegated from the Championship again at the end of the 2022-23 season in bottom place - would start the 2023-24 season on minus eight points. The club was sold again, this time to the Wigan Warriors Rugby League club co-owner Mike Hannon, in June 2023.