The following is a joint statement issued by the Board of Directors of Frome Town Holdings Ltd and Frome Town AFC Ltd in response to comments made and questions asked at the recent community engagement event held in October 2022.
Frome Town Football Club – financial background
People have rightly asked how the football club got into the financial position which led to a request for assistance from the Town Council to pay off the legal charge on the ground at Badgers Hill.
We set out here a summary of the events leading up to that situation. The directors of Frome Town Holdings Ltd (FTH Ltd) accept with the benefit of hindsight that things could have been handled better. It is also accepted that there were shortcomings in financial management and corporate governance before the new Board of Directors of Frome Town AFC Ltd (AFC Ltd) was constituted in Autumn 2020.
In March 2019 the Club was heavily in debt to a number of parties, with no visible means of repaying. They had also been approached by a company called Panache Design and Development (the development company) who were proposing a redevelopment of Badgers Hill which would provide brand new club facilities and some housing. The develop ment company wanted seed money to finance the planning process, but as part of the agreement they also agreed to pay the interest on the loan that had to be taken out to pay off the outstanding debts. Whilst a limited amount of work was done in respect of the planning process, this never progressed to a substantive stage, with various excuses being made.
To get the project moving £165,000 was borrowed by FTH Ltd from a company called Social Money Ltd, nearly £22,000 of this sum was retained by the lender as an arrangement fee. Almost £29,500 was used to pay off utility bills, approximately £13,00 in legal fees, with the balance of just under £100,000 going to the development company.
Subsequently Social Money Ltd refused to extend the loan at the end of the period and there was an urgent need to refinance the debt. To not do that could have resulted in the lender seizing the ground. The terms of the loan had punitive penalty clauses. A second lender, Goldchevron Ltd, was found who in June 2020 lent £250,000, of which close to £183,000 had to be paid to Social Money Ltd. Whilst some poor decisions were made during this period the directors believed that they were trying to act in the best interests of the club.
The property developer Panache Developments informed FTH Ltd in June 2021 that they were pulling out of the project, interest payments to Goldchevron continued to be met until October 2021. Under the terms of the agreement, when the property developer withdrew, a substantial sum of money should have been repaid to FTH Ltd. It never was, and the property developer was in effect insolvent. With hindsight it is clear that the property developer was unable to undertake this complex project. It was decided that costly legal action against them was pointless as there were no assets to seize.
In addition to the outstanding Goldchevron loan, the new board of AFC Ltd was informed that there were additional outstanding debts. In particular there was a very sizeable debt to HMRC in respect of unpaid PAYE contributions and VAT. How these debts were allowed to accrue has not been resolved. The Board of AFC Ltd settled the VAT debt and other debts totalling approximately £30,000. The Board entered into an arrangement with HMRC to repay the outstanding PAYE. These debt repayments are of the order of £50,000 and are factored into the Club’s budget and managed accordingly.
It was at this point, with the threat again of the ground being closed and sold, that the Board of AFC Ltd approached the Town Council for assistance. The Council have made it plain that they expect the emphasis to now be on forming a community club. The future is potentially bright with the formation of a Community Benefit Society and the introduction of new skills and experiences.
The Football Supporters’ Association has commented that the new board of AFC Ltd has stabilised the club, "The latest set of accounts from the Club show that the Club is operating efficiently and sustainably.” They have further stated that the current Board of the Club “have shown themselves to be more than capable of operating and administering the Club efficiently and on a sustainable footing”.
If you have any questions about the above statement please contact us via the website contact form or there will be an opportunity to ask questions at the Fans Forum event on the 21st December. To register for our Fans Forum, please follow the link below.