INSOLVENCY MAKES FOOTBALL CLUBS VERY HAPPY Football club Dinamo Bucharest waiting until autumn to find out the full list of its creditors

• Most companies or associations that have arrears have been removed from the football business, being left as empty shells

Football clubs that are heavily indebted are getting to ready to file for bankruptcy. While this may be bad news for the state, the clubs were careful to cover all their bases early on, with the help of the Romanian Football Federation, by spinning off their troubled companies and creating new, "clean" ones.

The Dinamo Football Club Association (ACSFC Dinamo) has entered insolvency. Creditors have until to September 7th to register their claims. AA Total Insolvency IPURL was appointed as the trustee in bankruptcy of ACSFC Dinamo, an association which was created in 1994 (at the time the Ministry of Internal Affairs supplied the sports facilities, while investors provided the funding). Starting with 2001, ACSFC Dinamo functioned alongside SC Dinamo 1948 SA, both having the same line of business: the football team. It needs mentioning that ACSFC Dinamo was one of the shareholders of SC Dinamo 1948 SA. In a nutshell, the debts would be recorded in the accounts of ACSFC Dinamo, whereas SC Dinamo 1948 SA which was debt-free, held the license from the Romanian Football Federation.

After five years of demanding that the club pay up its arrears, the Administration of Public Finance of the First District of Bucharest decided to get its money back and requested the bankruptcy of ACS FC Dinamo, for a debt of 10 million Euros, representing taxes on the wages of the players, social security contributions, VAT and default fees. Vasile Turcu, a shareholder of the football team also attempted to sue the club to get his investment back. The football players have contracts signed with SC Dinamo 1948 SA, so there is no problem with freezing the funds obtained by the club from any transfers of its players. The management of the club does not agree with ANAF, which requested the payment of unpaid taxes based on the provisions of the Labor Code, claiming that professional footballers are hired under Civil Conventions based on Ordinance 205 of the year 2005.

Nistor Mandache Ioan, trustee in bankruptcy of the debtor ACSFC Dinamo, said that in September the full list of the club"s creditors will become known, and that the club has various ongoing contracts, including advertising contracts which will allow it to pay back some of its debts. As the crisis has lowered the number of sponsors, most likely only 10% of the debt will be recovered.

Other clubs could take similar action, without suffering any serious consequences.

In may 2005, the combined debts of the clubs of the First Football League de stat amounted to an eye-popping 780 billion lei. Based on the exchange rate of the time, this meant about 213 million Euros, which have in the meantime accrued large default penalties.

In June 2005, the Football Federation disaffiliated the companies that had debts and created new ones which became shareholders of the clubs: FC Politehnica Iaşi SA, FC Oţelul Galaţi SA, FC Naţional SA Bucureşti, FC Braşov SA, FC Dinamo 1948 SA Bucureşti, FC 2005 SA Piteşti and FC Sporting Club SA Vaslui. Later, in June 2005, the Federation approved the disaffiliation of the following entities: Sports Club Poli - Unirea Iaşi, Football Club Oţelul Galaţi, The Football Club Naţional 2000 Bucharest Association, The FC Braşov Sports Association, The Football Club Dinamo Bucureşti Sports Club, The Football Club Argeş Piteşti and Vaslui Football Club. In the case of Steaua, the judges ruled that there was no connection between the former administration of the club and the current one. The assets of the disaffiliated companies aren"t worth much, meaning that their debts could not be paid off by liquidating them.

These days, the management of the club UT Arad, which is theoretically a member of the Second League, is struggling to get rid of its current organization structure - the non-profit association FCM UTA SA - and to transfer the ownership of the club to the joint stock company SC UTA 1947 SA, which already exists.

The major question is whether or not this time the Romanian Football Federation will accept the affiliation of the new company. This scheme would allow the team to get rid of debts of around 3.5 million Euros.