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Sport England Announce First Suspension Of Funding For Failure To Comply With Governance Code

Table Tennis England has become the first sport to lose access to public funding due to failure to comply with UK Sport and Sport England’s Code for Sports Governance.

The sport was due to receive a total of around £9 million from Sport England over the 2017-21 funding cycle, with the latest tranche being due this month.  As a body in receipt of more than £1 million, table tennis is a “Tier 3” organisation, required to comply with the most rigorous set of Mandatory Requirements (“MRs”) in the Code.  However, following its AGM on 8 July at which the members voted on some of the Board’s proposed governance reforms, the governing body has found itself in breach of its funding agreement with Sport England.

Sport England has suspended its funding of table tennis with immediate effect.

As we have commented previously, whilst the release of the Code saw the introduction of a ‘gold standard’ of governance principles for sport in the UK, at the time of the its publication there remained some questions relating to aspects such as the precise timeframe for compliance as well and the consequences of failure to comply with the Code’s requirements.  Against this background, the case of Table Tennis England is particularly interesting and will no doubt serve as a warning to other governing bodies and organisations in receipt of funds from Sport England or UK Sport.

Both Sport England and Table Tennis England have issued formal statements on the matter, with Sport England taking a firm stance:

“Our policy is clear. Organisations that don’t meet the Code for Sports Governance will not eligible to receive public investment.  Therefore no further investment can be made in Table Tennis England until changes are made.”  (Sport England’s full statement is available here)

 Meanwhile, Table Tennis England has sought to reassure its members but has acknowledged some immediate financial difficulties:

“…every single one of you, our members, matter to us and we intend to work harder than ever to ensure you receive the service you deserve. However, non-committed spend is now on hold.  All non-committed expenditure will be considered on a case-by-case basis.”

Sandra Deaton, the governing body’s chairman has also warned:

“Despite being told of the consequences, the action of a small number of the individuals, some with their own agendas, have meant that the Association is now in a suspended state of business.  Table tennis has become the first sport to fail to deliver on the Government’s requirements for funding. This has put our future at risk, as well as every programme we operate.”

So why did the proposal fail?

From a legal point of view, it is likely that the reason Table Tennis England needed to secure a 75% majority vote is that the Board’s proposal required an amendment to the governing body’s articles of association.   Table Tennis England is a registered company limited by shares and is subject to English law, including the Companies Act 2006 which reserves certain decision-making powers to a company’s shareholders meaning a Board cannot implement certain changes of its own accord.  Those reserved powers include amendments to a company’s articles of association (a key constitutional document of a company, setting out its basic management and administrative structure), which can only be effected by passing a “special resolution”.  There are a number of methods of passing a special resolution but, broadly speaking, it requires a vote passed by at least 75% of the company’s membership.  Table Tennis England’s proposal secured only 74.93% and consequently no special resolution was passed.  As a result, Table Tennis England was rendered in breach of its funding contract with Sport England.

Deaton’s statement emphasises that the Board put forward what it considered to be the “only workable proposal”.  Reports suggest that the controversy related to the mechanism for appointing members to the Board, with critics reportedly claiming that the proposed changes created a risk of persons lacking sufficient knowledge of the sport and governing body being appointed to positions on the board.  Whether this related to measures designed to address the appointment of independent non-executive directors (required by MR 1.19) or to provisions designed to increase diversity (governed by MRs 2.1 – 2.3) or more generally to the processes and rules governing the composition of the Board is not known.

Table Tennis England has made a public commitment to working closely with Sport England with the immediate aim of exploring ways to secure its next funding instalment and with the longer term aim of ensuring it is able to comply with the Code.  Their progress will no doubt be closely watched by all in the sector.

Funding in the sports sector is a hot topic at the moment, with the first annual report on UK Sport’s “Sporting Future” strategy having been published in February this year and following the most recent cycle of Olympic funding announcements.  Sports Shorts will be attending tomorrow’s Westminster Media Forum on the topic, where a range of speakers will discuss issues ranging from how to address the shortfall resulting from declining lottery revenues to the future for driving commercial income generation.

© Copyright 2022 Squire Patton Boggs (US) LLPNational Law Review, Volume VII, Number 193
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