Explained: Why Derby County are likely to avoid a new points deduction

Derby County is unlikely to be affected by further point deductions after Chris Kirchner took over the club.

Last year the Rams were hit with two separate penalties for entering administration and breaching the EFL’s profit and sustainability rules, totaling a 21-point deduction. That led to the club’s relegation from the Championship that season, despite a valiant attempt by Wayne Rooney’s men to survive relegation to League One.

Reports in March suggested another point deduction could be on the cards. It was feared that neither offer would meet the Football League’s bankruptcy rules.

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However, this does not appear to be the case two months later. After Kirchner was named preferred bidder in April, it was reported that the American businessman had told the EFL he plans to pay 35p in pounds to non-football creditors over the next three years.

As football finance expert Kieran Maguire outlined on a recent episode of the Price of Football podcast, that would be enough for Derby to avoid another dreaded point deduction. “There is no reason why there should be a point deduction,” he said.

“If you come from the administration, there are two options. First, if you commit to paying 25 per cent to unsecured creditors – mainly local suppliers, electricity suppliers, utilities – upon exit, or if you commit to paying 35 per cent within three years, then you avoid the 15-point penalty .

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“It looks like Chris Kirchner will choose the second of those options.

Maguire added that he expects some sort of deal to be arranged whereby the club won’t pay the full hit of their massive tax bill. “A relatively recent change in legislation means HMRC is entitled to 100 per cent of its debt before paying any monies to unsecured creditors, but we expect some sort of haircut on this,” he said.

“[There will be]some form of agreement between Quantuma and HMRC, but we don’t know the extent yet.”

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The EFL announced this week that they have given Kirchner approval but that is subject to the sale of the stadium and the approval of secured creditors. Former chairman Mel Morris separated ownership of Pride Park from the club in 2018.

Team Derby, a group that also includes politicians, is continuing talks on the ground with May 31 being the target date for completion.

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