Florentino Pérez has again shake the foundations of football with a proposal that could take a 180 -degree turn to the soul of Real Madrid: transform the Institution of the Sports Club to Sociedad Mercantil. As? Through a possible operation in which the Real Madrid Foundation would have 51% of the shares, while the remaining 49% would be left by investors. This is a strategy that, as the president already announced last November, seeks to protect the heritage of the entity and, in summary, to have the majority control of the only team that has raised 15 European glasses. The plan is still in its beta phase, and the club has not left clues about whether this operation will finally take place. However, the proposal that Florentino Pérez has put on the table resusciates an intense debate in the football industry. Sports club or company? That is the issue. And it is that teams can only choose between these are two options. Spanish football is governed by the Sports Law, which requires that institutions that compete in professional leagues must be constituted as sports clubs (or non -profit associations) or as sports anonymous societies (SAD). Football teams can choose between face or cross, but the truth is that most opt for one side of the currency: the sports corporation. But it has its explanation. The previous Sports Law of 1990 «imposed the obligation to make all professional clubs that did not obtain positive economic results in the previous exercises to the Sports Society,» says Juan de Dios Crespo, partner of Ruiz-Huerta & Crespo, specialist in sports law. This rule caused only four teams – Real Madrid, Barcelona, Athletic and Osasuna – remained as a sports club, while the rest «were in the imperative need to become SAD as determined by law,» explains Crespo. From the reform of 2022, this obligation disappeared. Three decades later, these four teams still maintain their sports club structure. And what is it? «This is a model of direct democratic participation, where the partners vote in assembly and choose the president,» replies Gonzalo Jiménez, a sports law partner in Martínez-Echevarría. This type of organization allows base partners to have more weight within the entity. However, it also presents limitations to compete with the rest of the sports entities: «The absence of shareholders prevents capital from external investors,» says Jiménez. On the contrary, in the case of debt, adds Roberto Álvarez, a specialized partner in culture, sport and entertainment of four, the partners do not respond to the club's holes, unless the statutes say otherwise. Nor do they have the possibility of being holders of a part of the share capital. The model of a sports corporation, unlike that of an association, is not characterized by being a partners club, but the property passes to the one who has more actions. SAD works like any commercial society. «They have shareholders (which can be natural or legal persons), a share capital divided into shares, and business administration bodies,» explains Gonzalo Jiménez. His activity, Roberto Álvarez details, is «regulated mainly by the Law on Sports Corporations, by the Sports Law and, supplementary, by the Capital Societies Law.» At present, a variety of equipment – such as Manchester City, Arsenal, PSG or Inter Milan – have been acquired by investors with private capital funds.
Multiclub management
In Spain there are also cases of investors who are financing teams. For example, Alan Pace, owner of the English matrix Velocity Sports Partner and owner of Burnley FC, announced on Monday the purchase of the RCD Espanyol for 130 million euros, now being the majority shareholder of the institution (with 99% total property). This operation opens the door to a “Multiclub management model,” says Pedro Fernández-Villamea, an expert lawyer in corporate legal strategy. «It places both teams – Burnley in the English Premier League and Espanyol in the Spanish League – under the same strategic axis, but with different sporting brands and objectives,» in order to obtain the same benefits in both national competitions. The differences between both models are also appreciated in the taxation of the teams. How do each one pay? The sports corporation pays the Corporation Tax, «which implies that they are subject to the general tax rate of 25% of its benefits, without the possibility of applying specific exemptions for their sports activity,» says Bartolomé Sánchez, prosecutor's advisor in Cuatrecasas. Sports clubs also pay the general type of 25%, but, unlike a SAD, «they can benefit from the partially exempt entity regime provided for in the Company Tax Law,» explains Sánchez, provided that they come from activities that constitute their corporate purpose and are not considerate of economic activities. Sports clubs can protect themselves in the exemption of some income such as «the quotas of the partners, donations and subsidies for sports activity,» the expert exemplifies. Ellegating the legal structure of the institution is not an easy decision. «It is the framework on which absolutely everything is managed, from the hiring of players, sponsorships, concerts, subscribers … and television rights,» says Fernández-Villamea. «Without such framework, there would be no effective management, which could cause the progressive bankruptcy of the entity,» he warns.
A new revolutionary model?
Professional football is diving in a third model: the Sports Foundation with corporate structure. «It is an exploration phase system, not consolidated in institutional practice, but in the legal and strategic discourse,» says Gonzalo Jiménez, partner of Martínez-Echevarría. At the moment, no sports entity works under this model. The law does not prohibit a sports foundation from being constituted as a commercial company. Of course, provided that this participation serves to channel social, educational or cultural projects linked to the club.
