Hurdles for Perak FC, even after acquisition by IMC

It appears that the prayers of the Perak Football Association (PAFA) have been answered.

On Dec 24, 2021, the association officially relinquished 100 per cent of its holdings in Perak FC Sdn Bhd (Perak FC) to Impact Media and Communication Sdn Bhd (IMC).

PAFA sold the football outfit which had a glorious history, but was marred by inefficiency and carelessness, and heading for insolvency.

The club had plunged into the second tier of the domestic league (Premier League) and had racked massive debts for the first time in its 100-year history.

As of Dec 31, 2021, the club’s total liabilities stood at RM11.8 million. But as Perak FC charges forward to reclaim its lost glory under IMC, it will face immediate, and major challenges.

For one, IMC had taken over the club at the worst possible time. The takeover was concluded on Dec 24, 2021. At the time, the other clubs were finalising their team composition and were already in their third or fourth week of pre-season training.

This drove the club towards quickly settling 75 per cent of the unpaid salaries (August-November 2021). But some of the Perak footballers had already taken leave, while others had signed on with rival football clubs.

Settling the unpaid salaries was essential in restoring the confidence and trust of our domestic footballers, as none were willing to sit down and negotiate contract terms prior to the settlement.

Next, came the management of cases involving decisions issued by Fifa Dispute Resolution Chambers (Fifa DRC).

This next step was paramount as the decisions issued resulted in the transfer embargo for both foreign and domestic footballers. Even though Perak FC had retained their licence to play for season 2022 from the Malaysian Football League, they cannot register new football players, and can only work with the existing players already approved within the system.

In the run-up to the acquisition of Perak FC, prior to the due diligence, IMC was constantly notified by PAFA that there was only one case resulting in a transfer embargo.

The case involved a South Korean footballer, who apparently never played a single competitive game, as he was injured throughout the entire season.

Despite the previous management’s attempt to revoke the decision via the Court of Arbitration of Sports, the decision remained.

In reality, though, Perak has four Fifa cases, resulting in a transfer embargo.

Two of those cases were introduced in the midst of a settlement negotiation, which has now conveniently rendered the talks lifeless and cold. Apparently, Perak was led to believe that it was in a genuine negotiation, whereas in fact, the representative was simply dragging the process and waiting for a Fifa DRC decision, which would be favourable to the complainant.

Now, settling the two earlier cases wouldn’t make a difference, as lifting the embargo required the settlement of all four cases. This means that the 13 newly signed footballers would not be able to register until the settlement of all four is paid in full.

This also means that Perak FC would have to start the first half of the season with the existing 20 footballers who are already within the registration system.

Another major challenge is with the Employees Provident Fund, Social Security Organisation, and the Inland Revenue Board.

In the past, deductions were made to the salaries of the players to satisfy their responsibilities to all these agencies. However, these deductions did not end up in the coffers of said agencies. This has resulted in liabilities amounting to millions.

These agencies were at first, reluctant to open their books or start making claims as the football club was politically connected, but things quickly changed when the football club went fully private.

Football is awash with dual contract practices. This practice is meant to reduce contributions to the agencies mentioned above.

To minimise their contributions, both footballers and their respective clubs would agree on a remuneration structure involving a salary and allowances governed by two separate contracts or agreements.

Only the salary is declared to the agencies, while the allowances are undeclared. In other words, a professional footballer may have a contract stipulating that his salary is RM19,000 per month, but is also likely to have another separate agreement stating that his allowances totalled RM30,000 per month, which means that his entire club earnings is RM49,000 per month.

This is wrong and reprehensible. Taxes for instance, are imposed on the entire income and earnings of the individual, whether it is in the form of salaries, or allowances. Many clubs that practice this, march proudly, thinking that they have outsmarted the agencies.

This is not true. These agencies are well aware of the abuses and malpractices.

The only reason they often choose to turn a blind eye is because the clubs are well-connected.

However, things quickly changed when the football club went fully private. This “mismanagement by design” has been going on for so long, and is deeply entrenched within the system, that explaining it to footballers and their agents is an ordeal unto itself.

The corporate governance that had been long ingrained within the club has turned into a toxic culture that requires drastic structural reforms within the very institution.

Experience has taught IMC that football associations are clueless as to their financial state, and that the acquisition of a football club is not as straightforward as a corporate takeover.

As a sporting successor defined by Fifa, IMC would assume legacies and liabilities that go back six years – beyond the incorporation of the company, Perak FC Sdn Bhd.

But IMC is not attempting to remove those liabilities by denying the fact that they are a sporting successor of Perak FC. IMC is not attempting to evade the liabilities that come with being a sporting successor. IMC is merely asking for time and space to resolve the matter, especially those involving the transfer embargo imposed by Fifa.

Around the world, Malaysian football is not known for fair play and decency. We just like to think we are.

What we are known for in football are, unpaid salaries, a bookie’s haven, and thankfully, Johor Darul Ta’zim. And if we are not careful, we will also be known as a graveyard of heritage football clubs with glorious histories.

Blanket transfer embargoes or sanctions imposed on clubs with severely poor management practices are rightfully permissible, but not necessarily constructive.

They do not present the needed rescue mechanisms that encourage honest private equity investors or viable companies the opportunity or the motivation to restore business growth and discipline.

This is the personal opinion of the writer and does not necessarily represent the views of Twentytwo13.

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