Leicester City have been referred to an independent commission by the Premier League for an alleged breach of profit and sustainability rules (PSR).
The alleged breach comes in the three-year reporting period which ended in the 2022-23 season, which saw Leicester relegated from the Premier League after a nine-season stay.
It has been anticipated that Leicester were facing a charge for their alleged breach since earlier this month.
Leicester say they are "extremely disappointed" with the Premier League's decision to charge them over their alleged PSR breach.
The Leicestershire club say they have "repeatedly demonstrated its commitment to the P&S rules through its operating model over a considerable period", adding that the club is taking "careful advice about its position and, if necessary, will continue to defend itself from any unlawful acts by the football authorities".
"The alleged breach relates to the assessment period ending Season 2022-23, when the club was a member of the Premier League," a league statement said on Thursday.
The alleged breach comes in the three-year reporting period which ended in the 2022-23 season, which saw Leicester relegated from the Premier League after a nine-season stay.
All Premier League clubs are assessed for their adherence to the competition's PSR each year.
Their compliance with said rules is assessed by reference to the club's PSR calculation, which is the aggregate of its adjusted earnings before tax for the relevant assessment period.
Under the PSR, clubs are allowed to lose a maximum of £105m over three seasons (or £35m a season) but certain costs can be deducted, such as investment in youth development, infrastructure, community and women's football.
There were also specific allowances relating to COVID and, to help clubs, the league combined the two pandemic-hit seasons into one, turning the three-year accounting period into four years.
Their compliance with said rules is assessed by reference to the club's PSR calculation, which is the aggregate of its adjusted earnings before tax for the relevant assessment period.
Under the PSR, clubs are allowed to lose a maximum of £105m over three seasons (or £35m a season) but certain costs can be deducted, such as investment in youth development, infrastructure, community and women's football.
There were also specific allowances relating to COVID and, to help clubs, the league combined the two pandemic-hit seasons into one, turning the three-year accounting period into four years.
It has been anticipated that Leicester were facing a charge for their alleged breach since earlier this month.
Leicester say they are "extremely disappointed" with the Premier League's decision to charge them over their alleged PSR breach.
The Leicestershire club say they have "repeatedly demonstrated its commitment to the P&S rules through its operating model over a considerable period", adding that the club is taking "careful advice about its position and, if necessary, will continue to defend itself from any unlawful acts by the football authorities".
"The alleged breach relates to the assessment period ending Season 2022-23, when the club was a member of the Premier League," a league statement said on Thursday.
"Leicester City is surprised at the actions the Premier League has taken today. The club is extremely disappointed that the Premier League has chosen to charge LCFC now, despite the club's efforts to engage constructively with the Premier League in relation to the matters that are the subject of this charge, even though LCFC is not currently a Premier League club.
"LCFC remains willing and eager to engage constructively with the Premier League and the EFL to seek the proper resolution of any potential charges, by the right bodies, and at the right time. The club continues to take careful advice about its position and, if necessary, will continue to defend itself from any unlawful acts by the football authorities, should they seek to exercise jurisdiction where they cannot do so, as occurred earlier this year.
"LCFC has repeatedly demonstrated its commitment to the P&S rules through its operating model over a considerable period, achieving compliance while pursuing sporting ambitions that are entirely credible given the consistent success that the club has achieved in that time, both domestically and in European competition.
"As we continue to represent the club's position, we will continue to fight for the right of all clubs to pursue their ambitions, particularly where these have been reasonably and fairly established through sustained sporting achievement.
"The club thanks its supporters for their understanding in this matter and for their continued support for our team, whose success on the pitch during the final weeks of the season remains our primary focus."
"LCFC remains willing and eager to engage constructively with the Premier League and the EFL to seek the proper resolution of any potential charges, by the right bodies, and at the right time. The club continues to take careful advice about its position and, if necessary, will continue to defend itself from any unlawful acts by the football authorities, should they seek to exercise jurisdiction where they cannot do so, as occurred earlier this year.
"LCFC has repeatedly demonstrated its commitment to the P&S rules through its operating model over a considerable period, achieving compliance while pursuing sporting ambitions that are entirely credible given the consistent success that the club has achieved in that time, both domestically and in European competition.
"As we continue to represent the club's position, we will continue to fight for the right of all clubs to pursue their ambitions, particularly where these have been reasonably and fairly established through sustained sporting achievement.
"The club thanks its supporters for their understanding in this matter and for their continued support for our team, whose success on the pitch during the final weeks of the season remains our primary focus."
When Leicester were relegated nine and a half months ago, chief executive Susan Whelan sent all employees an email giving assurances that, for the club as a whole, it would be business as usual. There were no redundancies. On the playing side, however, there had to be deep cuts.
James Maddison (to Tottenham Hotspur), Harvey Barnes (Newcastle United) and Timothy Castagne (Fulham) were sold for a combined £83million. George Hirst was also sold to Ipswich Town for £1.75m. High earners Youri Tielemans, Jonny Evans, Ayoze Perez, Caglar Soyuncu, Ryan Bertrand, Daniel Amartey and Nampalys Mendy left at the end of their contracts, while the remaining players received substantial pay cuts.
However, having posted losses, which were heavily adjusted for the impact of the Covid-19 pandemic, of £67.3million in 2020, £31.2m a year later and a club record £92.5m in 2022, Leicester find themselves under the microscope.
The EFL's move to try to impose a business plan immediately after they submitted financial information on request was unusual and a clear indication that, despite the cuts, the league and many of their Championship rivals believe they didn't go far enough to avoid a financial advantage.
At the end of this month, Leicester will release their accounts for 2022-23, the relegation season. While they pumped the brakes on their transfer spending, to then manager Brendan Rodgers' annoyance, and sold Wesley Fofana to Chelsea for £75million, another significant loss is anticipated.
James Maddison (to Tottenham Hotspur), Harvey Barnes (Newcastle United) and Timothy Castagne (Fulham) were sold for a combined £83million. George Hirst was also sold to Ipswich Town for £1.75m. High earners Youri Tielemans, Jonny Evans, Ayoze Perez, Caglar Soyuncu, Ryan Bertrand, Daniel Amartey and Nampalys Mendy left at the end of their contracts, while the remaining players received substantial pay cuts.
However, having posted losses, which were heavily adjusted for the impact of the Covid-19 pandemic, of £67.3million in 2020, £31.2m a year later and a club record £92.5m in 2022, Leicester find themselves under the microscope.
The EFL's move to try to impose a business plan immediately after they submitted financial information on request was unusual and a clear indication that, despite the cuts, the league and many of their Championship rivals believe they didn't go far enough to avoid a financial advantage.
At the end of this month, Leicester will release their accounts for 2022-23, the relegation season. While they pumped the brakes on their transfer spending, to then manager Brendan Rodgers' annoyance, and sold Wesley Fofana to Chelsea for £75million, another significant loss is anticipated.
This season — i.e. the three-year reporting period ending with the 2023-24 campaign — also presents a potential PSR issue, as Leicester are on track for another breach unless they sell more players before the end of June.
The club were predicted to be on course to exceed that threshold in November and were asked by the English Football League (EFL) to submit a business plan to demonstrate how they would comply with the spending limits. However, an independent panel ruled the club did not have to submit a business plan, which would have led to sales in the January window.
The club successfully argued that the EFL did not have the right to enforce this demand this season, as the rulebook states clubs new to the Championship, via promotion or relegation, only have to file their accounts by the end of March. This meant the league was being too hasty in making assumptions about the club's ability to comply with the rules.
In a statement, the club said it was "pleased" with the ruling but expressed concern that the league's FFP unit had tried to act "outside the established rules".
It added that the club was "in discussions with the football authorities regarding its profitability and sustainability calculations" and "remains committed to seeking an appropriate overall outcome in this matter".
Whether this reassures worried fans or not is hard to say, as the club must get under the £83million threshold by July or risk facing the same fate as Everton, who have been hit with two PSR charges in one season.
The club were predicted to be on course to exceed that threshold in November and were asked by the English Football League (EFL) to submit a business plan to demonstrate how they would comply with the spending limits. However, an independent panel ruled the club did not have to submit a business plan, which would have led to sales in the January window.
The club successfully argued that the EFL did not have the right to enforce this demand this season, as the rulebook states clubs new to the Championship, via promotion or relegation, only have to file their accounts by the end of March. This meant the league was being too hasty in making assumptions about the club's ability to comply with the rules.
In a statement, the club said it was "pleased" with the ruling but expressed concern that the league's FFP unit had tried to act "outside the established rules".
It added that the club was "in discussions with the football authorities regarding its profitability and sustainability calculations" and "remains committed to seeking an appropriate overall outcome in this matter".
Whether this reassures worried fans or not is hard to say, as the club must get under the £83million threshold by July or risk facing the same fate as Everton, who have been hit with two PSR charges in one season.
