The end of the season is upon us, although there is no rest for clubs, agents and players as attention now turns to the transfer market.

Teams spent a record $1.57bn (£1.27bn) on players in the January transfer window this season while an all-time high number of international deals were completed, and with some of the potential stars on the move with the figures mentioned, we could be about to bear witness to yet another manic transfer window.

Beyond the rumours and speculation, this is important work for all stakeholders in the football industry, not only on the pitch but within the offices and departments of law, finance and governance – a successful operation at a football club depends on multiple factors and the fruits of the work for many teams this summer are reliant on these pieces functioning as part of a larger structure.

A transfer can take many guises: permanent transfers, loans with or without a buy option, signing of free agents or the payment of a buy-out clause; while there are also various rules and regulations which are at play: the nationality and age of a transfer target and the compliance of salary limits and financial fair play.

So how does it all work?

 

Sporting decisions, first contacts and formal offers

Once a sporting department makes the decision to sign someone, an initial contact is made between clubs, agents and the player.

Those involved will have done their homework prior to any initiation of action in regards to the eligibility of club competitions – an example of this is the Brexit points system for players joining clubs in the UK, or those unable to play in other competitions due to being cup tied.

This initial contact can come from the club, but also an agent who offers the services of the player he/she represents.

In these first instances, it is vital that clubs do not to violate the regulations that prevent a negotiation with a player without prior permission from their current team – a practice known as ‘tapping up’.

This is only permitted when a player has a minimum of six months left on their contract, while there must also be no third-party interests related to the player or economic rights.

After initial contact is made, the parties will exchange formal offers with basic conditions which are always subject to the further development of contractual documents.

Depending on the case at hand, various stipulations can be included such as a limit on the validity of an offer to a period of time.

These contacts and exchanges are diverse (e.g. buying club to seller; buying club to player; buying club to agent; etc.) and are handled in variety of manners such as on the phone, in person or even done over WhatsApp.

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Financial aspects

Once contact has been established, the main element of the negotiation between clubs is usually the transfer fee.

While the fee itself is often what grabs the headline, there are various different components at play here: taxation, fixed objectives, variable clauses and future rights’ and clubs will also have to take into account the rules on salary caps, as well as their own finances and financial fair play rules.

Once the amount is determined, the parties agree on the payment schedule, taxation and the influence of other issues that may affect the price (e.g. agents’ fees, training and solidarity rights of third-party clubs).

Generally, the selling club will want to receive the full amount net of any deductions, while the buyer will want the opposite to avoid increasing its cost of acquiring the player.

The interested club has to not only negotiate with the selling club but also the player’s personal terms, normally carried out by the player’s agent who defends his/her client’s interests.

Aspects such as the player’s salary, taxation, duration of the contract, image rights, possible signing bonuses – especially relevant for free agents – and/or the buy-out clause are fundamental in these negotiations.

These negotiations are particularly influenced by the salary cap of the club concerned in order to define its squad and, for its part, the negotiation with the player’s agents will also bear in mind new regulations on agent’s fee caps when they come into force.

 

Drawing up the contracts

Once the basic terms of the transaction have been defined, it is time for the legal teams to move on to drafting the contractual documents.

Practice has taught us that it is at this stage that small details are crucial in the event of future disputes and, equally, where there are multiple exchanges of documentation – the wording used in these contracts will be key in case of a potential conflict later on.

You will be surprised by how many documents are prepared at this point: the transfer of a player from one team to another, the player’s contract with his new club (with all annexes) and the usual termination agreement with his previous club to avoid claims and contracts with agents are among other documents that vary depending on the country.

Generally, the federations and the leagues themselves have their own forms, although it is common practice to accompany them with private, longer and more detailed contracts.

Let’s use Spain as an example: in addition to the model federation contract, the parties enter into private employment contracts with players, where the terms and conditions of the form are developed and exhaustively detailed.

It is precisely because this process will define and regulate the relationship between the parties as to why it is the most crucial.

If we add to that the variety of elements that are usually included in these contracts (e.g. suspensive clauses, term of the contract, fixed transfer fee, variable transfer fee, sell-on, buy-out clause, image rights, tax burden of the agreement, solidarity rights, first refusal rights, etc.) and the interest of the parties in making the wording favourable to their interests, we find ourselves with a tough process in terms of negotiation and where attention to detail is key.

Just when you would think the paperwork is done, we have to take into account the usual inclusion of clauses that activate a contract such as the passing of a medical, the player is able to be registered and that the player is able to obtain a work permit.

The Anatomy of a Transfer: An Insider’s Guide

 

Player Registration

If a transfer occurs between different countries, a key element is the transfer release/request process that both clubs must follow via FIFA through TMS.

The agility of the federations in this process is fundamental, as well as the clubs incorporating identical information in TMS so that FIFA can check that the information is correct and the federations of each country can act.

Clubs must expedite the sending of documents to the competent bodies, usually the league and federation in question, in order to have the transfer validated prior to the transfer window deadline.

If the agreement is well advanced, it is common practice to allow the player to go to the facilities of his new club in order to undergo a medical examination and to finalise the contractual conditions.

Other aspects such as coordination between the communications teams of both clubs are important, in order to align the legal and communication process around the transfer.

First day and welcome at the club

 Then it is over the club player liaison officers to ensure their new star gets settled as quickly as possible.

This involves getting a house, transport, schooling, paperwork and additional requests all sorted – in the manic world of football, you would be amazed at some of the requirements players have.

Transfer

 

As you can probably tell, transfers are often long planned in advance and require a great deal of work, and as a result, we have seen a steady transition away from the madness of a transfer deadline day – although that is not to say some departments are up past midnight to get an agreement over the line.

This summer promises even more transfer activity and it remains to be seen who will be on the move, but one thing is for sure though: it will be a busy few months for those involved.

To read more from our Insight series, click here.