Company 03419514 And The Problem Of Welsh Rugby’s Food Chain

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The Welsh Rugby Union’s recent accounts paint a picture of increasing revenues and falling debt. So what to do with the cash in a members’ organisation. Geraint Powell recognises that some mouths need more feeding than others, but says the solution is an orderly queue.

Who owns company 03419514, otherwise known as The Welsh Rugby Union Ltd?

It is a question which invariably induces panic when asked, for somebody must own it in the absence of a post-property rights end stage Marxist utopia in South Wales!

The answer is that the 320+ guarantor member clubs are the owners of the WRU. The pro regions are also owners, but have less votes than the club members in just the Rhondda Fawr valley alone.

In amongst the Union’s pleasing financial news in their latest annual report, outlining increased revenue, increased surplus, increased distributions and less net bank debt, was a candid if understated admission from the chief executive of the “need to improve the connection between community and professional rugby at a local level.

The observation will have come as a surprise to few, but it is easier said than done.

The Home Unions all chose different constitutional frameworks following professionalism.

The IRFU remains an unincorporated association, the RFU is an unincorporated “Friendly Society” and the SRU is incorporated as a company limited by shares.

The WRU is a company limited by guarantee.

The size of the guarantee payment required from each member club/region in the event of a winding-up might not trouble a small child’s piggy bank, indeed it is ideal for use with a supermarket trolley, but it is not without significant implications.

The practical reality is that nobody actually worries about ownership in a non-profit making company limited by guarantee for, after entering the member “ownership class”, it is then governance that becomes all important.

There are no WRU shareholders, so no differing shareholdings and different classes of shares, just equal club membership voting rights in relation to appointing the district and national directors to the board as well as to pass ordinary and special resolutions at annual and extraordinary general meetings.

The money turns upon the distribution of the surplus, and governance – particularly the power of the club game to control the board membership – determines the allocation between competing claimants including the costs of the revenue earning Test team itself.

The pro regions were not set-up in 2003 as integral to this landscape, a serious blunder and one of those classic Welsh self-inflicted wounds of the professional era, instead existing as some sort of privately owned external entities in nearby orbit in the general vicinity of the WRU pyramid.

Compare with the IRFU, in effect a federal body with four autonomous provincial branches to which the clubs are affiliated and who operate the four professional teams.

To compound Welsh rugby problems, some of these new pro region offshoots of historic major clubs were barely distinguishable from the continuing historic club that founded them.

The solution in terms of funding these new pro regions was a contractual relationship based on the pretext/illusion of their selling services to the WRU at “arms-length”. The reality has been the WRU allocating part of the Test team profit/surplus to them, after periodically assessing their own finances and the completing claims for funding from all stakeholders.

It is obviously not a model, given the obvious inequality in bargaining power under World Rugby’s Regulation 9 on mandatory player release for Test rugby windows, which encourages the WRU to fund the pro region teams to the same extent as the IRFU funds its own constituent pro provincial branch teams.

It is therefore of no surprise that, in this governance landscape and with this poor structural model, an ever increasing requirement by the externalised regions over the last decade for additional funding from the WRU was going to prove highly problematic.

One of the proposed solutions has been splitting the professional regional and grassroots club games, taking on a dogmatic life of its own in certain quarters.

The problem is in getting any two proponents to agree on what this means in practice.

A proper split would see the pro regions purchase the WRU and the Principality Stadium off the clubs and operate the Test team and venue.

The clubs would set-up a new Welsh Amateur Rugby Union to govern themselves, under the ultimate governance jurisdiction of the WRU as the Welsh governing body at World Rugby.

Think Rugby Football League (RFL)/British Amateur Rugby League Association (BARLA), a sport created by teams leaving rugby union, turning professional, and then neglecting the grassroots.

This is never going to happen. The union of clubs have no incentive to sell, indeed a Test ticket supply is financially critical to many of them, and the pro regions could not possibly afford to buy. Indeed, the WRU now majority own one of the four pro regions.

What began as a quest for a split, became a demand for commercial autonomy and an arms-length relationship between the WRU club membership and the regions via an independent professional regional game board.

It is fair to say that my observation that this was “intellectually incoherent”, given the need for additional WRU funding and the inequality of bargaining power between the WRU and the pro regions, was not well received by all proponents of this ‘solution’.

If the problem is insufficient WRU funding, the solution requires greater integration and alignment rather than even further severance and disconnect.

We see this generally, such as with much of the WRU’s (non-retained) increased surplus in 2017-18 being handed to the pro regions.

And we see this specifically, such as the WRU bailing-out the Dragons franchise last year to maintain professional regional rugby in Gwent and so avoiding another Celtic Warriors outcome.

What now constitutes a split between the pro regions and the grassroots club game is sensible, but hardly worthy of the word “split”.

A true split would be separate focussed sub-boards of the WRU, a logical separate commercial focus, and trying to mitigate the operation of a player development pathway that has displeased high performance personnel at the pro regions and increasingly made a mockery of the competition integrity of the WRU Premiership below.

Many would argue that the biggest problem is not one of operationally administering the pro regions and the grassroots clubs separately, but in treating the semi-pro clubs as grassroots clubs.

Rather than splitting the WRU and the pro regions, it should be more a process of gradually co-opting the pro regions into the WRU pyramid and structures as the governing body will always be the regional rugby funder of last resort.

That’s funder, not contractor.

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