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    The 2 SA AFL Clubs

    Outlined below is details regarding the the relationship between the SANFL and the Adelaide Football Club and Port Adelaide Football Club, together with a brief outline of the background relating to the entry of each of these clubs into the AFL competition.  The SANFL holds the Head Licences relating to the participation of both of these teams in the AFL competition.

    A:      Adelaide Football Club

    1. Background

      Events which finally lead to a licence being granted to the SANFL to field the first South Australian team in the AFL Competition began in the early 1980’s when initial contact was made between representatives of the then VFL and the SANFL concerning the possibility of a South Australian side being entered into the then VFL Competition.

      These discussions took place over a number of years and through the force of circumstances which arose in late 1990 in relation to a proposal put to the AFL by the now Port Adelaide Magpies Football Club, a Licence was ultimately granted to the SANFL to field the first South Australian Team in the AFL Competition.  It was agreed as between the SANFL and the AFL that it was to be a composite side; that is, it was not to be based on any particular Club in the SANFL.

      It was also agreed that the team itself would not be fielded directly in the AFL Competition by the SANFL but through a new Club to be known as Adelaide Football Club which was intended at the outset to be “owned” by, and be a subsidiary of, the SANFL. 
    2. Licence Agreement

      The Licence Agreement between the AFL and the SANFL relating to the entry of the Adelaide Crows into the AFL Competition (“the Crows Licence Agreement”) was based, we understand, upon Licence Agreements which had been granted by the AFL to other AFL Clubs to field teams in the AFL Competition.  The Licence Agreement with Adelaide however did contain terms and conditions which were pertinent only to the SANFL (and to the Crows).  These terms and conditions were:-

      1. All home games of the team would be played at Football Park (now AAMI Stadium).
      2. The SANFL would establish an independent Board or Commission with effective powers to administer football in South Australia.  This independent Board or Commission had to be established by 31 March 1991 and the majority of its members was to consist of persons who were neither members, officers, employees, nominees or delegates of the SANFL or any Club competing in the SANFL Competition.

        This condition was stated to be a fundamental condition of the Licence Agreement.
      3. Despite the right which the AFL retained to have the absolute discretion concerning the granting of any new Licences to play football in the AFL, the AFL agreed with the SANFL that it would not, without the SANFL’s consent, grant a Licence or allow the transfer of a Licence into South Australia to field another South Australian based team in the AFL before 1 January 1996 and that in any event it would not grant or issue or permit any Licence for a South Australian based team to play AFL football to be held by anybody unless the AFL gave the SANFL a first right to take up such new Licence.
    3. South Australian Football Commission

      The Constitution of the SANFL was altered in early 1991 to provide for the establishing of the South Australian Football Commission.  These alterations were embodied in what is now Rule 5.8 of the SANFL Constitution. 

      Prior to an alteration made to this Rule in 2002 it was possible for up to three (3) persons with a Club affiliation to sit on the Commission.  In 2002 an alteration was made to Rule 5.8 at the request of the SANFL Clubs, to provide that all six (6) persons appointed by members of the SANFL, had, in effect, to be independent of the member Clubs of the SANFL.

       The current Rule 5.8, which was approved by the AFL provides that the SA Football Commission will comprise:-
      1. The President for the time being of the SANFL;
      2. The Executive Commissioner for the time being of the SANFL;
      3. Six (6) persons appointed by the members of the SANFL none of whom could be an officer or employee of a League Club or delegate or Director or Alternate Director of the League appointed by any League Club;
    1. Adelaide Football Club Ltd – Constitution

      Adelaide Football Club Ltd was incorporated in 1985 as Adelaide Football Club Pty Ltd.  It was a proprietary company incorporated with two issued shares, one of which was held by Mr Max Basheer and the other by Mr Leigh Whicker, in each case held in trust for the SANFL.  The reason for incorporating the company in 1985 was to give some form of protection to the name “Adelaide Football Club” in the event of a South Australian team being entered into the AFL Competition. 

      In 1990, following the negotiations which took place leading to the entry of the first South Australian based team into the AFL Competition, it was decided to use Adelaide Football Club Pty Ltd as the vehicle through which the team would be administered and fielded in the AFL competition.

       In October 1990, Adelaide Football Club Pty Ltd converted from its proprietary company status to a company limited by shares and guarantee, changed its name to Adelaide Football Club Ltd, and adopted a new Constitution, the terms of which were pre-approved by the AFL through its solicitors. 

      On the adoption of the new Constitution, all rights and powers attaching to the two shares issued to Messrs Basheer and Whicker were removed so that those shares, not only have no rights or powers attaching to them, but they are also valueless.

      Under its Articles of Association all Directors of Adelaide Football Club are appointed by the SA Football Commission.

      In September 1998, following a request by its Board, the Articles of Association of Adelaide Football Club Ltd were altered, with the AFL’s approval, to provide that not more than one third of the total number of Directors holding office at any one time could be persons nominated for appointment as Directors by a resolution of members of Adelaide Football Club Ltd.  It is stressed that this was not a right given to the members to directly elect persons to the Board, but merely the right to nominate persons for appointment, the power of appointment being still retained by the SA Football Commission.

      This situation has continued since 1998 and has lead to appointments being made by the League of persons nominated by members of the Club, which includes the current Chairman of the Directors, Mr Bill Sanders.

      It is pointed out that the right to nominate persons for appointment to the Board has not always been exercised by the members of the Club in each year since 1998


    B:       Port Adelaide Football Club Ltd

     

    1. Background

      In 1994 the AFL made a decision to invite the participation of a second AFL team based in South Australia.  In line with the first right of refusal which was granted to the SANFL under the Crows Licence Agreement in 1990, the AFL was obliged to give the SANFL first right of refusal in respect of this Licence.  The SANFL took up this right.

      Following discussions between representatives of the SANFL and the AFL it was agreed, at that time, that a process would be adopted whereby tenders would be invited from the existing SANFL Clubs to take a sub-licence in Joint Venture with the SANFL, of the Licence which the SANFL was to have granted to it in respect of this second AFL Licence based in South Australia.

      The outcome of these discussions was that tenders were called from the SANFL Clubs to bid for the second sub-licence to field a team, in Joint Venture with the SANFL  in the AFL Competition.

      As a result of this invitation, tenders were received from three (3) Clubs / Groups.  They were:-

      1. Port Adelaide Football Club Inc;
      2. A combined tender by the Sturt Football Club Inc and Norwood Football Club Inc;
      3. Woodville/West Torrens Football Club Inc.

    An exhaustive tender process was carried out with each of the bids being assessed by a sub-committee appointed by the SA Football Commission with the guidance and assistance of an independent facilitator and the AFL (through Mr Ross Oakley).  This process took several months and in the end based on the recommendation of the sub-committee, the decision was made to grant the second sub-licence to a new Club to be formed by the SANFL in Joint Venture with the Port Adelaide Football Club Inc (as it was then known).

    1. Port Adelaide Football Club Ltd

      As a result of the decision to grant the second sub-licence to a joint venture comprising the SANFL and Port Adelaide Football Club Inc (which Club subsequently changed its name to Port Adelaide Magpies
      Football Club Inc) the company now known as Port Adelaide Football Club Ltd was incorporated in March 1995.  Port Adelaide Football Club Ltd is a company limited by guarantee and its original Constitution was prepared by the SANFL in consultation with Port Adelaide Football Club Inc, (through their respective solicitors). 
    1. The Constitution of Port Adelaide Football Club Ltd does not differ greatly, for all practical purposes, from that of the Adelaide Football Club Ltd except in two significant respects.  The first and major difference is that the Board of Port Adelaide Football Club Ltd must comprise of ten (10) persons, all of whom must be appointed by the SA Football Commission.  Of those appointee’s five (5) must be persons nominated for appointment to the Board by members of Club known as Port Adelaide Football Club which was established under the new Constitution.  The remaining five (5) members of the Board can be any persons appointed by the SA Football Commission in its absolute discretion.

      The second difference, of significance, is that on the winding up of Adelaide Football Club, any surplus assets, can be distributed to the SANFL.  On the winding up of Port Adelaide Football Club Ltd any surplus assets are to be divided effectively between the SANFL and the now Port Adelaide Magpies Football Club Inc, in equal shares. 

      Port Adelaide Football Club Ltd is also, as a matter of law, a subsidiary of the SANFL, by virtue of it having all its Directors appointed by the SA Football Commission.
    2. Licence Agreement

      The Licence Agreement between the AFL and the SANFL relating to the entry of Port Power into the AFL Competition (“the Port Power Licence Agreement”) is essentially on the same basic terms and conditions as those contained in the Crows Licence Agreement. 

      The “Port Power” Licence Agreement provides that it is an obligation of the SANFL to ensure that the SA Football Commission continues in existence and further it goes on to provide that compliance with the Clause relating to this continuance is a fundamental term of the Licence Agreement.

      The “Port Power” Licence Agreement also provides an undertaking by the AFL that it would not grant a new Licence or agree to a transfer of any Licence into South Australia for the entry of a third South Australian based team in the AFL Competition before January 2002 (which was subsequently extended to 2007) and that thereafter it will not do so without giving the SANFL the first right of refusal to enter a third South Australian based team in the AFL Competition.

    C:       Administration of Adelaide Football Club  and Port Adelaide Football Club

    1. Boards of Directors

      As pointed out above the Boards of each of the Adelaide Football Club and Port Adelaide Football Club are appointed by the SA Football Commission.  The only difference between the two Clubs is that up to one third of the members of the Board of Adelaide Football Club may be persons nominated for appointment by members of that Club, whereas with Port Adelaide Football Club five persons (one half) must be persons nominated for appointment by members of the Port Adelaide Football Club.

      Each year, representatives of the SA Football Commission and the Boards of each of the AFL Clubs meet for a performance review.  At those meetings a question of prospective new Board members is discussed.  In addition to the nominations for appointment to the Board by the respective members of the Crows and Port Power, the SANFL and the Boards of each of those Clubs canvass widely within the Football industry for prospective new Board members.
    2. Sub Licence Agreements

      In the case of each of Adelaide Football Club and Port Adelaide Football Club there is a sub-licence Agreement in existence with the SANFL.  Under each of these sub-licence Agreements the right to conduct a team in the AFL Competition is sub-licensed to each of them respectively, in return for which each must pay to the SANFL a sub-licence fee.

      Under the original sub-licence Agreement between the Adelaide Football Club and the SANFL the sub-licence fee payable to the SANFL was the greater of $400,000.00 or 80% of its operating surplus in each year.

      In 1995, as a result of the negotiations with Port Adelaide Football Club Inc, the sub-licence fee payable by Port Adelaide Football Club Ltd was to be calculated on a sliding scale so that as the operating surplus of the Club increased, the percentage of such operating surplus which was payable through the sub-licence fee decreased.

      In terms of equity as between the Adelaide Crows and Port Power, the SANFL altered the Crows sub-licence agreement so that the sub-licence fee payable from the 1996 year onwards was calculated in the same way as it was for Port Power.

      In late 2002, in separate negotiations with each Club, the SANFL agreed on the payment of a fixed licence fee in each year, in the case of Adelaide Football Club for the years 2003 to 2005 inclusive and in the case of the Port Adelaide Football Club for the years 2003 to 2006 inclusive.  The fixed sub-licence fee arrangements with the two Clubs, was a result of their requests and was agreed to by the SANFL so as to give each of the Clubs the opportunity to accumulate working capital which the existing sub-licence fee arrangement made it difficult to do.

    In late 2006, a new 5 year fixed licence agreement was negotiated with each club.

    1. Administration

      Even though the SA Football Commission has the power to appoint and remove the Boards of each of Adelaide Football Club Ltd and Port Adelaide Football Club Ltd the reality has been, and is, that once those Boards are appointed, they are left to administer their respective affairs, subject to their respective sub-licence agreements, without control or interference by the SA Football Commission with minor exceptions namely:-
      1. Each of them must submit a budget of the proposed expenditure to the League in respect of each financial year commencing on 1 November.
      2. Each of them has an obligation to provide monthly management accounts to the SANFL. 

    The SA Football Commission and the administration of the SANFL have excellent working relationships with the Boards and Administrations of each of the Clubs and despite the power of the SA Football Commission to remove Directors of each of the Clubs at its discretion, a power which it must retain, such power has never been exercised or threatened.

     

    Having said this however, it should be recognised that the SANFL views its “total” ownership of Adelaide Football Club Ltd and “part” ownership of Port Adelaide Football Club as being an investment, the return on which (in the form of sub-licence fees) is used to assist the SANFL in carrying out its obligations under the Affiliation Agreement which it has with the AFL, namely to control the administration of football in South Australia.  The investment of the SANFL in the two Clubs is significant with a total cash investment alone, exceeding $8 million.