When your partner gets relegated: contract lessons from Manchester City’s guilty verdict

On 29 September 2026, the Premier League confirmed Manchester City had been found guilty of serious breaches of its financial rules spanning nine years. An independent commission found the club had arranged ‘sham’ commercial deals, artificially inflated revenues and concealed its true finances by more than £900m.

Manchester City denies the allegations and, on 1 October 2026, lodged a comprehensive appeal against the commission’s findings, stating that it believes the opinion contains material errors of law, principle and fact.

The verdict has dominated the sports pages, but the commercial fallout extends beyond football. It raises a question any business in a regulated market should ask about its own contracts.

The ripple effect

Manchester City’s guilty verdict affects more than just the club. It touches every commercially connected party: sponsors, broadcasters, partners, kit suppliers and the 19 rival clubs that competed against a team found to have operated outside the rules for nearly a decade.

That ripple effect is already producing legal consequences. Several Premier League clubs are reportedly seeking advice on damages claims, with a coordinated class action possible.

The lesson is straightforward: when one party in a regulated market breaks the rules, the consequences aren’t limited to the offender and the regulator. They can affect everyone competing in that space.

The sponsor’s dilemma

The verdict creates a particular problem for Manchester City’s commercial partners. Reports suggest several sponsors are examining their agreements, with some holding contractual rights to renegotiate if the club is relegated. The question is whether their deals contain protections allowing them to adjust or exit: for example, performance benchmarks tied to league status, termination triggers for regulatory findings or reputation clauses permitting disassociation.

There’s a further layer of complexity. The commission found that many of Manchester City’s sponsorship agreements were part of the ‘sham’ funding structure: sponsors paid only a fraction of the recorded fees, with the remainder funded by the club’s ownership. Between 2009 and 2018, the club recorded nearly £950m in sponsorship revenue, but only 13% was actually paid by the sponsors.

Legitimate sponsors entering new or renewed deals will want their arrangements clearly distinguished from those found problematic, and their contracts robust enough to withstand further regulatory fallout, particularly while the appeal process continues.

Does your contract have a ‘relegation clause’?

In football, a relegation clause allows a player to leave or triggers a salary adjustment if the club is relegated to a lower division. Reports suggest many Manchester City players lack such clauses, meaning they could be contractually tied to a club outside the Premier League with limited remedies.

The concept isn’t limited to football. In any commercial relationship, the question is the same: if your counterparty is sanctioned, found guilty of misconduct or suffers a serious change in status, does your contract give you a way out?

The commercial equivalents of a relegation clause include:

• Material adverse change (MAC) clauses, allowing a party to terminate or renegotiate if the other suffers a significant negative change, such as regulatory sanctions, loss of licence or reputational damage
• Termination triggers linked to regulatory action, giving one party the right to exit if the other is investigated, prosecuted or found guilty of misconduct by a regulator
• Morality clauses, particularly common in sponsorship agreements, allowing a sponsor to suspend or terminate if the sponsored party’s conduct damages the commercial value of the sponsorship. Manchester City’s guilty verdict — a formal finding by an independent commission — is exactly the objective trigger these clauses are designed for.

A practical takeaway

The Manchester City verdict is a reminder that contracts should plan for the worst, not just the best. If you’re entering a commercial partnership, sponsorship, joint venture or supply arrangement, ask a simple question: what happens if the other side breaks the rules?

If your contracts don’t address that scenario, now is a good time to review them.