Nottingham Forest have confirmed to the Premier League they have breached financial regulations.
The league said the news follows the club sustaining losses above the permitted thresholds under profitability and sustainability rules.
The club’s case will now be referred to an independent commission, who will decide on any sanction at a later date.
Possible punishments include a fine, points deduction and other sporting sanction.
Everton have also confirmed they are in breach today (January 15), and face a possible sanction for breaching league rules for the second time this season.
Confirming the news in a club statement on Monday afternoon, Forest said: “The club intends to continue to cooperate fully with the Premier League on this matter and are confident of a speedy and fair resolution.”
This season Everton have already been hit with the largest points penalty in the history of the Premier League.
The club was deducted ten points in November, and have since launched an appeal.
The rules Forest are accused of breaching fall under the Premier League’s profitability and sustainability regulations. They are sometimes referred to as financial fair play or ‘FFP’ – although this phrase actually relates to different rules which UEFA employs to their competitions.
The league said Forest’s breaches related to the end of a reporting period in ending season 2022-23, but released no further information about the exact circumstances.
It added in a statement: “Commissions are independent of the Premier League and member clubs. The proceedings are heard in private with the Commissions’ final decisions made public on the Premier League’s website. The League will make no further comment until that time.”
The Premier League’s rules say clubs can lose up to £15million of their own money over a three-year monitoring period.
However, losses of up to £105million are also allowed as long as the £90million difference is covered by secure funding from a club’s owners.
This can involve buying up more shares, instead of giving their club a loan.
Forest owner Evangelos Marinakis has switched debt to club shares four times, in an attempt to improve Forest’s financial footing and stay within league regulations.
In December, the club announced Mr Marinakis had converted £11 million of loans into shares for the current financial year.
It was the fourth consecutive year in which Mr Marinakis converted club debt into equity.
In the 2021/22 financial year he converted £41m worth of loans into shares. This followed a similar conversion of £12m in 2020/21 and over £20m in 2019/20.
However, in two of the years in the three-year monitored cycle, Nottingham Forest were in the Championship, where their loss cap would’ve been significantly less.
Championship teams are allowed to lose the same £15 million over three years. But losses up to only £39 million are allowed at the upper threshold as long as the £24 million difference is covered by ‘secured funds’.
This means Forest are likely not subject to the £105 million loss cap but must be within £61 millions of losses over the last three years to comply with the rules.
In previously handing out Everton’s ten-point deduction, a commission determined the club had lost £124.5 million in the 2021-22 season – £19.5 million over their threshold.
