An interview on a TV chat show in 1981 produced legendary Liverpool manager Bill Shankly's famous quote: "Someone said 'football is more important than life and death to you' and I said 'Listen, it's more important than that'." Few will deny the importance of football in the national psyche. But football is now no longer purely a sport. It is an enormous business, with well-known Premiership clubs receiving and spending vast sums of money. The aspiration of every club in each league is to be promoted to the league above; and the dread of every club is the prospect of relegation to the league below. League position determines a club's profitability, as well as its corporate value.

To some extent, we are now in a new age where, for the first time, commercial interests threaten to distract the game of football. It was largely because of the onset of the age of professionalism in 1885 that football became a disorganised mess, with games being called off because clubs had arranged more lucrative games elsewhere. It was in this climate (and to bring order to the game) that the Football League was founded, in the Anderton's Hotel in Fleet Street on 22 March, 1888, the brainchild of William McGregor.

But today's world is a far cry from the days when organised football competition began. If McGregor were alive today, he would barely recognise the league competition that he founded.

For a start, football is now extremely complex – not just the game, but the entire structure. Almost everything that happens within a football club needs experienced legal and commercial advice and specialist input on matters such as tax, employment, commercial contracts, loan and equity funding and corporate governance.

An additional complication is the growth of the game's regulatory provisions. Now the most important and often incomprehensible feature of a football club's existence is the plethora of rules and regulations established by the Football Association (FA), the Football League (and the Premier League for the top clubs), and (where relevant) FIFA and UEFA. Then there is the Professional Footballers' Association (PFA). These rules govern the conduct and misconduct (as defined by those organisations) of clubs, their owners and directors, officials and players. Club owners and directors are assumed to have a complete knowledge and understanding of the rules and regulations. This simply is not practical, which is where external advisers have a vital role to play. An increasingly frequent and critical aspect of specialist legal advice required by clubs arises from confrontations and disputes with the FA, in respect of what is considered by the relevant club to be an unfair, harsh, arbitrary, discriminatory or misconceived application of its rules. Most contested rule applications have imposed a disciplinary sanction or have a punitive sting in their tail, which, by their nature, disadvantage the club in some way. The FA has enormous powers and the exercise of these have given rise to challenges in the High Court.

While we are used to reading about the enormous wealth and success of the top clubs in football, there is another side to the game which exists in parallel: the large number of clubs that experience financial difficulties and enter into an insolvency process. The roll call of clubs entering administration is long: Bradford City (with debts of £36.5m), Leeds United, AFC Bournemouth, Luton Town, Wimbledon FC, Notts County, Port Vale, Leicester City, Ipswich, Barnsley, York, Huddersfield and Exeter City FC are all recent instances. The full list is longer. So why have so many clubs gone into administration? The answer is that very few clubs break even as a result of player wage costs. Notorious schemes have been devised to surmount this difficulty, such as that used by Bradford City – ominously referred to as 'off-balance sheet third-party transfer funding'. This scheme worked by the club 'buying' players by way of a lease from a third-party, such as a bank, over the length of the players' contracts. The attraction of this scheme is that the selling club receives its money upfront and the buying club has the benefit of paying in instalments. However, the accounting treatment of this scheme concealed the true extent of Bradford City's insolvency.

An emotive issue that is never far from the headlines is the FA's attitude in its rules towards clubs which go into administration. An immediate consequence is the mandatory deduction of 10 points from its league table position. The League imposes this sanction as a way to penalise clubs that do not and cannot pay their creditors because of financial mismanagement. On the face of it, there is a case to be made for this sanction. However, it will apply irrespective of whether some unforeseen catastrophe is the cause of the predicament of the club, or plain poor corporate management. The automatic 10-point sanction is just that – it does not distinguish between levels of culpability within the two extremes. The deduction only applies to the football season in which the administrator was appointed. The effect of the 10-point deduction can be catastrophic for a club. It is very likely to result in the club being relegated, and this will further dissuade commercial investment and therefore the club's future prospects. Surely it was wishful thinking on the part of Sean O'Driscoll, the former AFC Bournemouth manager when he suggested that: "Whether you have got millions or are in administration, the important thing is attitude and commitment – all the things that cost nothing."

Recently, Leeds United went into administration and suffered the mandatory 10-point deduction. The Football League subsequently imposed a further 15-point deduction on the club. The legality and propriety of this is currently being challenged in the High Court and will be a matter of much interest to the footballing community and its governing bodies.

Is it time for a wholesale rethink about the nature and type of sanction that apply when a club enters administration? Should football's governing bodies do more (or less) to assist its member clubs? Is a blanket points deduction fair and reasonable, irrespective of the cause? Is it an appropriate deterrent or it is a penalty that is applied too blindly? There are many club directors who, with some justification, would welcome reform in this area. The current regulatory regime tends to hit the most vulnerable clubs the hardest. Apart from the 10-point deduction, the following additional points apply:

- During a transfer window covered by the administration period, the club can sell players, but it cannot buy players. The purpose of this is obviously to prevent expenditure. But is this mandatory rule necessary? Should it not be a matter for the administrators and the creditors of the club? In administration the interests of the creditors are paramount, but there may be circumstances where a player-purchase, with the consent of the creditors, would increase the value of the club and its success on the field if it continues to play while in administration. This would achieve a better return for the creditors in the company voluntary arrangement (CVA).

- The administration has to be accompanied by a CVA. This rule has the ability to work harshly when it is read in conjunction with the well-known 'football creditors' rule. The rule provides that 'football creditors' have to be paid in full, irrespective of the position of the other unsecured creditors of the club. These creditors are paid whatever the prospective new owners can negotiate. This super-priority for a special category of creditor requires justification. Why should a club, which is an unsecured creditor of another club in administration, be more deserving of being paid than the club caterer or the Inland Revenue? The Inland Revenue challenged this rule in the Court of Appeal but lost (Inland Revenue v Wimbledon FC [2004]). The Inland Revenue's fallback position is to vote against a CVA proposed in relation to a club as a matter of policy.

Presently, lawyers do make a large contribution to football, particularly in relation to its corporate management. It would be a welcome task in the future for lawyers to assist clubs and their governing bodies to devise and adapt rules so the key principle of treating clubs fairly is preserved in these fast-changing times.

Nikki Singla is a barrister at Wilberforce Chambers.