Wasps and Worcester have failed with ‘no fault insolvency’ applications that would have seen them avoid automatic relegation from the Gallagher Premiership if successful.
Administrators made the applications for Wasps Holdings Limited and WRFC Trading Limited, the main operating entities of each club.
The Rugby Football Union said that both applications cited impact of the Covid-19 pandemic as the primary reason for entering administration in October.
But the RFU board has now ratified a recommendation from the governing body’s club financial viability group that both applications should be rejected, although Wasps and Worcester can now appeal to an independent panel.
The timeline to agree sales of both clubs is next week. Should that be met and rugby creditors paid, then Wasps and Worcester will begin next season in the Championship
In Wasps’ case, the RFU’s view was that the club provided “insufficient evidence” to conclude there was no fault on the club’s part.
Wasps’ business plan was described as lacking resilience and one that could not transform a “loss-making and debt-funded business”.
In terms of Worcester, the RFU identified “a business model which did appear to be perpetually funded by debt”, adding that “the directors of the club had allowed the club to be in such a precarious position that a shock such as Covid, the challenging debt markets or another external event would have created a real and increased likelihood of an insolvency event happening”.
RFU chief executive Bill Sweeney said: “We are all deeply concerned by the insolvency of Worcester Warriors and Wasps rugby clubs.
“We appreciate this decision will be disappointing for the clubs and their fans, but it is clear from the club financial viability group’s investigation that there were factors beyond Covid that resulted in the clubs entering insolvency.
“This has reinforced the need for greater financial transparency between clubs, Premiership Rugby and the RFU to enable both organisations to have better visibility of how these businesses are run.
“We are already working on plans with Premiership Rugby to explore how to improve the structure, governance and business model of rugby union in England and support the clubs in becoming more sustainable.”