Everton and Nottingham Forest face the threat of points deductions this season after the Premier League said the clubs had confirmed they were in breach of the competition’s financial rules.

Here, the PA news agency takes a closer look.

What has happened?

The Premier League says Everton and Forest have confirmed to it that they are in breach of the competition’s profitability and sustainability rules (PSR), having incurred losses above permitted levels for the assessment period up to the end of last season. Independent commissions will now be appointed to determine the appropriate sanctions, the league said in a statement on Monday afternoon.

What are the PSR?

The intention of these regulations is to ensure clubs are run sustainably. They have been in place for over a decade. Clubs are in breach of PSR if their losses over the assessment period – usually three seasons but in this case 2022-23, 2021-22 and an average of the two Covid-affected seasons before that – exceed £105m. Losses related to investment in infrastructure spending and other areas such as youth and women’s football are “added back” and not included within the calculation of loss. Forest’s maximum permitted loss was £61m, with the threshold reduced by £22m for each season that they were in the Championship during the assessment period. Critics of PSR say the rules lock in advantage for the bigger clubs with higher revenues and prevent ambitious clubs from challenging the elite.

What have the affected clubs said?

Forest say they intend to “continue to co-operate fully with the Premier League” and that they are “confident of a speedy and fair resolution”. Everton, who are already appealing against a 10-point penalty imposed by an independent commission in November in relation to an earlier PSR breach, released a much more bullish statement which highlighted what they see as “a clear deficiency” in the league’s rules. The club are understood to feel they are the subject of ‘double jeopardy’, and that league rules do not prevent a club being sanctioned for breaches which have already been subject to punishment.

What happens now?

• Clubs have 14 days to respond
• Hearings must conclude within 12 weeks

Clubs agreed a new expedited process to deal with PSR breaches at their most recent annual general meeting in summer 2023. Under that process, Everton and Forest have 14 days to respond to Monday’s complaint from the Premier League, and hearings must conclude within 12 weeks of the complaint being issued. The commission’s decision must be handed down within seven days of the hearing’s conclusion to allow time for the appeal process, which must be complete no later than June 1 – the point at which promoted clubs gain their Premier League ‘shares’. In Everton’s case, they say the ‘in-season’ process means they must defend the league’s complaint before the appeal against the November sanction has even been heard.

If Everton and Forest’s cases will be dealt with this season, why is the Manchester City case still rumbling on?

In simple terms, because the City case is so much more complex. Although the league announced City had been referred to an independent commission last February, the size and scope of the case means it will take much longer to resolve. Sources close to the league point out that even if a case of an equivalent magnitude happened now, since the adoption of the ‘in-season’ process, it could not be dealt with under an expedited process.