As Huddersfield Town wait for news on any potential transfer for former player Jordan Rhodes from Blackburn Rovers, this is how a sell-on deal works.
Town are due to receive 20% of any profit on Rhodes, who moved to Ewood Park in an £8m deal in August 2012.
So these are the key factors:
Clubs are not allowed to owe money to two clubs in relation to the same player.
While that principle is straightforward it can become complicated in practice because of payment terms and possible extra add-ons which may arise in future, plus sell-on clauses.
If a club still owes part of a transfer fee to the player’s previous club, then this must be paid up first, in full, at the time he moves on to his next club.
So, out of any cash that’s received at the start, the first slug of that must go to pay off any outstanding amount to the previous club.
If an £8m player is paid for at £2m over four years, and he is sold again after the second year, the remaining £4m must be paid up to his to his previous club when the he is sold, before the selling club gets to keep a penny.
Sell-ons are paid to previous clubs pro-rata when cash is received by the selling club.
Were Blackburn, for instance, to agree £9m down and be guaranteed £5m later for Rhodes, then Blackburn would make a £6m profit on the £8m cost.
Town – having been paid any remainder still due out of their initial £8m for the player, which was reported last year to be £2m – would also initially receive 9/15ths of their 20% sell-on of the £6m profit.
The rest of the profit sell-on would then come pro-rata as Blackburn receive the rest of the guaranteed cash.
If other add-ons are earned, such as promotion bonuses or appearance fees, then Town would get a share of those too, but only when Blackburn get the cash from the buying club.
Town, in turn, would have to pay Ipswich pro-rata for their sell-ons from when Rhodes moved to the John Smith’s Stadium in July 2009.