The USA Rugby board of directors and congress have voted to officially file Chapter 11 bankruptcy as a result of compounded and insurmountable financial constraints.
The board said the current suspension of sanctioned rugby activities caused by the ongoing Covid-19 pandemic has accelerated the existing financial challenges facing the union, and a reorganisation process would now be progressed with input from World Rugby.
The board and congress agreed that filing for Chapter 11 bankruptcy supported by a robust action plan, was the best strategy to address challenges and deliver a foundation for future stability.
The opportunity for Chapter 11 bankruptcy was presented to USA Rugby Congress over the weekend, where an overwhelming vote in favour officially ratified the filing.
The filing is reinforced by a financial support package approved by the World Rugby Executive Committee (EXCO), where measures will enable USA Rugby to revitalise from a governance and financial perspective; including key milestones, metrics and controls.
This measure will protect and support the men's and women's sevens and fifteens programmes as they continue to compete on the world stage.
Significant cost reductions and a financial support package from World Rugby will allow the board, congress and governance restructuring group to continue under union operation and control.
USA Rugby will retain procedure of the reorganisation over a 30-day period where World Rugby and other creditors will need to review and endorse final court-approved restructuring plans; allowing USA Rugby to emerge from Chapter 11.
"This is the most challenging period this organisation has faced and all resolves were never taken lightly in coming to this determination," noted USA Rugby chairwoman Barbara O'Brien,
"While the current climate is of course much larger than rugby, we remain focused with stakeholders and supporters in the continued effort toward a balanced rugby community where the game can truly grow."
In response to the Covid-19 pandemic, USA Rugby suspended sanctioned competition and rugby activities for a 30-day period on March 13 and indefinitely on March 20, 2020.
Given the need for precaution as instructed by federal health officials, the hiatus of activities and promotion of social distancing the board said it was in the best interest of USA Rugby members and those around them.
The suspension of competition resulted in significant loss of revenue from spring and summer membership dues, sponsorship drawbacks and additional revenue sources.
USA Rugby was aware of the negative financial implications, however held with the suspension and worked on potential solutions to mitigate the impact of lost revenue.
Given the ongoing financial challenges following a 2019 budgetary overspend, the unplanned loss of income advanced an insurmountable cashflow deficit and immediate action needed to be taken.
Chapter 11 bankruptcy resulted as the most ideal scenario where the full body of congress then voted to ratify the filing on Sunday evening.
Through the Chapter 11 filing, significant staff and budget reductions were required at the national office. The USA Rugby headquarters will continue to operate on a condensed staffing model through the remainder of the restructure.
USA Rugby said further information on the accelerated reorganisation, along with pertinent updates pertaining to the effects of Covid-19 would be regularly communicated on its website and social media channels.