Crystal Palace's Europa League qualification hangs in the balance after UEFA rejected proposals from shareholders John Textor and David Blitzer to place their shares in blind trusts.
The FA Cup winners face potential exclusion from European competition due to multi-club ownership regulations.
Textor, who holds a 45 per cent stake in Palace, is also the majority owner of Lyon, whilst Blitzer owns Danish club Brondby.
Both Lyon and Brøndby have qualified for UEFA competitions next season, creating a conflict under European football's governing body's rules.
Crystal Palace face being booted out of the Europa League
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The regulations prohibit individuals from having control or influence over multiple clubs participating in the same UEFA competition, leaving Palace's first-ever Europa League campaign in serious doubt.
Palace executives, including Textor and chairman Steve Parish, met with UEFA officials in Nyon on Tuesday in an attempt to find a solution.
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According to the Guardian, UEFA rejected the blind trust option because the club missed the 1 March deadline for registering such arrangements.
UEFA rules stipulate that ownership changes must occur before 1 March to take effect for the following season.
Palace were told this week they would receive no flexibility on this deadline.
European qualification wasn't on Palace's radar before March, as they sat mid-table in the Premier League and hadn't progressed beyond the FA Cup fifth round.
The club now faces paying a heavy price for this lack of foresight.
UEFA sources stressed that with more than 300 clubs participating in its competitions each season, regulations must be applied consistently.
UEFA's multi-club ownership rules are explicit: "No one may simultaneously be involved in any capacity whatsoever in the management, administration, and/or sporting performance of more than one club participating in a UEFA club competition."
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Crystal Palace qualified for the Europa League after winning the FA Cup
PA
The regulations also prohibit any individual or legal entity from having "control or influence over more than one club participating in a UEFA club competition."
This includes holding majority voting rights, appointing board members, or exercising decisive influence in club decision-making.
Palace's European position is under threat rather than Lyon's, as UEFA rules state that the club ranked highest in their domestic championship receives priority.
Lyon's sixth-place finish in Ligue 1 gives them precedence over Palace, who finished 12th in the Premier League.
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Crystal Palace are unable to move to the Conference League due to David Blitzer's ownership of BrondbyGettyShould Palace be barred from the Europa League, Nottingham Forest could be promoted to take their place after qualifying for the Conference League by finishing seventh.
Brighton, who finished eighth, could then replace Forest in the Conference League.
Textor told the Daily Mail after Tuesday's meeting that he is seeking to sell his 45 per cent stake in Palace. However, there is little realistic prospect of this happening before the Europa League qualifying draw on 17 June.
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