The government has welcomed the Premier League's move to get tough on clubs under a raft of new rule changes aimed at providing greater financial clarity and safeguards within the game.
Clubs could be forced to sell their star players and other valuable assets if they fail more stringent financial tests expected to be ratified by the board next month.
Premier League chief executive Richard Scudamore does not believe there will be a situation where a top-flight club suffers from insolvency but he is ready to hit clubs with severe penalties if any of the elite are found guilty of financial failure in future.
Scudamore was responding to a letter in October from Andy Burnham, the Secretary of State for Culture, Media and Sport, concerning finances at, and ownership of, football clubs and a spokesman for his office said: "We are encouraged by the Premier League's response, in particular the proposed changes that will lead to greater financial transparency surrounding the running of football clubs including a strengthened 'Fit and Proper Person's' Test.
"We will continue our dialogue with football on the detail of these proposals and look forward to forthcoming responses from the Football Association and Football League,'' he said.
The Premier League responded to Burnham's questions by insisting that sanctions are just one of the new measures aimed at ensuring clubs survive any possible financial meltdown.
"It's more about putting other sanctions upon them and that will be for the board to decide what the appropriate sanction is,'' Scudamore added.
"It might be no transfers, it might be forced sale of players, forced sale of assets, there must be other things you can do to keep the club alive, because the most important thing is to keep the club in existence.''
The Premier League have proposed 10 rule changes aimed at tightening-up the governance of clubs at the highest level.
They want to reduce the risk of another 'Leeds', who collapsed into insolvency after gross overspending in the early part of this decade and were relegated in 2004.
"What happened to Leeds is what should happen to Leeds if you run the club like that,'' Scudamore added.
"It's tough on Leeds fans. But what these rules envisage is the football authorities getting involved earlier in that process, a bit more interference in that process. Not to prevent it, but to reduce the chance of that happening.
"If a club has overstretched to get a competitive advantage, if you get yourself in financial difficulties, it should unravel.''
The Premier League are also looking to enhance the 'early warning system' by asking clubs to submit future financial information and to improve the transparency of ownership by amending the rules to require disclosure of any interest in a club above 10%.
Other significant rule changes include making anyone ineligible for directorship if they have been convicted of a one-year prison sentence for any offence.
Individuals who are banned from entering the UK or whose assets are frozen will also be barred from taking up a club directorship under the proposed changes.