Both former owner of Watford FC Laurence Bassini and the club have been charged with misconduct by the Football League.

The charge relates to alleged breaches of the Football League’s regulations regarding two separate transactions that are said to have taken place in 2011 between the Hornets and a finance company called LNOC Limited.

One of the alleged transactions concerns two transfer instalments following Danny Graham’s move to Swansea City and the other is for two promissory notes worth £1.8m.

Yesterday, solicitors acting for Mr Bassini said the matter would be “defended vigorously”.

The league became concerned after Watford attempted to enter into a finance agreement earlier this year with a company (not LNOC) that was going to buy promissory notes from Watford for money the club was due to receive from Bolton Wanderers for the sale of Marvin Sordell.

When the Hornets and Mr Bassini approached the Football League about this agreement, the governing body claims it made it clear such an arrangement would need its approval.

Although the Sordell finance deal did not go ahead, the Football League says it then became aware Watford had allegedly failed to reveal two similar agreements were already in place with LNOC.

One involved a transaction between the Hornets and LNOC Limited relating to the final two instalments of Danny Graham’s transfer fee from Swansea, each worth £500,000.

The Football League claims Watford breached regulation 44.2 on two counts relating to the Graham/LNOC Limited deal, as the club had an obligation to provide the governing body with a copy of the contractual document and because the agreement needed the League’s approval. Both of which, it is claimed, did not happen.

The Hornets and Mr Bassini are also accused of breaching regulation 48.1, which relates to third party investments, because they did not receive the League’s consent.

Swansea subsequently paid the first £500,000 instalment into the Football League’s transfer account, which clubs are obliged to do.

The governing body claims that when it asked Watford if an agreement with LNOC Limited existed, it was told it did not and the money was subsequently paid to the Hornets.

The second instalment was then paid directly to Watford several months later, in February 2012.

It is said LNOC Limited then threatened Swansea with legal proceedings as the finance company had not received the money.

The Football League intervened and money Watford was due to receive this year from the governing body was paid to Swansea for that club to pass on to LNOC.

The second transaction also relates to LNOC. It is claimed Watford agreed to two promissory notes each worth £900,000, a total of £1.8m, in return for a £1.66m advance from the finance company.

In relation to the promissory notes, it is claimed Watford and LNOC signed a further agreement that would entitle the finance company to £1.8m of the Hornets’ money from the Football League ‘pool’ account, if the two notes were not paid.

The Football League claims Watford should have notified it about the second LNOC agreement within 24 hours and failure to do so was a breach of regulation 19.

If clubs sign an agreement in which a third party is set to receive some, or all, of its money from the Football League pool account, it is subject to a transfer embargo during which it cannot sign players without prior consent from the governing body until that agreement has been concluded.

That would have meant Watford should have been under a transfer embargo from September 2011 and would have needed Football League permission to sign players.

The Football League believes the circumstances surrounding payment of the Graham transfer money could have caused significant prejudice to clubs and the image of professional football.

It has charged Watford and Mr Bassini with misconduct.

It is also seeking to disqualify the former owner from being a director of a club for a period of time to be determined.

Solicitors acting for Mr Bassini said: “We are not instructed by Mr Bassini in relation to the proceedings commenced by the Football League however we understand from our client these matters are currently the subject of legal action and are being defended vigorously and he is therefore unable to comment further”.

The Football League declined to comment when asked this week.

Watford intimated, when questioned by the Watford Observer, that it would be inappropriate to comment on this matter at the current time.