Uefa has launched a formal investigation into Manchester City following the allegations that the club violated financial fair play rules made in the German magazine Der Spiegel and based on “leaked” documents.

The most serious allegation was that City disguised investment by the club’s owner, Sheikh Mansour bin Zayed al- Nahyan of the Abu Dhabi ruling family, and represented it as sponsorship by the country’s airline, Etihad.

The chairman of Uefa’s club financial control body (CFCB), Yves Leterme, said this year that if the allegations published by Der Spiegel are true, and City are found to be in breach of rules and to have deceived Uefa, the “heaviest punishment” possible is “exclusion from Uefa competitions”.

Uefa’s FFP rules, intended to encourage clubs not to overspend on players’ wages by making heavy losses bankrolled by an owner, allow sponsorships by companies connected to owners, but only if they are for “fair value”.

Etihad has sponsored City since May 2009, following Mansour’s 2008 takeover, with the club always stating that all the money for carrying the name on their shirts, stadium, academy and other branding came from the airline. An internal email between City executives published by Der Spiegel states that the value of the partnership by 2015-16 was £67.5m. Of that, the email said, “£8m should be funded directly by Etihad and £59.5m by ADUG”, which is Mansour’s own City holding company.

The potential issue for City which Uefa will now investigate is not necessarily that the value of the sponsorship deal is overstated, given the status City now occupy as Premier League champions following 11 years and £1.2bn investment from Mansour, but that the club’s filings to Uefa may not have been honest.

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Uefa and the CFCB, which oversees compliance with FFP, have hesitated about investigating since Der Spiegel first published the allegations nearly four months ago. At the weekend, the magazine published the internal emails and financial presentations on which they were based, and on Thursday the CFCB had a regular scheduled meeting at Uefa’s headquarters in Nyon. The CFCB is understood to have been encouraged by Uefa to investigate, after it initially said it is not set up to do so.

That was agreed on Thursday, and a statement was issued by Uefa. “The investigatory chamber of the independent Uefa club financial control body has today opened a formal investigation into Manchester City FC for potential breaches of financial fair play regulations,” it read. “The investigation will focus on several alleged violations of FFP that were recently made public in various media outlets. Uefa will make no further comments on the matter while the investigation is ongoing.”

City responded to the announcement of the investigation by issuing the first denial of any wrongdoing during the media coverage. Previously the club had refused to engage with questions about the documents or the allegations, saying only: “We will not be providing any comment on out of context materials purportedly hacked or stolen from City Football Group and Manchester City personnel and associated people. The attempt to damage the club’s reputation is organised and clear.”

Der Spiegel has confirmed that its source for the documents was Rui Pinto, who ran the Football Leaks website, and carried his denial that the documents were hacked or stolen. In January, Pinto was arrested near his home in Budapest and now faces extradition to Portugal for alleged “extortion, violation of secrecy and illegally accessing information”, not related to the City “leaks” which he denies.

Following Uefa’s statement, City responded on their website. “Manchester City welcomes the opening of a formal Uefa investigation as an opportunity to bring to an end the speculation resulting from the illegal hacking and out of context publication of City emails. The accusation of financial irregularities are entirely false. The club’s published accounts are full and complete and a matter of legal and regulatory record.”

City’s accounts, audited and filed at Companies House, have always stated since Mansour’s takeover that his investment is not connected to sponsorship income from Etihad and other Abu Dhabi companies. The implication of the statement is that if Mansour was covertly funding Etihad’s sponsorship, it would be a breach of financial law and regulation not to state it in the accounts.

Etihad has always denied that Mansour pays a share of its stated sponsorship, saying in a statement: “The airline’s financial obligations, associated with the partnership of the club and the broader City Football Group, have always been, and remain, the sole liability and responsibility of Etihad Airways. This is reflected in the airline’s audited accounts.”