Olympique Lyonnais (EEFG.PA), have been relegated to Ligue 2, French football's financial watchdog (DNCG) said on Tuesday following an audit of the club, which said it would appeal the decision immediately.

Lyon were provisionally demoted by the DNCG in November due to the poor state of their finances and the decision was confirmed on Tuesday after a meeting between club owner John Textor and the DNCG.

The club criticised the decision in a statement on Tuesday and said it had worked closely with the DNCG, satisfying all their requests.

"Olympique Lyonnais takes note of the incomprehensible decision handed down by the DNCG this evening and confirms that it will appeal immediately," the club said, Reuters reported.

"With demonstrated funds and sporting success that has earned us a place in European competition two years running, we sincerely fail to understand how an administrative decision could relegate such a great French club."

The decision to relegate Lyon comes a day after US businessman Textor sold a 43% stake in English club Crystal Palace.

"Thanks to the equity contributions from our shareholders and the sale of Crystal Palace, our cash position has improved considerably and we have more than sufficient resources for the 2025/26 season," the Lyon statement added.

In October, Textor’s Eagle Football Group revealed debts totalling around 422 million pounds ($574.85 million), raising concerns about the French club's financial stability.

Since then, Lyon have raised funds by offloading several players, including Maxence Caqueret to Como and Rayan Cherki to Manchester City.

The club, however, have been unable to convince the authorities that their financial situation has improved enough to have the sanctions lifted.

The 59-year-old Textor gave a positive assessment of their financial position prior to the decision being announced.

"You can see from the contributions of our shareholders, we have invested new capital, not only for the DNCG, but also for our UEFA licensing process. Not to mention the good news of the sale of Crystal Palace. Our liquidity situation has improved considerably," he told reporters earlier on Tuesday.

Lyon, who were crowned French Champions seven times between 2002 and 2008, qualified for next season's Europa League following a sixth-placed finish in Ligue 1.

Should the decision stand, Stade de Reims, who were demoted from Ligue 1 in the relegation playoffs after losing to Metz, will take Lyon’s spot next season in the French top tier.