AC Milan have been warned by UEFA they must break even by June 2021 or face being banned from European competition for a full season under Financial Fair Play rules.

The Italian giants had successfully appealed against a ban which would have applied this season, with the Court of Arbitration for Sport agreeing they had breached the break-even requirement of the rules but sending the case back to UEFA's adjudicatory committee to impose a "proportionate disciplinary measure" in July.

The new ruling was announced on Friday, and gives Milan two and a half years to balance their books or face missing European competition in either 2022-23 or 2023-24 should they qualify.

The seven-time European champions did not escape without immediate punishment, with UEFA to withhold €12m in prize money from this season's Europa League, while the club will be limited to registering 21 players for European competition should they qualify in either of the next two seasons.

Milan were knocked out of the Europa League on Thursday night after a 3-1 defeat at Olympiakos saw them finish third in Group F.

Traditionally one of European football's great powers, Milan have struggled for relevancy since their last Serie A title in 2011. In 2017 they dropped out of the top 20 in Deloitte's Football Money League for the first time since it began.

That was the same year the club was taken over by Chinese businessman Li Yonghong, and the club went on a spending drive as more than 200 million euros was spent on the likes of Leonardo Bonucci, Hakan Calhanoglu and Andre Silva.

But Li's reign was brief and ill-fated, and Milan are now controlled by US hedge fund Elliott, which had loaned Li substantial funds to buy the club.

In its ruling in July, CAS noted the club's financial position had "significantly improved following the recent change in ownership".