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Restructuring your business. Declan Taite, FGS Partner, Corporate Restructuring & Insolvency. Experience overview. Macreddin Golf Club : Acted as Receiver and Manager to the acclaimed golf course designed by Irish Ryder Cup legend Paul McGinley.

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restructuring your business

Restructuring your business

Declan Taite, FGS Partner,

Corporate Restructuring & Insolvency

slide2

Experience overview

  • Macreddin Golf Club: Acted as Receiver and Manager to the acclaimed golf course designed by Irish Ryder Cup legend Paul McGinley.
  • Michael McNamara & Company: Appointed statutory receiver by NAMA.
  • Vantive Holdings and Morston Investment Ltd: Appointed Official Liquidator to the two holding companies within Liam Carroll’s Zoe Group.
experience overview
Experience overview
  • Zoe Group: appointed Receiver to four companies within Group, with significant land banks within the Dublin Docklands area.
  • Kinnitty Castle Hotel: appointed Receiver to the renowned hotel and wedding venue.
  • BDS Security Management: appointed Receiver to one of Ireland’s largest providers of static security care.
experience overview1
Experience overview
  • Elenco Engineering Ltd: appointed official Liquidator to this top five mechanical and electrical provider.
  • Building/development companies: appointed Receiver and Manager to a series of companies located in Kilkenny, Laois, Wexford, Cavan, Mayo, Leitrim and other counties.
presentation contents
Presentation contents:
  • Introduction/General Overview
  • Recent high profile golf club failures
  • Sustainability and Profitability
  • Working Capital Management
  • What is Insolvency?
  • Implications of Insolvency for Directors?
  • Restructuring Options
  • Some good news?
introduction general overview
Introduction / General overview
  • Unprecedented economic environment.
  • Record levels of insolvency & business failures.
  • 1 in 7 failures occurring within hospitality / leisure sector.
  • Illiquid market.
  • Working capital pressures.
introduction general overview1
Introduction / General overview
  • Debt burden.
  • Significant over-capacity in the golf club sector with in excess of 430 clubs.
  • Falling membership numbers.
introduction general overview2
Introduction / General overview
  • Questions must be asked regarding sustainability of certain golf clubs:
    • What can be done?
    • What are the options?
    • How do we preserve sustainability and profitability?
    • There is no magic solution!!!
recent high profile golf club failures
Recent high profile golf club failures
  • The Macreddin Golf Club plc.
  • Moyvalley Golf Club plc
  • Blarney Golf Resort
  • Heritage Golf Club
  • Tulfarris Golf Club
sustainability profitability issues
Sustainability & profitability issues
  • Joining fees
  • Annual memberships fees
  • Green Fees
  • Catering / food & beverage
  • Pro shop
  • Bank debt
  • IT Automation
  • Marketing
  • Recalibration of economic model required
working capital management
Working capital management
  • Know what your club’s burn rate is – the rate at which the club is consuming cash on a monthly basis.
  • Identify the timing of major cash outflows within the club.
  • Identify also those external factors which will impact on the cash-flow of the business i.e. seasonality issues, adverse weather etc.
working capital management1
Working Capital Management
  • Review cash-flow projections, at least, on a monthly basis. 
  • Monitor actual cash-flow performance against projections and ensure all financial information is kept up to date to allow for quick informed decisions to be made.
working capital management2
Working capital management
  • Preserve cash by maximizing credit terms from suppliers. Review all cash outgoings and eliminate unnecessary expenditure.
  • Seek financial advice early if you anticipate pressure on the club’s cash-flow – don’t stick your head in the sand!
working capital management3
Working capital management
  • In terms of those clubs with bank debt –take a proactive approach by meeting your bank manager if cashflow problems are foreseen, before they approach you!
  • Take positive steps to manage the situation.
what is insolvency
What is Insolvency?
  • Definition of Insolvency
  • On becoming aware of insolvency…..
    • Seek relevant legal and financial advice.
    • Preserve assets for benefit of all creditors.
    • Do not incur any further credit.
    • Do not make any payments other than justifiable payments associated with preserving assets (insurance, security, utilities).
    • Do not dispose of assets.
implications of insolvency for directors
Implications of Insolvency for Directors
  • Potential Restriction / Disqualification from acting as director of a company (Section 150 & 160, Companies Act, 1990).
  • Potential Fraudulent & Reckless Trading (Section 297 / 297A, Companies Act, 1963 as amended).
  • Potential Fraudulent Preference (Section 286, Companies Act 1963).
  • Potential Loss of Tax Clearance Certificate.
  • Crystallization of Personal Guarantees.
  • May affect personal ability to borrow.
restructuring options
Restructuring Options
  • Remember that approximately 20% of respondents have bank debt greater than annual revenue.
  • Credible cash-flows / projected P&L a pre-requisite in negotiating with finance provider:
    • Term of loan
    • Interest Rate
    • Capital Reduction / Moratorium
restructuring options1
Restructuring Options
  • Levies.
  • Franchise options for catering.
  • Sharing arrangements between clubs – co-op type arrangements.
  • Strategic Plans a must for any restructuring option.
  • Outsourcing of course maintenance costs, payroll costs, machinery & vehicle leasing costs.
restructuring options an outsourced solution
Restructuring Options - An Outsourced Solution

Golf Club XYZ - An Outsourced Example

some good news
Some good news?
  • An important ECJ ruling may provide an opportunity for member owned clubs to make protective claims for VAT overpaid on Green Fees in the last four years.
  • In Ireland, VAT exemption currently applies only to membership fees for these clubs, whereas green fees are subject to VAT at the reduced rate of 13.5%.
some good news1
Some good news?
  • However, the ECJ decision in Canterbury Hockey Club strongly indicates that the VAT treatment of a service should not be determined by the status of the recipient of that service i.e. it should not matter whether the recipient is a club member or not. 
  • The logical conclusion to be drawn from the ECJ’s ruling is that VAT exemption should apply not only to membership fees, but also to visitors’ Green Fees when received by a non-profit making organisation such a member owned golf club.
some good news2
Some good news?
  • In the UK, a large number of claims have been submitted by member owned golf clubs in respect of VAT paid to HMRC on green fees for the last four years. 
  • HMRC in the UK currently contend that the ECJ ruling does not apply in full to non-profit making organisations and as a result have not yet repaid any of these claims.  It is likely that HMRC’s stance will eventually be challenged, but it is impossible to say how soon such a test case will arise.
some good news3
Some good news?
  • In the meantime, you may wish to consider preparing and submitting a protective claim for VAT paid on green fees during the last four years.
slide24

Please Note: This slide presentation is for guidance purposes only and should not be relied upon as being sufficient in specific circumstances.

For further advice or assistance please contact:

Declan Taite,

Partner FGS Corporate Restructuring & Insolvency

T: + 353 (0) 1 4182000

E: declan.taite@fgspartnership.com

thank you

Thank you

Registered to carry on audit work and authorised to carry on investment business by the Institute of Chartered Accountants in Ireland (ICAI). Chartered Accountants Ireland is the operating name of ICAI. FGS is a member of the RSM International network. The RSM International network is a network of independent accounting and consulting firms, each of which practice in their own right. The RSM International network is not itself a separate legal entity in any jurisdiction.