Restructuring your business

Declan Taite, FGS Partner,Corporate Restructuring & Insolvency

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 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:

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

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 overview

Debt burden. Significant over-capacity in the golf club sector with

in excess of 430 clubs. Falling membership numbers.

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

The Macreddin Golf Club plc.

Moyvalley Golf Club plc

Blarney Golf Resort

Heritage Golf Club

Tulfarris Golf Club

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 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 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 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 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?

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 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 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 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

Golf Club XYZ - An Outsourced Example

Cost Area Efficiencies Achieved

Course Maintenance Costs 27%

Payroll Costs 22%

Machinery and Vehicle Leasing Costs 33%

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 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 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 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.

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

For further information about FGS visit our website:

www.fgspartnership.com

Thank you

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