Restructuring your business

1. Restructuring your business Declan Taite, FGS Partner, Corporate Restructuring & Insolvency

2. 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.

3. 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.

4. 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.

5. 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?

6. 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.

7. Introduction / General overview • Debt burden. • Significant over-capacity in the golf club sector with in excess of 430 clubs. • Falling membership numbers.

8. 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!!!

9. Recent high profile golf club failures • The Macreddin Golf Club plc. • Moyvalley Golf Club plc • Blarney Golf Resort • Heritage Golf Club • Tulfarris Golf Club

10. 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

11. 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.

12. 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.

13. 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!

14. 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.

15. 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.

16. 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.

17. 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

18. 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.

19. Restructuring Options - An Outsourced Solution Golf Club XYZ - An Outsourced Example

20. 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%.

21. 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.

22. 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.

23. 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.

24. 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

25. For further information about FGS visit our website: www.fgspartnership.com

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