I am a supplier to hotel’s so this article is largely based on the hospitality sector, but most of the points can be applied to any business.
Before I get into the ‘action plan’ for dealing with hotels or companies that have gone into administration, you need to know a little about the administration process.
Many people panic when they are doing business with a company and they hear that it has gone into administration, administration is very different to bankruptcy. Bankruptcy is when a company has no possible way of survival and everything is lost. Administration is a process of survival.
A company can be placed into administration by one of more companies that it owe’s money to. Typically in the hotel business, the two main culprits who place hotels into administration are banks (who are owed a large amount of money in a mortgage or overdraft) and the Inland Revenue who are maybe owed a large amount of cash in VAT or PAYE payments. A company may also place itself into administration if it thinks things have gone to far.
The company responsible for placing a company into administration, then appoints an Administrator.
The administer is a company specialist in this sort of thing, they act on behalf of the company owners, the people the company owes money to and the general running of the day to day business.
With hotels it is usually normal practice for the administrator to appoint a ‘hotel management company’ to do the day to day stuff which lets them concentrate on the future of the business. The original owner of the business’s involvement mainly depends on the how the administrator feels about how they have ran the business up to the point it went into administration. It is common enough for the administrators to pay the owner a salary to stay involved in the interim, in some cases the owner will not be allowed on the premises for any reason.
The company will not stay in administration for-ever but the time can vary from one month to 3 years (or more) dependent on the debt levels, current turnover and future plans.
There are a number of potential outcomes to administration.
1. Complete bankruptcy, the company has no future and is wound down.
2. Break up, in the case of a hotel, the property and land might be sold in chunks to developers. The fixtures and fittings sold at auction etc, this is common if the month to month business is simply un-viable moving forward. In hotel chains, it is common for the individual hotels to be sold off or the group to be split into smaller groups.
3. The company is sold to another company, this is generally the quickest way out of administrator where another company see’s a bargain and grabs the hotel for a cut down price.
4. The hotel can work it’s way out of administration and return to the original owners, this is also not un-common and a situation were the administrators gets the company running correctly again, cutting all dead weight, re-structuring the debt and sailing on.
5. Management buy-out. Not as common in today’s market but in times when credit is more freely available, management who were not previously owners can club together with the help of investors and banks to buy back the company.
So what do you do, if you supply a company that goes into administration.
The ‘Action Plan’
1. Firstly, you need to get to know your industry. Thankfully, I am well connected in the hotel industry so I hear about these things (in most case’s) before they go public, this means conversations can take place ahead of the news. Have you ever tried calling a business the day bad news is broken? It’s not a good idea.
2. You need to know the law and your rights as a supplier. You have a contract with BIG HOTEL LTD and on 21st May 2011, BIG HOTEL LTD goes into Administration, You are owed every single penny up until 21st May, thats not to say you will get paid that money but you are owed it.
3. You need to cut the credit to BIG HOTEL LTD, if you continue to supply credit to this company there is a good chance you won’t get paid because that company on paper does not trade anymore
4. Speak to the management, the administrators, your contacts, the doorman, the bank, the neighbours dogs, whoever you like. The point of this conversation is three fold, firstly that you are happy to continue to supply them, secondly to agree new terms (ie, reduced credit, a DD mandate, payment up front, whatever you are comfortable with) and thirdly to GET THE NEW COMPANY DETAILS.
The new company details will generally be BIG HOTEL (IN ADMINISTRATION) LTD with the same company registration number and all of your documents, invoices and agreements need to reflect this.
5. Set up a new agreement but be careful who sign’s it, it can be signed by the following people
a) BIG HOTEL (IN ADMINISTRATION) LTD, co-signed by the administrators
b) The administrators themselves
c) The new management company, appointed by the administrators.
6. You need to treat the debt owed to you by BIG HOTEL (IN ADMINISTRATION) LTD and BIG HOTEL LTD as two separate things, if you are like me, you will probably be well down the pecking order for getting paid but you might agree to settle the balance for less. The Government and the Banks will always get their money first, thats just the way it is.
7. Chill out, follow the process and be happy. It is in everyone’s best interest for the company to survive, do your part to make it happen!
My business is built around the hotel industry so I spend my days meeting with general managers and hotel owners of every kind of hotel from a 12 bedroom one man ran operation to a sprawling 1000 acre 5 star estate.
Because the nation’s best hotels are not built within a 100 radius of my house, I often sleep in them too. Sometimes I am the mood for 5 star luxury and sometimes I just was peace, quiet and a bed.
Tonight, I just want the latter so I am staying in a Travelodge. Travelodge are a fantastic business which get a lot of flack but really, a clean room, flat screen TV and a shower for €35 – what could be better?
Obviously to get all this for €35 you lose a lot of the ‘extras’ other hotels give you. There is no porter for example, no breakfast, no bar, no foyer to speak off, no leisure club, no gym the list is endless but Travelodge do this to give you a quality room at a reasonable price. Read the rest of this entry »
Climb a mountain, fly a plane, build a hovercraft, canoe, Race a 4×4, Drive 1500 miles around Ireland in a car worth no more than £100, learn to surf, meet new people, learn to stakeboard, Go to a Gala Ball, Fix a car, Camp with fellow scouts from all over the world, Travel, Go to Australia, America and Canada, Fish, Hike, Swim, Sit around the fire and enjoy the craic, Get outside, DO SOMETHING NEW !
Just some of the things we have done / are doing this year at Scouts all over County Antrim.
Who says Scouts are boring ???? Things have changed over the last few years and the stigma of ‘Scouts are boring’ is starting to leave the movement !
Think its time you got involved ? we have some great sections for older guys and dare I say it, girls !
Antrim Network Scouts caters for people aged 18 – 25 , more info can be found by clicking here.
Lagan Valley Explorers caters for people aged 14-18, more info can be found by clicking here.
I am a better person for what Scouting has done for me, Its time you found out why !
I came across this poem around 10 years ago and straight away thought of my good friend Avril is Clonakilty, so I photocopied it and sent it.
10 years later and im in Dublin on Business crashing at her pad, She found it the other day and was commenting how good it was to still be great friends regardless of the distance!
I was not sure who wrote it then, and im still not now!
Here is it…….
Around the corner I have a friend,
In this great city that has no end,
Yet the days go by and weeks rush on.
And I before I know it a year is gone.
And I never see my old friends face,
For life is a swift and terrible race,
He knows I like him just as well,
As in the days when I rang his bell.
And he rang mine if, we were younger then,
And now we are busy tired old men.
Tired of playing a foolish game,
Tired of trying to make a name.
Tomorrow I say “I will call on Jim”
Just to say Im thinking of him
But tomorrow comes and tomorrow goes,
And distance between us grows and grows,
Around the corner yet miles away,
Here’s a telegram sir “Jim died today”
And thats what we get and deserve in the end
Around the corner a vanished friend
Whilst traveling with my scout group is Northern Territory I received an interesting invitation
‘Dear Russell McQuillan & Guest, The lord mayor of Darwin NT would like to invite you to a reception in the civic centre’
Nice one, We had just been to see the Mayor of Cairns last week when we where in town there!
So uniform on, shoes polished we waited in the room we where to do a few photos and the like, In strolls this old ‘dude’ with a Malawian shirt and a pair of shorts
G’Day, what can I do you for, @oh we are just waiting for the Mayor’
That would be me then, GEORGE
(im thinking this guy is nuts, the Mayor of Cairns had a full title, protection, a suit and a load of staff)
Nice to meet you George, what is your full title for our speech later, GEORGE, JUST GEORGE The only people allowed to call me anything different are my competitors, and I can repeat what those b*stards say!!?
On our travels we found Darwin to be ever so slightly more laid back than the rest of Australia (if thats possable) probably because the Mayor is as laid back as they come!! Nice place to live!
An interesting fact is that Darwin has had to be completely rebuilt twice! Once is WW2 and then again after a cyclone in 1974!