Leisure Sector Update: Early Restructuring Advice to Protect Your Business and You
Welcome to the Harrison Drury Leisure Sector Newsletter. Your regular update on legal developments across the leisure, hospitality and tourism sector. Our aim is to keep you informed, prepared and ahead of the curve with insights tailored to support you and your business.
The Cost of Waiting too Long
Leisure and hospitality continues to face a challenging economic environment. Rising costs, tighter consumer spending, staff shortages and increased financing pressures are all placing significant strain on cash flow and margins and for many, the pressure is persistent rather than temporary.
We know that when these circumstances result in financial difficulties, it is not uncommon for owners and directors to feel that there is a stigma attached to seeking advice, and so to try to avoid it, instead hoping that the issues will be remedied maybe by a strong summer, by a refinancing, or even by a sale. However, delaying action can gradually narrow your options and that in turn, in some cases, can increase the risk of personal exposure for directors.
There should be no stigma in seeking restructuring or insolvency advice. Engaging with specialist advisers early is a responsible step that many well‑run businesses take as part of prudent governance and the role of advisors like the specialists at Harrison Drury is not simply to close businesses, but to help preserve value, protect jobs and minimise risk for both the company and its directors.
Early advice typically allows for and leads to better and more flexible outcomes. With time on your side, tools such as informal restructurings with landlords and lenders, time‑to‑pay arrangements with HMRC, solvent reorganisation options or managed wind‑down strategies may all be available. These can often avoid the need for a formal insolvency process or, where a formal process is appropriate, can make that process more orderly and with better options.
Case Study
John was the sole director of a small company operating two bar‑restaurants. Trading had been difficult for some time, and the business had begun to fall behind on rent, VAT and supplier payments. Rather than taking advice, John continued to trade in the hope that a busy summer would restore profitability. To keep the doors open, he personally guaranteed new supplier credit and allowed tax arrears to increase further.
When the company ultimately entered liquidation, there were insufficient assets to realise to repay creditors. The liquidator investigated John’s conduct and sought a contribution from him personally, alleging that the company had traded wrongfully once it was clear there was no reasonable prospect of avoiding liquidation. His personal guarantees were also called in, leaving him with significant personal debts that might have been avoided.
Had John taken advice earlier, cash flow and viability could have been assessed at an earlier stage. Options such as negotiating with key stakeholders, closing one loss‑making site, or implementing a timely formal restructuring process could have been explored. Whilst obviously undesirable, this could have reduced creditor losses, protected more jobs and significantly limited John’s personal risk.
How we can help
Our Insolvency and Restructuring Team has extensive experience advising leisure and hospitality operators of all sizes. If you are concerned about your business’s financial position – however early the stage – please contact us for a confidential, without‑obligation discussion.
We would be pleased to talk through your options and help you put a clear, commercially focused plan in place.
We have a team of solicitors across a range of legal disciplines all with significant experience in supporting businesses in the leisure sector. Meet our leisure sector team to see how our team can help support you. If you wish to subscribe to our leisure newsletter, please do so here.