Jersey Reds - Administration???

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 Camquin wrote:

My worry is that Jersey went into the season with a business plan that essentially says "A miracle happens here" 

They needed extra investment to pay the first month's salary. 
They obviously thought they had a backer willing to put in money - but unless the ink is dry and yo have seen the money - it is a gamble.

This is the second season in three that Cambridge will lose a home game due to a club collapsing in the weeks before the league season starts.

Pirates will not be able to cancel the staffing, suppers for tomorrow, so lose that and the gate money. 

Hopefully, teams will be able to get their travel spend for Jersey back. If they can that might just compensate for the loss of a home game. 

A lot of supporters will not. 

What was the RFU doing?

Camqui's point and the points made by others are valid. 

However for those running the company behind Jersey Reds it is a very tough business/financial call. It maybe that the existing investors and possibly potential new investors were holding out the promise of further funding depending on the outcome of talks with the RFU, the financial windfall of the game against Exeter Chiefs etc.

For a sports business the decision and timing of when to pull the plug is almost certainly binary. In other businesses that market to other businesses you may be able to reduce costs in stages with redundancies and other cost cutting measures and still retain operational effectiveness and potentially your client base.

When your customers are the public and your major costs are a squad of players and coaches it would be very difficult to incrementally scale back......This will all be a hindsight test for the liquidator but I suspect that Jersey's board of directors would have considered the position prior to the start of the season and probably had a financial plan which although perhaps dependent on further investment was considered to be reasonable with a likely prospect of the further investment (probably based on talks with existing investors).

If you pull the plug too early you could be viewed as destroying a viable business and impacting creditors/staff and shareholders..........pull the plug too late and you will be accused of not acting soon enough. It is a horrible dilemma and most boards will be advised by experienced professionals to assist in making such a decision.

I have been in the above position a number of times and thankfully was always on the right side of the decision but some were spectacularly close calls with either trade sales or further investment (which had being worked on for many months) being finally secured at a few minutes to midnight. 

It is a very difficult position to be in and requires very close monitoring of all the facts on a daily basis to determine when the realistic prospect of being able to continue to trade has evaporated. Some times this can be quite a few months ahead of actually running out of cash but often because of the realistic prospect of a trade sale or further investment, (which has likely been worked on for months) it runs right up to the wire and sometimes it only falls over at the final hurdle when the buyer or investor gets cold feet.

I have also been in situations where directors with no equity interest in the business have turned turtle at the first whiff of financial difficulty and have pushed for Administration at way too early a juncture before the options to salvage the business have been properly explored. 

In both these cases the businesses were saved through a combination of a solvent transaction and an improvement in trading through the extremely hard work and tireless efforts of the other directors and the staff and employees. 

It is always very difficult for all involved and I would never judge any business in this situation until I knew all the facts which are usually uncovered by the Administrator/Liquidator and set out in their reports.

Edited by Big Eddie - 28 Sep 2023 at 14:05