THERE ARE NO GUARANTEES IN LIFE
What happens when a company you bought from goes bust?
When businesses fail there are lots of causalities. There are the owners of the business, employees, and customers. They can all suffer as a result. Here are some of the things you need to be aware of if you’re dealing with a company that’s in trouble.
Gift cards are a great way to ensure you give someone something they can use without having to secondguess exactly what they might for a birthday, Christmas or some other special occasion. But it’s important to understand your rights when purchasing them for other people as they can, potentially, end up being a lot more trouble than simply slipping some cash into a card.
Many of the issues with gift cards have been put into sharp focus with the closure of toy retailer Toys ‘R’ Us. When a business that has issued gift cards closes down, the holders of those cards become unsecured creditors.
In practical terms, an unsecured creditor is someone who will be amongst the last to get paid once all the other defunct company’s financial obligations are met. That’s because although the company owes you money or goods or services, you don’t have any stake in any of the company’s assets. So, when the assets are sold after the company stops trading, nothing you own or have an interest in has been sold.
When that happens, the worstcase scenario is that you lose the entire value of the gift card.
Toys ‘R’ Us took a more controversial approach. The liquidator overseeing the closure of the retailer gave customers holding gift cards two weeks to use them, regardless of the expiry date. But, in an “interesting” move, the administrators Mc GrathNicol, added another condition.
In order to redeem a gift card, you needed to spend the equivalent value in cash. So, to redeem a $50 gift card, you needed to spend another $50 of your own money.
The Australian Securities and Investments Commission says voluntary administrators can place new conditions on the use of gift cards when a retailer goes out of business. So, while the move by Mc GrathNicol sucks for customers, at least they had some opportunity to redeem their cards.
If you have a lay-by with a company that’s going bust, you’re also an unsecured creditor. Your best bet is to get to the store and pay the item off. Otherwise, once the retailer stops trading, you’ll lose the deposit and any opportunity to get the items you had set aside.
WARRANTIES AND GUARANTEES
If you’re concerned about warranty and ongoing support arrangements, the ACCC recommends that you contact the party overseeing the close down of the company. That’s where things can get messy.
It’s important to keep receipts just in case the easiest road, for you, is to go back to a distributor or manufacturer. That’s not ideal but it may be the only way to get a problem resolved once the place you purchased from is closed.
WHAT IF YOU’RE LEFT HANGING?
The ACCC advises that if a company you’re dealing with stops trading and they owe you money, you will need to register with the external administrator as an ordinary unsecured creditor.
The insolvency process will determine whether you receive the goods paid for, a full or partial refund, or not at all.
It’s almost impossible to know of a company you’re dealing with is likely to fold while you’re holding gift cards or some other form of store credit. Our advice is to use gift cards promptly when you receive just in case. But if you are holding gift cads for a retailer that looks like they’re in trouble, use them and keep an eye on the news for any new conditions that might be imposed.
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“The insolvency process will determine whether you receive the goods paid for”
ANTHONY CARUANA has worked for almost every major masthead in the Australian IT press. As an experienced IT professional – having worked as the lead IT executive in several businesses, he brings a unique insight to his reporting of IT for both...