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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.


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.


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.


If you’ve had an is­sue or had some­thing hap­pen and you think in­ves­ti­ga­tor could help, email your prob­lem to in­ves­ti­ga­tor@pcan­dtechau­thor­

“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...

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