What happens when a business goes bust?

Over the last few years, countless businesses have filed for liquidation, from big high-street brands to small online organisations.

In 2000 alone over 17,500 chain store outlets closed their doors. Around the UK, too many businesses are boarded up and councils are having to reimagine the high street for future generations.

At Resolver, we believe it’s really important that we support the businesses and brands we love. But it makes sense to be prepared should a shop go bust. Here’s what to watch out for if you’re worried about a business going under.

When firms go under

Officially, when a firm goes bust, you join the long list of creditors who are owed money by the business. In reality, you join the back of the queue. It’s very rare to actually get any cash back. So for most people, when a firm goes into liquidation any cash you’ve paid along with vouchers and gift cards vanishes – even if you’ve not had the goods.

If you want to pursue a complaint – or believe you are owed money – the business website should provide the details of the liquidators (the organisation that is appointed to manage the liquidation of the business).

However, the process of a firm going into administration isn’t usually instantaneous. There’s usually a window of opportunity where you can quickly spend the voucher or recall card payments before the firm goes under.

There’s no way to definitively prepare for this. You just have to keep an eye on the news and remember what vouchers and store credit you have. Sometimes the administrators of the company will allow you to spend the voucher or card – or may even honour them. But the rule of thumb is this – if you hear a firm is going under, spend the voucher.

Vouchers

A voucher is a paper, card or virtual document that entitles you to buy goods or services up to a certain prepaid amount. Vouchers can be bought as gifts or issued in lieu of a refund. In fact huge numbers of people hold vouchers for goods or services that couldn’t take place over the pandemic, from flights to festivals.

Vouchers usually have an expiry date printed on them and you must ‘use it or lose it’ by this date. Many vouchers meet this fate mouldering in wallets and purses across the land. This is why businesses like them – people forget to cash them in. If you have a voucher, put a reminder note in your calendar at least a month before the expiry so you don’t lose out.

Gift cards

Gift cards work in a similar way to vouchers and are almost exclusively purchased as gifts. Again, they should have clear expiry dates on them, though there have been disputes in the past about these rubbing off or not being very clear. If you’re making a complaint about a gift card, then the purchaser usually has to make the complaint.

When a firm gets taken over

In the past there was a general assumption that when a business was purchased or rescued by another party after verging on bankruptcy gift cards and vouchers would be honoured if the firm continued to trade.

That all became a little complicated in recent years. Some new owners suggested that new vouchers would be issued, but we’ve seen hundreds of complaints about this. In short, don’t assume that your vouchers will carry over under new management.

Complaints

When a business goes bust, your complaint usually ends. This is the same for complaints that have been made to an Ombudsman or ADR (Alternative Dispute Resolution Scheme). However, in some sets of circumstances, there may be negotiations with the Courts, Government or regulators about schemes to help people affected by the winding up of the business. This will be specified on the business website and you should be notified by the liquidators of any proposals that might affect you.

One last tip

If you have vouchers or shop credit spend it as soon as you can. And if you hear a firm might go under, ask you bank if they can ‘charge back’ any cash you’ve spent. The quicker you act, the more likely it is you’ll get your cash.

Resolver can help you sort out complaints about pretty much anything. Check out www.resolver.co.uk