A Word of Advice

16 April 2004

What are your rights when a business closes down?

You’ve paid a deposit on a new couch and are expecting the store to have it ready in a couple of weeks. It’s been a while so you decide to go down to the store to see if it’s ready, only to find the doors are locked and the phone is disconnected. It seems that the store has closed down. What does this mean for you? If you can’t get the couch, can you get the deposit you paid back?

A business can either go into receivership or into liquidation. Receivership is when a business is run by a receiver, instead of its own managers. The receiver is like a caretaker who comes in to run the business until its debts can be paid off. If the debts can’t be paid off, the business will go into liquidation. With liquidation, the business and its assets such as furniture and goods for sale, are all sold off to pay its debts.

The first sign is often a notice on the store window or door saying that the business has closed down. It may state that the business has gone into receivership or liquidation, and give the name of the receiver or liquidator. If there is no sign, you can check with the Companies Office (freephone 0508 266 726)  to see if they know about this store – they may be able to tell you if it has been placed into receivership or liquidation. It’s also a good idea to check whether the store closure has been noted in major newspapers in your area.

When a business goes into receivership or liquidation, you become an unsecured creditor, which means that you are paid last when the debts of the business are paid. Sometimes there’s not enough money left after all the business assets are sold and you might not get your deposit back.

When you buy goods on layby, you have special protection under the Layby Sales Act. The Act says that when a store closes down you can pay off the layby and collect the goods – provided there are goods of that type available in stock.

If you have a problem with a business that has gone into receivership or liquidation, you need to contact the receiver or liquidator. Often this is displayed at the store – if not, try checking the public notices of a major newspaper in your area or contact the Companies Office (freephone 0508 266 726).  You then need to lodge a claim with the receiver – contact the receiver to find out how to do this. You will have to put your claim in writing and provide evidence to support your claim.

You should be given it back because the washing machine is yours, but you will have to identify the machine and still pay for the repairs if any were done. So it pays to take down the serial number of your goods before you take them in for repairs or label them with your name and address.

When a business is in receivership, it is no longer the same business that sold you the gift voucher. The voucher holder is owed the goods by the business and not by the receiver. This means it is very difficult to have the gift voucher honoured so try and buy vouchers that can be redeemed at more than one business. If you are given a gift voucher, try to use it as soon as possible.

To find out more about your rights when a business closes down, visit the consumer information section of our website.  You can also visit your local CAB and pick up a copy of our factsheet, When a Business Closes Down.