Your rights when a trader or company closes down or goes out of business, and what you can do to try to get your money or your products back.

If a company or trader is closing down or has gone out of business and they owe you money or a product or service, your protection is very limited.

Creditors are any people that the business owes money to. Secured creditors such as banks, employees and Inland Revenue get their money back before you and other customers. You are an unsecured creditor and have limited rights in this situation. This means you are owed money by a business, but you don't have a valid security interest over any of their assets.

Tips to reduce your risk

Some ways to reduce your risk before you buy:

  • check the delivery times for products on order (avoid buying if too long)
  • only pay a small deposit
  • pay by credit card for products on order so you can apply for a chargeback if not delivered
  • for repairs, record the serial number and a description of products
  • buy gift vouchers that can be used at more than one business
  • make sure you make a layby payment at least every three months
  • keep any warranty documents and receipts to claim early in the event of a problem.

If you hear any news about a company in difficulty, check:

  • the companies register – takes up to 10 days to be updated
  • public notices on the Insolvency and Trustee website – also includes notices about traders in financial difficulty.

If you see a business you have a layby with is having a closing down sale, pay up quickly and collect the item.

Your rights

Your rights depend on:

  • what sort of sale it was, such as layby or a gift voucher, on order for delivery or a credit sale
  • whether the business is sold and the new owners are willing to honour claims as a matter of customer goodwill
  • if the business was a registered company or a sole trader/partnership.

Limited liability companies

When a company goes into receivership, liquidation, or voluntary/statutory administration, it is no longer run by its owners. The receiver’s or liquidator’s job is to sort out any assets or money left and pay it to the creditors.

To find out more about how to claim from an insolvent company, read the Insolvency and Trustee Service website(external link).

Sole traders or partnerships

A trader is personally responsible for returning your money if they are in financial difficulty. You can claim your money back at the Disputes Tribunal or District Court, but if the trader has declared bankruptcy you’re unlikely to get anything back unless there are funds available in the bankruptcy estate for a dividend to creditors. The trader may alternatively have entered into a Summary Instalment Order or a No Asset Procedure, if this is the case then you will need to make a claim with the Official Assignee.

To find out more about how to claim from an insolvent trader, read Owed money(external link) on the Insolvency and Trustee Service website.

Receivers, liquidators or any new owners don’t have to accept gift vouchers or credit notes. This is because both a gift voucher and a credit note are the previous owner’s responsibility. It is unlikely that you will get any money back as an unsecured creditor.

Specific rules under the Fair Trading Act give you some protection, as long as you have not missed a payment within the last three months and the products are still there.

You will have to claim back your money from the receiver or liquidator if the products aren’t there. You still have priority over other unsecured creditors for the value of amounts already paid. If you have missed payments, you have none of the rights set out above and you probably will not get your money back.

Gift vouchers and laybys

Contact the receiver or liquidator if the business is a company in receivership or liquidation to see if you can get your products or money back, but you probably won’t be able to.

Finance on credit sales will usually be done through a finance company separate from the retailer. You will still have to make the payments to the finance company, but you won’t be at any risk of losing your products because you already have them.

Cancelling your credit contract

You will have to claim under the manufacturer’s warranty or contact the manufacturer directly to make a claim under the Consumer Guarantees Act. However, your rights are more limited than with a supplier. Your rights depend on the warranty.

If the business is a registered company under administration you can contact the receivers or adminstrators to pursue your rights for faulty products or services under the Consumer Gurantees Act. This may be difficult.

You may have other rights under an extended warranty if you purchased one. Contact the insurance provider listed in your extended warranty documents.

Any faulty products that are in for repairs currently with the trader are still your property and you should get them back even if not repaired.

You also can go back to the lender for faulty products bought on finance if the lender arranged the loan for the products. They are also responsible for the quality guarantees under the Consumer Guarantees Act and have the same obligations as the supplier.

See also:

If things go wrong

You may be able to get your money back in limited circumstances. Here are some steps to take.

Contact the trader

If the business has been sold, the new owners may not have purchased the previous owner’s liabilities. This means they don’t have to:

  • honour gift vouchers issued by the previous owner
  • complete orders placed with the previous owner that have not yet been delivered
  • repair faulty products sold by the previous owner.

If the trader has gone out of business and is a sole trader or partnership, not a registered company, the trader may be held personally liable for returning your money. You can claim money back at the Disputes Tribunal or District Court, but if the trader has declared bankruptcy you probably won't be able to get anything back. Check at the Insolvency and Trustee Service(external link).

Contact the receiver, liquidator or administrator

You can complete a claim form, which the receiver or liquidator will provide or will be available on their websites. You may need to provide evidence such as receipts, serial numbers, bank statements, copies of vouchers or credit notes.

During the closing-down period, companies often continue trading under the control of the external administrator. Notices advising of most appointments of external administrators are published in newspapers or on the administrator’s website. If the external administrator has announced that the company will honour gift vouchers or laybys, you follow the instructions on their website.

Contact your bank

If you have paid for a product or service by credit card that has not been delivered, you may be able to request a chargeback on the transaction. Banks have strict time limits for claiming this.

Contact the finance company or warranty insurance company or manufacturer

Go to the lender if you bought the product or service on credit and it is faulty, or if the product has not been delivered or the service is incomplete, and claim under the Consumer Guarantees Act.

If a manufacturer’s warranty is still current, go directly to the manufacturer, for any faulty products or services.

If you have purchased an extended warranty, go to the company that provided the warranty for any faulty products or services, if they are separate from the retailer.

Need more help?

Contact us for more guidance.

Common situations

Gift voucher not honoured

Francis buys a gift voucher for his mum from Dick Smith as a Christmas present. In the new year it is announced Dick Smith is closing and the receivers will not honour any unused gift vouchers. It is unlikely he will get his money back.

Repairs after retail business closes

Jenny buys a dryer from a retailer which later goes into receivership. The dryer starts to overheat and smell of burning. Jenny contacts the receivers of the store and they direct her to the manufacturer. She still has a current manufacturer’s warranty and so she can claim repairs under the warranty.

Layby and trader gone out of business

Katy has a jacket on layby at a clothing store near her. She has been making regular payments. The owner advertises a closing-down sale. Katy rushes in to make the last payment and pick up her layby before the last day.