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Company in Administration: E-vouchers and Gift Vouchers

Last Edit: 27/06/13

In the past, prior to the World Wide Web and online shopping, a gift voucher was a fairly reliable present to give, but as time has passed, and the high street struggles to compete with its online equivilent, more and more high street chain stores have closed or entered into administration: Woolworths, Phones4U, Blockbuster, Barratts, Tie Rack, JJB Sports, Comet, C&A, Focus, Zavvi, Dixons, Toys R Us, Maplin, Poundworld, British Home Stores (BHS), HMV etc. Therefore, the question naturally arises, what is the status of e-vouchers and gift vouchers when a company enters administration. It should first noted that when a company enters administration an administrator is appointed -- who is a licensed insolvency practitioner -- and the administrator takes full control of the company. Therefore, when a company enters administration its legal status is altered and ultimately the new legal entity does not have to honour gift vouchers or e-vouchers.

Woolworths stores entered into administration in 2008, and Woolworths Group in 2009

Woolworths stores entered into administration in 2008, and Woolworths Group in 2009.

While it may be possible for consumers to gain a refund from the administrator, it is unlikely. Ultimately, it is at the discretion of the administrator whether the ongoing business entity will honour the gift vouchers sold during its previous trading status. At the beginning of 2013, HMV entered administration, and at first they did not honour gift vouchers previously issued, but this policy was later changed, and from the 23rd of January 2013, HMV's administrators stated that they would begin honouring customers' cards and vouchers. Whether a retailer will begin to accept gift vouchers will usually depend upon whether its administrator can get the business 'back on its feet', but in some cases -- such as Comet -- they allowed customers to redeem vouchers while the company was being 'wound down'. In conclusion, how retailers deal with evouchers and gift vouchers will depend on its administrator, there is no set rule the administrator has to follow, its at their discretion.

However, if the administrator refuses to accept gift vouchers, there is some recourses left to the consumer if the e-voucher / gift voucher was purchased with a debit or credit card: Visa, Mastercard and Amex have a 'chargeback' scheme, which provides a refund for goods you purchased that you did not receive. One of the problems with the chargeback scheme is that a consumer will typically need to make a claim before one hundred and twenty days has passed (since the purchase/transaction). This time limit may differ between mastercard, visa and american express cards, and the issuing bank / financial institution. The chargeback scheme is a voluntary agreement, and is therefore not enforced by UK law. However, if a consumer believes that they have been unfairly treated in a chargeback claim, then they can take their case to the Financial Ombudsman. Section 75 of the Consumer Credit Act 1974 is another avenue available to UK consumers, backed by UK law, that requires credit card issuers to protect purchases over £100 -- meaning the card issuer is liable if something goes wrong, such as a company going into administration before the goods can be provided. The one issue with section 75 claims, is that most e-vouchers and gift vouchers are under £100, so, the chargeback scheme will probably be the route to take: as that covers claims up to £100. If the chargeback scheme and section 75 are unsuitable -- a consumer waited too long to make claim or the claim was under £100 -- then a consumer can lodge a claim as a creditor in a bankruptcy or liquidation: https://www.gov.uk/register-creditor-bankruptcy.

When it comes to comparing e-vouchers and gift vouchers and which is preferable to own during a companies administration, it will depend on the type of business that went into administration, and whether the company in question relied primarily on its bricks and mortar trading, or its online trading. In some cases -- where the only profitable portion of the business is offline or online -- then its website may be closed or vice versa, the website remains open but the stores are closed. This may impact whether the administrator will accept an e-voucher or a gift voucher.