Dick Smith Enters Voluntary Administration: How Will This Affect You?

This morning, electronics retailer Dick Smith went into voluntary administration. You will probably know that this isn't a good thing for the business but you may not know what this means to you as a consumer, especially if you have a product on layby or a Dick Smith gift card.

Voluntary administration is when an external administrator is called into a company that is experiencing cash flow issues and having serious trouble with paying off its debts. The administrator will then look at the company's assets and assess the business to determine the best course of action. The aim of this whole process is to give companies some breathing room to restructure and recover without having to deal with debt collectors knocking on the door.

So being in voluntary administration doesn't necessarily mean Dick Smith will die and fade into oblivion. The administration process usually takes around a month and store are likely to continue trading as per usual. According to Griffith University's Asia-Pacific Centre for Franchising Excellence, the administrator will make one of the following recommendations to creditors, who have the final say on what happens:

  1. Liquidate the company, or
  2. Execute a deed of company arrangement (DOCA) – meaning compromise the debts in some way and allow the company to continue in existence, or
  3. Return the company to the control of the directors.

This third recommendation is rarely comes to fruition so it'd either be liquidation of Dick Smith's assets or selling the business off so that it can live on. So back to the most pertinent question for most Lifehacker readers: what does this all mean for you?

If you're someone who has goods under layby with a Dick Smith store, paid for a product in full or have an unused gift card for the retailer, you may fall into the category of "unsecured creditor", according to the Australian Competition and Consumer Commission (ACCC), the administrator will prioritise recovering debts for other classes of creditors, such as employees and shareholders, before compensating you in any way.

Nonetheless, provided that the company is still trading, you should be able to recover the money that is owing to you in - one form or another - for tge goods you paid for. The administrator will likely give instructions to consumers on how to do so in due course.

If the company has stopped trading, then it can become a bit tricky. Here's what the ACCC has to say:

If the company ceases trading, you will need to register with the external administrator as an ordinary unsecured creditor to recover your money. The insolvency process will determine whether you receive the goods paid for, a full or partial refund, or possibly nothing at all.

There is also a chance that during the administration process that there will be big sales at Dick Smith outlets to get rid of inventory and make some money to ease the cash flow problem. We'll be sure to keep an eye out for those.


Comments

    Thanks Spandas.

    Many people are watching with keen interest. I, like many others, think the writing is on the wall. How about doing a piece on "how to pick an over-inflated stock," and "will the law prosecute those that sold a $10mil company for $524mil"?

    just waiting for the Administrators to tell us how to register as an unsecured creditor.
    I received for Christmas, a $150 gift card that I WAS gong to spend this weekend.
    New years resolution - always spend gift cards immediately before the company goes under.

      If the person who purchased it used their credit card then they may be able to challenge it through the credit card company. I think there are time limits and they'll need to have a receipt of some sort no doubt.

    "There is also a chance that during the administration process that there will be big sales at Dick Smith outlets to get rid of inventory and make some money to ease the cash flow problem. We’ll be sure to keep an eye out for those."

    Seriously, if it's anything like the last super mega gigantic huge Dick Smith sales that have been mentioned on lifehacker before please don't bother! As much as I hate to see a well known brand go under at least we'll be rid of those horrible advertorials :|

      "We’ll be sure to keep an eye out for those."

      I think she meant "We'll keep an eye on OzBargain and post what users there have found".

    As someone who has been through, and has seen so many others go through a voluntary administration, I beg everyone to PLEASE not take out your frustrations on the poor employees of the company. In a lot of cases, the employees are the last to know and have just had to face the news that their employment is now uncertain and more than likely about to end. And not only that; they've now been told that for the x amount of time they have left in their job, they have no choice but to be the face of a company that has let a lot of customers down and will be required to field a huge amount of negativity on the front line.

    The staff know better than anyone that you are angry and feel let down, and now have their own beef with the company, so just have a bit of empathy please, and communicate in a reasonable manner. Plus, you're more like to get the staff to help you in any way that they can when you treat them with (hopefully mutual) respect.

    What if you buy something - and it breaks? How do our consumer protection laws behave, when the compmany that sold you a product no longer exists?

      You're screwed. I bought a reverse cycle ducted aircon a few years back through a local installer that supplied it from a company that promptly went out of business. It broke while still in the waranty period. Apparently the installer had no legal obligation to do anything. I ended up paying a service tech that used to do the waranty work for the brand $200 to take a 1 hour drive down to fix it with a $40 part. The local service company didn't want to touch it as they couldn't get parts.

      Warranties have always been handled by the manufacture of the goods. While you have the right to return the goods to the place of purchase you also have the right to return them to the manufacture so should your (insert brand name here) item break and it is under warranty then jump on (insert brand name here)'s website and fill a warranty claim that way. If you purchased an extended warranty you may still be covered as they are normally done by a third part insurance company.

      If it's a known brand (Samsung, Apple, Logitech, Sony etc) contact them directly. If it's a DSE branded product you might have some troubles

    Dick Smith has already died. It died the day they stopped stocking electronics parts.

    I bought an ipad online yesterday and paid with a debit card. Will I still receive it?

      I bought a TV from them online yesterday. Got a receipt from PayPal but nothing from Dick Smith. Tried to ring DS today and PP but could not get through to anyone. If they are selling goods and knowing that they cannot deliver then that is a crime. If so, the online website should be removed.

    I used to buy from Dick Smith electronics, back in the days when you could actually buy electronics like capacitors, resistors and LED's. They don't sell any of that stuff anymore, now its Dick Smith "electronics", mobile phone charger leads and that expensive stuff.

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