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.


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