Companies going out of business

When you hear that a company is closing down or has gone out of business, the news can be worrying for everyone involved, including suppliers, creditors, staff and customers.

Depending on the situation, the company may have gone out of business completely, or it may be in liquidation, examinership, or receivership.

This information will help you understand the possible impact on you if a company is going out of business. Each situation is likely to have different circumstances so this information is a guide only and you should bear this in mind. But you should act quickly in all cases.

In general, you are probably at greater risk of losing out if you have already paid for goods or services that haven’t yet been delivered.

There are four main ways in which you could lose your money in the event of a company going out of business:

• You have paid in full for something that is due to be collected/delivered
• You have paid a deposit
• You have a gift voucher or gift card for the business
• You discover you have a faulty product that you bought from the business

If the business goes into examinership, liquidation, or receivership, you will be treated as an ’unsecured creditor’. A creditor is someone the company owes money to. If you have paid for items that the business has not delivered yet, for example a sofa, and it goes out of business, then you are a creditor as they owe you money. However, as an unsecured creditor you rank behind secured creditors, such as Revenue, employees who are owed wages and banks that are owed money.

If a company changes ownership, the new owners may not have purchased the previous owner’s liabilities. This means the new owners may not have to honour gift vouchers issued by the previous owner. Also, the new owners may not be responsible for fulfilling orders placed with the previous owner which have not yet been delivered.

What to do if a business closes down

There are number of ways you can protect yourself:

• Think carefully before deciding to pay in advance for goods
• Only offer to pay a small deposit.
• Before placing a deposit, check with the business how long it will take for the goods to be delivered.
• Do not pay in full for items if there is a long delivery period involved. Even if you have only paid a deposit, avoid buying items if there is a long delay in delivery.
• When the item is delivered, check it immediately for possible faults and to make sure it is the item you ordered and paid for.
• If possible, pay by credit or debit card as these give you the option of a chargeback. This means you can look for your money back from your card provider if the item is not delivered. Get more information on this in our ‘chargeback’ section.
• Use gift vouchers or credit notes quickly. If a business goes into liquidation and you have an unused gift voucher or credit note, you will be treated as an “unsecured creditor”.

When a company goes into receivership or administration, in certain circumstances they may be allowed to continue trading. However, your consumer rights may be severely limited if you decide to buy from a company in receivership or administration. The Corporate Enforcement Authority have more information on receivership and administration.

What can you do if you have paid money to a business that closes down before your item is delivered?

• If the business goes into liquidation and your item has not been delivered, contact the liquidator to see if you can get the item.
• Your contract is with the business you buy from. So, if a supplier of that business closes down, they should fix the problem for you.
• Check the website of the business and also the website of the liquidator, examiner or receiver to get the latest news on the situation. Contact the official appointed to look after the affairs of the business for further details.
• If you have been given a guarantee by the manufacturer, you could also make a claim against the manufacturer if the goods turn out to be faulty.
• If you paid for the item by card, ask your card provider to reverse the transaction using a chargeback.

Information on the liquidator/examiner/receiver for the business is available from the Companies Registration Office (CRO).