Writing a letter

When companies go bust

What happens when a company goes out of business

In order to see this content you need to have both Javascript enabled and Flash installed. Visit BBC Webwise for full instructions

If you have ordered goods from a company that goes bust, what are your rights? This video looks at your chances of receiving your goods and explains what your legal rights are to a refund or replacement if the goods are faulty or unsuitable.


Professor Margaret Griffiths: When a company's insolvent and eventually goes bust, the court will usually appoint an Administrator to handle the company's affairs. And when a retailer goes insolvent, they typically leave the stores open for several weeks in an attempt to clear remaining stock and raise as much money as possible. Now on the upside, there are some great bargains to be had in these clearance sales, but on the downside, the whole process often leaves many consumers high and dry.

First woman in street: So, if I'd bought a product online, from a company that's now gone bust but I haven't received it yet, can I still expect to receive my product?

Professor Margaret Griffiths: Now, with regard to unfulfilled orders, if you've placed an order with a company that's gone into liquidation, the first thing you should do is contact the retailer to find out the status of your order. If they say your purchase is completed, packaged and ready to be despatched in the retailer's warehouse, then they should be able to fulfil your order. But if they say that your goods are not ready for despatch then you should contact the Administrator. Details of the Administrator should be readily available from the retailer's website or in the press, but if you do have trouble finding out the information, then contact Companies House.

Once you have the details, write to the Administrator, giving him all the information about your order. But unfortunately, even if you've done all that, there is no guarantee that you will get all or even any of your money back, as it will depend on how much money the company still has and how many people are making a claim on it. It's likely that you're going to be at the bottom of a very long list.

Second woman in street: What are my rights to get my money back on my credit card?

Professor Margaret Griffiths: With regard to paying on a credit card, it will depend on how much you spent. If you spent between £100 and £30,000, then there is a good chance that you'll get your money back from your credit card provider and some debit cards may even offer similar protection.

Man in street: If I've bought something that needs returning, what do I do?

Professor Margaret Griffiths: A company's customer refund policy is unlikely to be upheld once a company's gone into liquidation and it's most unlikely that you'll get your money back. But if the store is still open, it's worth going and speaking to staff about perhaps having a replacement. But if they can't give you a replacement, or the store is closed, then you'll have to place a claim with the Administrator.

First woman in street: If I have a gift card or a voucher from a store that's gone bust, is that voucher now useless?

Professor Margaret Griffiths: With regard to shopping vouchers, it's very similar to where you've placed an order; you've parted with your money but you've yet to have any goods and it's not likely that you're going to be able to spend your voucher. Also, if the shop's been taken over by another company, then the voucher may not be honoured.

One more thing before you go, remember, it's not just shops that can go under, if your bank were to go under, don't worry, savings will be protected under the Financial Services Compensation Scheme for up to £85,000.

Quick tips for tutors

A short video explaining what your rights are if a company you have bought goods or services from goes out of business. May be used in class to stimulate discussion around the featured topic. Alternatively, could be used to provide purpose and context to exercises around reading and understanding or writing a letter.