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 the 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

    Crap! I hadn't been following the news. I placed an order on Dick Smith online yesterday in the AM - just for some relatively inexpensive headphones. Does that mean all online orders are cancelled? What are the chances.

      Chase them up definitely. They cancelled mine with no confirmation and no reason.
      I was lucky to get a refund after weeks!

      I did the same thing, placed a click and collect order yesterday morning only to read they had gone into administration in the afternoon. Got the email to collect today and picked up the goods as normal.

      "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."

      Definitely cancel the order and try to get your money back, they are going under by the looks of it.

      There is a good chance you will have to go through the above process as a creditor of Dick Smith now and you may end up with nothing.

      You have to lodge an application with the external administrator this will not be through Dick Smith but rather the company they appointed as administrator most likely.

      Last edited 05/01/16 7:26 pm

        Thanks for that. will check out what darren wrote. charge back sounds like the easiest.

        If paid for on a credit card, you should be sweet. If paid for on a debit card, it might have very limited insurance. Anyone who's dropped cash and not got their product yet is basically screwed.

      If they have them in stock. you may get them. If not, they will just keep the money.
      Go onto the website NOW and cancel the order. Then contact your bank and cancel the transaction. This is YOUR money and you should not just give it to them.

      https://www.choice.com.au/shopping/consumer-rights-and-advice/your-rights/articles/what-to-do-when-a-company-collapses

        Got a shipment notification today. Might wait a couple days and see what happens.

          Sounds lucky - it might be something you have in stock. I would track it if they offer that and make sure something is on the way.

          Also be aware of how long you bank will allow chargeback.

            yeah the tracking still isn't working (via Toll). see what happens. I paid via VISA card so have 120 days apparently to chargeback. I'll let it go for a couple more days. I'll know pretty soon if they have actually sent it or not.

    We were warned about this some time ago. I've been alerted for 2 months.

    Sorry to say, but you've done your money, period. Orders haven't been cancelled, the recievers/administrators just take any money paid tyo the company even for goods not delivered and place the money into consolidated revenue, same with DS Gift cards, whilst you think they have a dollar value, they won't trade with them and even copurier companies that have received goods for delivery are returning them to DS, won't deliver them. Sure it's wrong and to my way of thinking is for want of a different expression straight out corporate theft, but the recievers/administrators just say sorry but this is now not the same company that it was yesterday.

      even courier companies that have received goods for delivery are returning them to DS, won't deliver them. That's pretty harsh.

      I don't think that's right, once they have left the premises the ownership of the product passes to the addressee. However if they were logged with the courier, but didn't actually leave then that is another matter (you have lost your money). Also if they never had the product in the first place (for whatever reason) and you paid for it then again you have lost your money.

      Last edited 05/01/16 6:15 pm

        Dispatching companies /can/ recall goods, though it sounds like a lot of effort, given administrators were only appointed today.

        Actually you are completely wrong. Goods remain property of the consignor until delivery in most cases.

    I ordered a camera through them over a month ago and it never came, no communication or contact, only a receipt saying I had paid for it.

    After several emails and phone calls, one where i was hung up on rudely by a customer service assistant (a lot of people are saying the same thing in reviews). They finally sent a refund only days before Christmas with no note or reason.

    I would advise anyone here with pending transactions or cards to call them every single day and email them until you get what you are owed. Don't accept that your money has gone down with the ship.

    figured as much! so the online store has different rules to the real store, yeah? interestingly, the online store is still up and running. I would have thought it'd be a scam to keep the online shop operational if they had no intention to fulfil orders.

      No intention to fullfill orders from yesterday. Orders today are a different story.

    My dad just bought my sister a TV there a week ago. The consultant talked him into a 12 month extended warranty for $30.

    They can't even honor 1 week it turns out let alone 24 months.

    The TV was about $250.

    My advice, tell everyone not to go to Dick Smith anymore now. And they just said on TV Dick Smith will not honor ANY gift card or deposit. They are basically insolvent.

    There won't be a restructure they are going under so far as I can tell, full liquidation. If they were restructuring they would at least honor their gift cards and deposits to keep faith with customers.

    Christmas was a week ago can you imagine how many customers got deceived out of probably hundreds of thousands or millions of dollars over Christmas, buying gift cards or putting down deposits that will not be honored...

    There is no coming back from this they are finished. There is going to be an uproar from all the customers that got deceived over Christmas too!

    Last edited 05/01/16 7:16 pm

      Is the extended warranty through Dick Smith or an external company. I would have thought that it was someone else. Check the paperwork.

        DS extended warranties are handled by The Warranty Group. It's listed in the warranty booklets customer /should/ receive when being sold an extended warranty.

    So return it to incompetent idiots who bankrupted it. How about nationalise it handing ownership to the employees and charge the directors with treason and shoot them.

      Its too late. The private equity group that bought DS first offloaded the assets then tarted up the company before offering an IPO. The share price tanked* and now the company is an "empty shell" ie its worthless.

      * DS shares have gone from $2.20 to 35.5c. By comparison, JB Hifi shares are around $20.00).

        That's not how you compare shares, as not every company has the same amount of shares. You need to talk in terms of percentages, and/or market capitalisations.

        DSE Market Cap = 83.96M, yearly growth = -82%
        JBH Market Cap = 1.97B, yearly growth = 30%

        Having said that, dick smiths share price implosion has more to do with an inflated float price than anything else.

    I wonder if they'll be having a closing down sale

      All the good stuff will be bought by the employees.

    Damn! Not a moment too soon, I'm glad I got my Pebble Time Steel off them just before Christmas. I'd say the reason the preorder was delayed for 2+ months was probably due to their financial problems...

      Amen!
      Pebble Time Steel for just $205!
      Cheaper then the original US price - U$199!!!

        And that price was below cost, by almost $50!

        Ditto :) I preordered for $250, then they had the special down to $211, which my store honoured, and THEN they went back up to $350 or something crazy afterwards. Absolute steal.

    Thanks for the breakdown, Spandas.

    Fortunately I don't have any laybys or gift cards at Dick Smith but I do feel bad for the people who will lose out in this ongoing debacle.

    Correction in the article - shareholders are last in the priority of claims following liquidation!

    This is going to be a liquidation, unless some white knight comes in. Generally, the accounting firms don't like to go into receivership because whilst they continue to trade they carry the risk of trading whilst insolvent (which the company could be if liabilities exceed assets), which is a serious problem and you could have ASIC knocking on your door. Australia doesn't have the same bankruptcy protection laws in the US, where debt restructuring can be (relatively) easily negotiated back to a point where the company is solvent. Not many bankrupt companies in Australia go into receivership, it's really hard to trade without some trade credit for stock. So Dick Smith is gone. Just wait for the fire sales at Graysonline.

      What's the go with Graysonline? Would you buy something labelled reconditioned from there or is it a bit risky?

        Most reconditioned product I've seen on there have been sold "as-is" with no warranty, even those auctioned by the manufacturer as opposed to a liquidator.
        Do your research before buying especially around pricing and models.
        I've found stuff on there and at their physical auctions that haven't had the most descriptive details (like model numbers and specs)

        It can be both a bargain and a ripoff, mate. The company i work for just bought up a smaller one, cherry picked the equipment (professional AV gear and concert grade audio arrays) then put the rest on grays. Some folks got themselves a sony projector worth over a grand for $50, others paid shitloads for 30 year old cables n speakers due to their popularity. Its just how any auction works. Having prior knowledge of the product and thoroughly checking gear out before you leave with it is crucial. Having said that, Our company buys stuff from them all the time and we get good deals more often than not. It does help that we have the ability to repair/recondition the duds we have bought at times tho...

      You've got your insolvency principles mixed up; you must be a financial adviser.

      Accounting firms don't control receivership, secured creditors do (e.g. banks etc.).

      Administrators (usually the accounting firms) don't like administration because the administrator can be held personally liable for debts incurred during the course of the administration.

      Debt restructuring can be negotiated in Australia, but depends on creditors agreeing (see the DOCA explanation in the article).

      Companies can't be bankrupted in Australia, only people can. Companies are "wound up".

    I saw it coming the moment my "solar" company made everyone redundant just before xmas. Dicksmith owned by the same parent company called Anchorage Holdings.

      Anchorage hasn't had anything to do with Dick Smith since they floated it on the share market and made a /killing/ in the process.

    i never buy from Dick Smiths anyway. i always find their ranges a bit lacking and prices not so great. i know they have had some great prices with their online sales, but its always been stuff i can get a similar price elsewhere at other times.

    Y'all should read this https://foragerfunds.com/bristlemouth/dick-smith-is-the-greatest-private-equity-heist-of-all-time/

    Pretty fucked up stuff.

    Pretty sure there was enough warning of Dick Smith's impending doom. Before Christmas there was that big 'sale' and associated stories about staff grabbing all the goodies before customers could. None of that matters now. Pity about any business going under though. Hope it can be revived.

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