Dick Smith voluntary administration: what does it mean?

Alex Kidman 5 January 2016


Dick Smith has entered into voluntary administration, but what will that mean for consumers?

Dick Smith Holdings, the company that owns the brand and stores that operate in Australia as Dick Smith (and previously Dick Smith Electronics, but for a very long time nothing at all to do with the entrepreneur and intermittent prankster of the same name) has issued a statement to the ASX that it is appointing a voluntary administrator for the business, following a trading halt in shares yesterday. Which is all well and good if you’re a fan of the financial papers, but what does that mean for consumers?

In retail terms, there are numerous local and online retailers that fill the niches that Dick Smith sells in, whether you’re after the more classical DIY electronics side of the business, or the consumer electronics market it has chased in recent years.

Just because a business goes into administration doesn’t automatically mean that it’s going to absolutely collapse. It’s possible that the administrators, once they’ve assessed the actual state of the business may be able to find a buyer for the business, at which point it will work to settle or rearrange existing financing options and the surviving stores, if any, would continue to trade as normal.

What is likely in the meantime, however, is that the administrator will seek to maximise the value of the business via the sale of assets -- which is to say, that whether or not the business goes bust, it’s likely that Dick Smith stores will start having rather more immediate sales on goods than they already were.

At the time of writing, there’s no change in Dick Smith’s online Web presence, which is still promoting a New Year’s sale special instead. There may be bargains to be had, but as with most administration sales you’d probably have to be present in person rather than ordering online to take advantage of them. All that remains to be seen, depending on the actual state of Dick Smith’s financial position.

The one thing you should do right away if you’re holding any gift cards from Dick Smith is head to the nearest store and see if they’ll honour them. If they will, find something to buy, and buy it today.

Under most financial administration contracts, gift card holders are seen as unsecured creditors at the very bottom of the payments chain, and gift cards are often not honoured if administration has been entered into. You may find a store will honour them if you’re quick, but this is in no way guaranteed.

Updated: As the Herald Sun reports, receivers Ferrier Hodgson have indicated that outstanding gift cards will not be honoured at stores, with holders of such cards being unsecured creditors. You could apply to the receivers to be listed as an unsecured creditor, which means you'd receive compensation if any funds are left over once secured creditors are paid off, but the realistic odds of seeing any money this way are slim.

Also, it bears pointing out whether you're chasing up a gift card or just chasing a bargain, don't be aggressive or rude towards the store staff. It's not their fault that the business is going into administration, and for many of them the very real prospect of unemployment may be in their future.

Image: Shutterstock

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