Administration and your rights– can I get my money back?
How to reclaim your cash from companies facing closure
Retailers and businesses struggling financially is a common news headline, both about high-street brands and lesser-known ones. We explain what your rights are when a company goes into 'administration' and how to get your money back.
What does 'administration' mean?
Businesses making cutbacks and redundancies is not unusual. But if the financial situation is really precarious, a business might choose to enter 'administration'.
Here an insolvency firm is called in to run the company and get what cash it can for creditors, either by selling or utilising its assets. In theory, a business can be kept running (or be sold) as a 'going concern', but this is unlikely in the long term.
Most likely, the insolvency firm will simply collect any assets, try to sell what it can, then distribute whatever cash remains to creditors. The money is distributed in order of priority.
Normally the order of priority works something like this:
Secured creditors. If the company borrowed money secured on property/assets.
Insolvency practitioners. To pay for their work completing the administration.
Employees. To cover redundancy pay and wages, for example.
Everyone else. What's left then gets shared with everyone else, such as customers, HM Revenue & Customs, extra money to employees, and so on.
My money is with a business that has gone into administration – can I get it back?
You've ordered something from a company that goes into administration before fulfilling your order. Whether you can get your money back depends on the company's exact situation and how far along your order has got.
If a company is in administration, it can't provide your goods or services and management is no longer in control. Yet that doesn't necessarily mean the company has closed down completely.
The administrator's job is to maximise the value from selling off the company, so if keeping it as a going concern in order to sell it does that, then it will keep trading. That may mean you can simply get a refund, or you receive the product as normal.
Otherwise, in order to have a chance of getting your money, you'll need to apply to the administrator, not the company. Any money left over after paying the secured creditors and staff will be split between everyone who has submitted a claim (such as yourself).
If you need to get a refund through the administrator, you may struggle to get all your money back. In fact, you may not get anything. Often it's just a few pence per pound owed.
Yet DON'T give up here. There are alternative routes to try, which we explain below...
Important: If you're struggling to get your money back from a company/administrator – or you've only got a partial refund – there are other routes to try.
Struggling to get your money back? What to try
Where you've had no luck getting your money back – or only got a partial refund – this doesn't have to be the end of the story. This is because there are alternative routes to try.
Paid by credit card? Check whether Section 75 can help
If what you purchased cost more than £100 (in other words, £100.01+) and you paid all, or just the deposit, or even only 1p, on credit card, then your credit card company is as equally liable as the retailer under what's known as Section 75 of the Consumer Credit Act.
It means that whatever rights you had with the retailer or business, you also have with the credit card company, so you should be able to get your money back from the card firm.
This is a legal protection credit card companies are bound to – by spending on credit card, you enter into an arrangement to borrow (even if you repay in full), so you get these rights.
Separately, if you suffered losses as a result of a business going into administration (for example, you had a half-finished kitchen and needed to pay extra to get it finished), you may also be able to claim this additional cost from the credit card company.
Do note the £100 limit is for a single item. So, if you ordered ten £90 kitchen stools – a total order of £900 – it wouldn't count, though chairs sold as a set for more than £100 would qualify. With the former, it's still worth giving Section 75 a go, but it's unlikely to help.
See our Section 75 guide for full details on how it works and how to claim.
TOP TIP: The best way to protect yourself against the possibility of a company struggling is to do all big spending on credit card, to ensure you get Section 75 protection (just be sure to pay off the card debt in full each month so you're not charged interest).
Can't use Section 75? Check if chargeback can help instead
If you paid on a Visa or Mastercard debit card for any amount, or Visa, Mastercard or Amex credit card for goods costing £100 or less, there's another step to try. It's called chargeback, where your bank gets cash back from the company's payment processing bank.
Unlike with credit cards, this isn't a legal protection, but a protection from firms' internal rules. It's designed so that if you pay for something, and that order isn't fulfilled or a mistake is made, your bank can do a chargeback from the bank that collected the payment.
Chargeback is valid on:
Warning. You must do chargeback within 120 days
You must make a chargeback complaint within 120 days of realising there's a problem (not from the transaction date). So if you can't start a chargeback immediately, note down when you realised there was a problem, to ensure you claim before the deadline.
See our Chargeback guide for full details on how it works.
Paid in cash, via cheque or by bank transfer?
This is where it gets tough.
Generally speaking, you don't have any protection when paying by cash, cheque or bank transfer. However, do remember that if you part-paid by credit card (even if this was only by a penny) and the goods cost more than £100, you'll be covered by Section 75.
Sometimes the company sets up specific procedures, otherwise your best route is to apply to the administrator for a refund, by adding your name to the list of creditors. But it's not likely to yield much, maybe 10% back at best.
What happens to gift vouchers? Can I still use them?
If you have gift vouchers for a company that's gone into administration, then it will be tough.
However, don't chuck them away immediately. The administrators will decide if the business will be wound up, or whether to continue operating it as a going concern in the hope of attracting a buyer. In the second scenario, you may still be able to spend your vouchers.
If the gift vouchers turn out to be worthless, it's worth trying a chargeback claim. There's no guarantee, and it won't work if the vouchers were bought in a different store (for example, Argos vouchers bought at Sainsbury's and Argos went under), but it's worth a shot.
Finally, if nothing else works, you can apply to the administrators to be registered as a creditor of the business that's in administration. However, bear in mind that you'll join a long list of creditors, many of who will be owed £1,000s by the business (so don't expect much).
Realistically, the best approach is to spend gift vouchers as soon as you get them. The less time you hold on them, the less likely the company will go bust in the meantime.
What if a holiday company has gone into administration?
If you purchased a package holiday with an ATOL-protected travel agent then you'll be covered for any part of the holiday where a company you're dealing with goes bust or into administration, be it flights, hotel or car hire.
In this situation, contact your travel company as soon as possible to organise travel or accommodation. The travel company is also responsible for any additional costs, so you shouldn't ultimately be left out of pocket.
Use ATOL's search facility to check if your tour company is ATOL protected.
However, it's crucial to understand that DIY holidays, where you book the elements yourself separately (flight, hotel, transfers, etc), do NOT get cover from ATOL. The only way you may be protected is through Section 75, so consider using a credit card for some of the cost.
Most travel insurance policies WON'T cover companies going bust, unless you specifically requested it and the provider agreed to include it.
See more help in our Holiday rights guide.
What if I've got faulty goods or services from a firm that's in administration?
If goods, digital content or services purchased from a company that goes into administration become faulty in any way, you still have rights.
Generally these are what we refer to as 'SAD FART' rights from the Consumer Rights Act 2015. We use the acronym 'SAD FART', because goods and services bought under the act must be:
Satisfactory quality,
As
Described
Fit for purpose
And last a
Reasonable length of
Time
For what 'SAD FART' means in practice and what exactly constitutes your statutory shopping rights, see our Consumer rights guide. Tool up on this knowledge.
It's then that the Section 75 rule above really comes into its own (if you have paid by credit card). That's because you have exactly the same rights with a credit card as with the retailer, which includes a breach of those statutory rights as well as administration, so you can ask the credit card provider for a refund along the same lines.
If you bought on a debit card, or on a credit card but it was for under £100 – meaning you're unable to use Section 75 – it's worth trying the chargeback procedure instead.
Again, those who've paid in any other way will find this harder, but you can still make a claim to the administrators. If it doesn't agree to pay you, you'll simply join the queue of creditors, though your chances of getting any money are slim.
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