When a business goes bust

  • When a business goes bust, consumers’ legal rights are affected, including under warranties and the consumer guarantees.
  • Consumers that are owed money can take steps to try to get some or all of their money back. Sometimes they can be left out of pocket when a business goes bust.
  • There are specific laws, administered by the Australian Securities and Investments Commission (ASIC), that determine how any money remaining in a business should be paid out to businesses and people owed money.

What the ACCC does

  • We provide information about consumer rights for businesses that are solvent and operating.

What the ACCC can't do

  • We don’t provide information about consumer rights when a business becomes insolvent or goes bust. This is the role of ASIC.
  • We don’t provide legal advice.

Impact of insolvency on consumer rights

When a business goes bust and can’t pay its debts on time, this is called insolvency.

Someone from outside the business, known as an external administrator, is appointed to try to save the business, or to wind it down and try to repay its debts.

‘Insolvency practitioners’, ‘voluntary administrators’, ‘liquidators’ and ‘receivers’ are all types of external administrators.

When a business becomes insolvent and an administrator is appointed, consumers’ legal rights are affected and they can be left out of pocket.

Insolvency affects a consumer’s entitlements when:

Checking if a business has become insolvent

Search by company name or number on the ASIC published notices listing, to check:

  • whether a business has become insolvent
  • who has been appointed as an administrator.

Occasions when consumers are owed money

Consumers are owed money by a business that has become insolvent when they:

  • paid in full for a product or service that hasn't yet been received
  • paid a deposit, such as in a lay-by agreement or interest-free offer
  • have a credit note, gift card or voucher from the business with an amount left on it.

Things to do if you are owed money

    There are several things you can do to try to get your money back when you are owed money by a business that has become insolvent.

    Understand who gets repaid first

    There are rules in laws administered by the Australian Securities and Investment Commission (ASIC) about the order in which an insolvent business’s debts must be paid.

    Usually, under these rules, consumers fall in a category called ‘unsecured creditors’.

    Unsecured creditors are only repaid after secured creditors, such as the business’s bank and major suppliers, are repaid and after priority unsecured creditors, such as employees are repaid. This means consumers may only get some of their money back or nothing at all.

    Ask your bank to reverse the payment

    If you paid with a loan, credit card, debit card or through a secure payment provider such as PayPal, your financial institution or card provider may be able to get your money back by reversing the payment. This is known as a ‘chargeback’. There are time limits on chargebacks, so contact your financial institution straight away.

    Check if the business will honour your transaction

    Sometimes, businesses under administration continue trading.

    During this time they may:

    • deliver a product or service you have paid for, or
    • honour some offers or transactions, such as gift cards or lay-bys.

    The administrator may place specific conditions on honouring transactions. For example, only honouring gift cards if people spend an equivalent amount on products or services to the amount redeemed on the gift card transaction.

    Check the administrator’s announcements and follow any instructions they give you.

    Register as a creditor

    If the company has stopped trading, you must register as an unsecured creditor with the administrator to have a chance of getting some or all of your money back.

    Apply for compensation where a fund exists

    In some states and territories, there may be funds that compensate consumers who lose money when a business in a particular industry becomes insolvent.

    Contact your state or territory consumer protection agency to find out if there are any funds you could apply to.

    Next steps if you have a problem with an insolvent business

    If you need to resolve a problem with an insolvent business, your first step is to contact the administrator to explain the problem.

    If the administrator won’t help you, contact ASIC on 1300 300 630. ASIC administers the laws about insolvent companies. It does not resolve individual disputes but can give you information about consumers’ rights with insolvent businesses.

    Find out more about your rights as a creditor on the ASIC website.