Most of us are now aware that HMV has gone into administration. What many of us do not understand is what exactly this means, particularly in light of growing frustration over the inability to spend gift vouchers.
So what does administration mean? In basic terms, it means that a company is no longer financially viable and, as such, the right of creditors to be paid is suspended until the administration process is complete.
A ‘receiver’ is appointed — that is, an individual or agency will take over the management of the company in order to assess the company’s financial situation and its future viability. Essentially, it will examine the cost structure of the company and endeavour to come up with a ‘rescue plan’.
If the administration process is successful, the courts will ask the creditors of the company to approve the plan. If so approved, the company will continue to operate based on this new plan. In practice, this usually means that a portion of the company’s debts will be written off and creditors will only receive a percentage, if anything, of the monies owed to them. If the process is unsuccessful, the company will likely go into liquidation. In other words, the company will cease to exist.
In the Republic, Deloitte Ireland has been appointed as receiver for HMV. The administration process is underway and the right of creditors to be paid has been suspended. The owner of a gift voucher, being owed a debt by the company, is considered a creditor. (This also applies to anyone who wishes to return an item to the company, though they may still have recourse with the manufacturer of the product if the item is faulty.)
In summary, if you hold a HMV gift voucher, your right to spend that voucher has been suspended until the administration process is complete. In reality, though by no means definite, there is little likelihood of your voucher ever being worth its full value.
So what can you do? At this moment in time, you could contact the receiver to ensure that you are on the list of the company’s creditors. In that way, you will have a say in any proposals or plans that are put forward by Deloitte at the end of the process. How that process will end is, at present, anyone’s guess; however, the situation is a serious one, and is unlikely to have a happy conclusion for the retail giant. Or for its creditors.