Independent Senator for SA Nick Xenophon has called for urgent legislative changes to corporations law to protect gift card holders caught up in the Dick Smith electronics retailer corporate collapse.
In addition to moving for an urgent senate inquiry into the collapse when the Senate resumes next month, Senator Xenophon is proposing that gift card holders and consumers who paid deposits (including layby) to retailers can be protected in three ways:
- Placing an obligation on external administrators to honour the gift cards by way of a greater priority as creditors;
- Requiring that funds used to purchase gift cards or deposits paid for goods be kept in a separate account by businesses that is protected in the event of a corporate collapse
- Changing corporations law with a presumption that directors of companies that collapse are to be personally liable for the value of gift cards purchased or deposits paid for goods.
“The Dick Smith Holdings collapse highlights the lack of protection for consumers when it comes to gift cards and deposits paid,” Nick said.
“These proposed reforms which will be contained in legislation I will be introducing into the Senate next month, will finally give consumers the protection they deserve.
“The reforms, if passed, will also have the effect of strengthening consumer confidence in gift cards which has been shaken with this collapse.”
Senator Xenophon also foreshadowed that the Terms of Reference for the inquiry to the Senate Economics References Committee will include a “forensic examination” of:
- the conduct of private equity firms during such takeovers;
- the adequacy of current laws that provide oversight for such deals;
- whether current accounting standards provide enough information to the market place;
- whether corporate watchdog ASIC needs additional oversight powers; and
- whether consumer watchdog the ACCC has adequate powers to protect consumers in the event of a corporate collapse.
“The Dick Smith stores collapse puts a spotlight on the role of private equity firms in takeovers where the long-term sustainability of a business is put in question by virtue of the structure of the deal that was done,” Nick said.