When companies like Robinsons wind up, do we still have consumer rights?

2020 — what a year to get married, huh? First your wedding gets postponed, then your house and renovation get delayed. And now the bed that you ordered from Robinsons might not even turn up.

Sounds familiar? Such stories have been pretty common ever since Robinsons announced its liquidation. Waves of angry consumers have been filing complaints about Robinsons to demand their goods (or at least refunds).

But the question is: When a company “up lorry”, do we still have any consumer rights? Here’s a walkthrough of the liquidation process.

What does “liquidation” actually mean?

Ehh… This is not one of the 3 states of matter in your primary school science.

Liquidation is what happens when a company either chooses to shut down, OR is ordered to shut down via a court order.

It is a process where cash is obtained by selling every single item the company owns. The proceeds will then be used to pay off debts to pay off the company’s creditors. 

Often, a third-party liquidator will be appointed to see through the process — think of it as hiring a divorce lawyer to handle the distribution of your assets. In Robinsons’ case, the appointed liquidator is KordaMentha.

You will often see “bankruptcy” or “liquidation” being used interchangeably. Don’t let it confuse you — bankruptcy is usually for individuals, while for companies, the equivalent is usually known as liquidation or winding up.

What is the liquidator supposed to do?

The liquidator (also known as the “official receiver”) helps to lelong your assets in the most advantageous manner.

In other words, the liquidator is there to squeeze out every single cent they can from the company’s existing possessions.This can include updating existing contractual terms and conditions to make them more favourable to their purpose.

In Robinsons’ case, KordaMentha supposedly changed the Robinsons voucher T&Cs such that consumers will have to spend double the amount of the voucher in order to redeem it.

After squeezing out as much cash as possible, the liquidator will distribute the money of the company based on certain order of preference. They will also look at outstanding claims and decide who gets the money.

O$P$: What’s the order of payments?

Not all Ah Loongs are created equal — especially when you have hundreds of Ah Loongs fighting for the same (limited) funds.

In general, secured creditors get the highest priority. That includes banks who lent the business money, landlords, and creditors who have a floating charge over the company’s assets. The liquidator’s fees and winding up costs also get priority.

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Next are labour costs. Employees are fairly high on the list, so the winding up company needs to pay their owed wages if possible.

You might be wondering, where do you stand as a consumer? Paiseh, you are at the bottom of the food chain together with the other unsecured creditors.

To get your money back, you will need to file for more paperwork known as Proof of Debt. But hey, even that isn’t your golden ticket to get your money back.

The fact is, you are at the bottom of the list. By the time it’s your turn, there probably isn’t much money to spare. Even if there are any pennies left, your claim might get rejected — then a lengthy and expensive appeal awaits you.

What does this mean for your missing Robinsons mattress?

Consumers who ordered Simmons, Sealy, Serta or King Koil mattresses from Robinsons, lady luck is on your side. The orders who have paid in full will be fulfilled.

For the rest of the consumers, you are nowhere to be found on the O$P$ list, so your best bet is to just insist on the mattress rather than a refund.

Since the company is already broke, it will be very challenging to get a cash refund; you can expect that all of Robinsons’ cash is being used to repay creditors.

But can you turn to the Consumers Association of Singapore (CASE) for help?

Unfortunately, CASE is also unable to provide any assistance. The process of winding up requires the company to be removed from Accounting and Corporate Regulatory Authority (ACRA). And CASE only deals with companies that are listed on ACRA.

Overall, vendors and consumers are stuck in limbo while they wait for the liquidator’s updates.

But why is Robinsons’ liquidation such a dumpster fire?

With Covid-19 hanging around, many companies have failed to stay afloat. Robinsons is not the first and definitely not the last.

But what’s really pissing vendors and consumers off is the lack of transparency and communication.

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You would think that at the age of 162, the old veteran would know a thing or two about service.

But, from news coverage, it seems that Robinsons did not communicate its financial problems transparently.

Up until recently, vendors were not even aware that Robinsons was struggling, and were even told to prepare for the upcoming festive sales.

And for us, consumers were also happily spending at Robinsons without even a hint that our orders might not even be fulfilled.

Overall, Robinsons did not handle its liquidation with grace; it feels like they’re making one last ditch effort to suck out every cent they could get to pay off their debts.

This article was first published in MoneySmart.