How to Get Back Your Money from a Company That’s Closing Down in Singapore
When companies close, customers who have left deposits or prepayment for services are adversely affected. A highly probable reason for a companies’ closure is due to its loss-making nature of their business. More often than not, funds will be limited, and a refund would unlikely be possible.
Furthermore, it might take a long period of time to receive repayment. After more than a year since California Fitness island-wide shut down in 2016, customers have yet to be refunded for their membership packages.
What are the possible methods to reclaim your deposits? This article aims to explore the viability of the potential options to receive your rightful refund of your deposits through the following methods:
- Directly Contacting the Company for a Refund
- Requesting for a Credit Card Chargeback
- Engaging the Consumer’s Association of Singapore (CASE) to Resolve Your Dispute
- Filing a Proof of Debt with the Company’s Liquidator
- Filing a Claim with the Small Claims Tribunal
- Taking Legal Action as a Group of Individuals Against the Company (Class Action)
As a first course of action, you should directly contact the company for a refund. To do so, you should determine whether the company has gone bust or has simply decided to close down its branches.
This can be done by visiting the company’s website, or in the case of a Singaporean company, through the Accounting and Corporate Regulatory Authority (ACRA) free online directory search.
A Singapore company is still existing and active if its status is displayed as a “live company” on ACRA. If the company is still live, it may direct you towards its refund procedures and the steps you should take.
Companies that are not depleted of funds are in a better financial position to make refunds and might even propose alternative repayment methods.
2. Requesting for a Credit Card Chargeback
If you have paid via your credit card, your bank may be able to help by charging back the transaction to the merchant. A chargeback reverses a credit card sales transaction, removing the charge from the cardholder’s bill.
A dispute resolution form should be submitted within 14 days of the credit card statement as a refund may take between 4 to 12 weeks, depending on the complexity of the issue.
A chargeback will generally be allowed if you can successfully show that the company in which you have placed a deposit in has closed down.
This can be done by presenting your documents such as:
- Receipts; and
- Membership agreement,
to the bank for verification.
A few credit card companies that offer the chargeback scheme include:
- American Express
You can contact your card-issuing bank’s 24-hour Customer Service Hotline to lodge your dispute.
Chargebacks only apply to individuals who have subscribed to monthly instalment membership schemes. This means that individuals who have purchased pre-paid or fixed term memberships may still be liable to repay the instalments to your bank.
3. Engaging the Consumers Association of Singapore (CASE) to Resolve Your Dispute
The Consumers Association of Singapore (CASE) is a non-governmental organisation that aims to protect the interest of consumers by working with retailers to promote good business practices.
In line with this dedication, CASE strictly applies only to consumers and does not handle business-to-business disputes.
CASE provides 2 options to resolving your complaint:
- Filing a case; where CASE will correspond with the company on your behalf to work towards an amicable resolution (usually through a mediation session). However, you must register as a CASE member so that CASE can follow up on the dispute on your behalf.
- Engaging the Assisted Case Scheme; where CASE will help you to draft a letter to the company to communicate your concerns and ideal outcome. You do not have to register as a CASE member, but CASE will not follow up the dispute on your behalf or provide you with any updates on your matter.
Depending on the amount of your claim, an administrative fee (inclusive of GST) will be charged. If a mediation session is arranged, separate charges would apply. According to CASE, these mediation sessions, which are limited to 2 hours, have a 70-80% rate of success.
An application to CASE may be made online, via a phone call or over the counter. Either way, you must present all supporting documents, including the:
- Proof of purchase
- Invoices; or
- Contracts signed with the company.
Please note that CASE is neither a regulator nor an enforcer as it does not adjudicate, but only makes communication between the company and you easier. It thus cannot guarantee that you will get your refund.
CASE can only assist you by requesting the company to attend a mediation session with you in hopes of reaching a compromise. Should the company be uncooperative or unresponsive, you might have to engage alternative options in getting your refund.
4. Filing a Proof of Debt with the Company’s Liquidator
When a company closes, liquidators will be appointed to sell off the company’s assets for cash in order to pay off outstanding debts. Creditors will be paid in a stipulated order, depending on who the debt is owed to.
To be entitled to the funds the liquidator distributes, you must file a proof of debt. This may be done by either submitting Form 77 online, or manually submitting Form 77 at the Insolvency Office. A small fee is chargeable upon submission of said forms.
However, filing a proof of debt might not guarantee success considering the following:
- The liquidator might reject your claim against the company if he deems it to be unsubstantiated. To substantiate your claim, supporting documents such as invoices, receipts and your agreement with the company should be submitted along with Form 77.
- You might not get your refund even if your filed proof of debt is accepted. Before the creditors (including you) are paid off, the costs of the liquidator and auditors are paid off first. Then, followed by unpaid wages or salaries owed to employees, retrenchment benefits, remuneration and CPF contributions.
Even amongst creditors, the debts of secured creditors such as banks are paid off first. After that, the company’s suppliers, vendors and service providers are paid off. Customers are on the lower end of the creditor queue, as these deposits are unsecured.
5. Filing a Claim with the Small Claims Tribunal
If the company is still active under ACRA and has yet to cease operations, you may lodge a claim with the Small Claims Tribunals.
However, your claim cannot exceed $20,000. This is unless you and the company both consent to a higher amount of up to $30,000 by signing a memorandum.
Also, all claims must be filed within 2 years from the date of your transaction.
All claims after 10 July 2017 must be submitted online via the Community Justice and Tribunals System. Supporting documents that must be uploaded include:
- All supporting invoices;
- Contracts; and
A small fee is chargeable depending on the amount of the claim. The Small Claims Tribunals will only deliver the judgment, regardless of whether the company is present.
This means that, even if you have won the claim, the Tribunals will not take any legal action against the company to ensure you receive the claim. You must claim the refund yourself.
However, take note that you cannot file a lawsuit against a company undergoing liquidation except with the permission of the court. If you wish to do so, you must persuade the court to grant such permission. This is because, the court may not wish to burden the closing company through the costs of unnecessary court claims.
Other factors that the court would take into consideration when deciding whether to grant permission include:
- The potential success/futility of the lawsuit and whether the claim can be supported by credible evidence;
- Whether the action is an attempt to bypass the standard procedures during winding up (e.g by filing proof of debts);
- Whether the action would prejudice the claims of other creditors; and
- The timing of the applicant seeking leave to bring an action against the company, as applications made at the last minute will unlikely be allowed.
6. Taking Legal Action as a Group of Individuals Against the Company (Class Action)
Where numerous persons have the same interest in proceedings, the proceedings may be brought by one of them (who is known as the representative claimant) on everyone’s behalf. The judgment of the court is then binding on all parties to the proceedings.
A representative action is cheaper and more practical for the individual parties, as fewer lawyers need to be appointed to represent everyone. This also allows small individual parties such as consumers to front a more powerful adversarial stance against larger companies.
However, take note that filing a lawsuit against the company is a lengthy process. The time and effort spent may also heavily outweigh small amounts of money intended to be reclaimed.
Furthermore, should a liquidator be appointed, he would find a suitable course of action and advise you on what to do. Instead of filing a class action, cooperation between the company’s liquidator(s) and you is advisable.
And similar to filing a claim under the Small Claims Tribunal, class actions cannot be brought forth unless the court gives permission if a liquidator has been appointed for the company.
From the abovementioned, it is apparent that retrieving refunds from companies that are closing down may be a difficult process. Should you wish to recover your money, you need to act promptly. As a takeaway, prevention is always better than cure.
To prevent yourself from being in a position where you are demanding for a refund, conduct some background research about the company you are about to give a deposit to. You should also:
- Inquire whether the business offers any prepayment protection,
- Ask about the refund policy of the prepayment, and
- Try to negotiate for progressive payments instead of a lump sum payment.
Look for complaints or negative reviews about the company online, as well as any news reports on the financial history and status of the company. For example, CASE provides a list of companies that have received frequent complaints.
For further protection, patronise companies under the CaseTrust accreditation scheme, as these companies must follow guidelines that help protect consumers from sudden business closures.
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