Gift cards sold by fashion retailers Marcs and David Lawrence will be worthless if the voluntary administrator cannot find a buyer in due time.
The two fashion retailers were placed in voluntary administration this morning after struggling with slow sales, tough market conditions and poor cash flow.
Administrators Rogers Reidy have been appointed to assess the options available for the clothing retailers, which could include a sale, liquidation or the winding up of operations.
Shoppers with gift cards can still redeem them at stores, says director Geoffrey Reidy, but are advised to do so quickly.
"We are going to honour the gift cards in accordance to the policies," he says.
But whether or not the gift cards can be used in the future will depend on the fate of the company.
"If the companies are not sold and no restructure proposal is put forward, then they would be placed in liquidation.
"If it was wound up, then the gift cards are an unsecured liability of the company which can't be paid [back to the gift card holders]."
Under Australian law, unsecured creditors are further down the list of priorities when it comes to recovering debts.
A decision on whether the retailers will be sold or wound up could be determined in as little as five weeks' time. There's no guarantee the gift cards will remain valid thereafter.
In the recent case of electronics giant Dick Smith, which was wound up and sold off
in pieces, most gift card holders were left out of pocket
Both retailers – Marcs and David Lawrence – have stopped sales of gift cards altogether.
Marcs and David Lawrence operate 52 standalone stores, 11 outlets and more than 140 concession stores throughout Australia and New Zealand, employing approximately 1130 staff.
Store employees have been paid until 30 January.