The Department for Business issued an interesting press release yesterday, 27 July 2020, outlining proposals that will make it fairer for consumers presently missing out if a company supplying pre-paid goods becomes insolvent and unable to deliver.

In a nut-shell the changes will:

• provide clarity for consumers about when they will own pre-paid goods, particularly if a retailer becomes insolvent,
• include guidelines that will set out ways of identifying the consumer as the legal owner, including if goods have been labelled or altered for the buyer – such as an engraved ring,
• update the current rules on transfer of ownership that date back to 1893 and are not fit for modern-day shopping practices.

Under existing rules, if a company becomes insolvent, goods paid for in advance that are still in the suppliers’ possession may be considered as assets belonging to the business.

These goods can then be held by the company’s administrators and used to pay off the firm’s debts, potentially leaving consumers out of pocket.

Consumer Affairs Minister Paul Scully has asked the Law Commission to consult on draft legislation to update the law that establishes when consumers legally own goods for which they have pre-paid.

Practitioners may need to consider the accounting treatment of goods ring-fenced in this way if and when changes to legislation are subsequently legislated.

Source: New feed