Legal Question in Business Law in California

Re: Business closed, outstanding gift certificates

The holder of the gift certificate is probably out of luck. How was the "business" organized? If a corporation or other entity, and the business was validly dissolved and/or wound up, the holders of the gift certificates are likely out. They are technically creditors of the business and would likely have a right to make a claim against the business.

As a practical matter, unless there are a large number of holders of such certificates, there is no economic incentive to move forward.

If the business was a dba of an individual, then perhaps you might make a claim against the individual (who owned the business) for reimbursement of the face value of the gift certificate. Does the gift certificate have any cash value? Was it purchased or was it a gift? Is it redeemable for cash or product? These are all legitimate questions which must be answered before moving forward.

If there is enough money at stake, and the gift certificate has cash valud, or you want to press for a refund of money which you paid to get the gift certificate, then you might consider suing the individual who owned the business. The suit would like be in Small Claims court, which provides a quick, efficient and inexpensive way to resolve small disputes.

Good luck.

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Re: Business closed, outstanding gift certificates

A Business owner can't just shut down a business without addressing its outstanding debts, such as unpaid wages and vacations, supplier bills, and customer deposits including gift certificates.

Sure, if the business is bankrupt, and a proper bankruptcy filing is made in federal court, the business has a degree of protection, but even then the court will locate the business assets and apportion them to creditors, and customer deposits such as gift certificates would have a medium priority, I believe.

If the business wasn't bankrupt when it ceased to operate, the owner(s) have a legal responsibility to pay creditors 100 cents on the dollar for gift-certificate liability; in my humble opinion, this would be true whether the business was a corporation, partnership, or a sole proprietorship. In the case of a corporation, the directors (not the shareholders) would be liable, since it is they who have the power to decide how corporate assets will be distributed upon going out of business.

As another attorney has pointed out, there is an economic problem in using the legal system to go after the former owner(s). The costs of suit would probably exceed the amount owed any single certificate holder. Maybe a class action would work, or maybe you're more interested in the principle of the thing than the money, but a suit would cost thousands of dollars for filing fees, attorney fees, service of process, research and other expenses.