Qoo10 vendors, customers accept they will likely not get money back
Source: Straits Times
Article Date: 13 Nov 2024
Author: Wong Yang & Timothy Goh
Vendors said there were signs that Qoo10 was in trouble back around end-2023.
When an online retailer began selling his products on e-commerce platform Qoo10 in August 2023, he did not bat an eyelid when it took 30 to 45 days for the platform to disburse his first payout, compared with about three to seven days for other e-commerce sites he was using.
But nearly a year later in July, payments owed to his business by Qoo10 had ballooned to about $1.6 million, as the platform’s payment delays exceeded two months and disbursements began trickling in, in smaller amounts.
The Singaporean, who wanted to be known only as Mr T and did not wish to divulge what he sold, pulled the plug on his Qoo10 shop this year in the middle of July, and filed a civil claim with the courts. He obtained a default judgment in October for Qoo10 to pay him what he is owed, after the e-commerce site failed to serve a notice of intention to contest or not contest the claim.
Mr T, who added that he had borrowed nearly $1 million from banks, friends and relatives to pay his suppliers, said: “I am not holding out hope that I will get much, or any, of my money back from Qoo10... By this point, I just want closure because it’s been so stressful.”
That closure might be on the horizon for Mr T, after the Singapore High Court found Qoo10 to be insolvent and ordered it to be wound up on Nov 11, with liquidators appointed to take over the management of the company.
Korea Culture Promotion (KCP), a gift certificates vendor in South Korea, had sought to wind up Qoo10 over nearly 76 billion won (S$72.4 million) in unpaid debt.
Like Mr T, other vendors who are owed payments by Qoo10 told The Straits Times they are resigned to not recovering the bulk of what they are due. They said they will submit their proof of debt to Qoo10’s liquidators and wait for them to arrange a creditors’ meeting.
At the court hearing for the winding-up application on Nov 11, KCP’s lawyer Chua Beng Chye, who is Rajah & Tann’s deputy head of restructuring and insolvency, said there were nine other civil suits against Qoo10 as at Nov 9.
Mr Richard Siaw, managing director of law firm R.S. Solomon, said five businesses that are owed hundreds of thousands of dollars each in delayed payments from Qoo10 had approached his firm in August. They had waited for four to six months before taking legal action, as they had good relationships with Qoo10.
He said four of his clients have since been granted default judgments for their civil claims against the e-commerce site.
“While my clients had expected that Qoo10 would be wound up, they are disappointed nonetheless because now it really seems like there is very little left (of Qoo10’s funds) to be salvaged. There is not much our clients and other creditors can do except to file a proof of debt with the liquidator when the time comes, and see how much they can recover,” added Mr Siaw.
Warning signs were there
Vendors said there were signs that Qoo10 was in trouble back around end-2023.
Mr T said that Qoo10 began to disburse monthly payments to his company across three separate payments of smaller amounts, rather than as one lump sum, around November and December 2023. He also said that in April 2024, the platform extended its payout period up to 60 days.
However, Mr T said he continued selling his products on Qoo10 because sales were brisk on the site, and while payments were slightly delayed, he always ended up getting paid by the platform.
“In hindsight, there were all these red flags I should have spotted, but I kept believing Qoo10’s explanations for every delay and was too patient with them. It’s a painful lesson for me,” said Mr T, who has been running his business for 12 years.
Buyers who had bought products on Qoo10 as recently as August told ST they have accepted they will not be able to recover money stored in the form of vouchers or Q*coins, Qoo10’s digital tokens.
Ms Wei Xin, who wanted to be known only by her first name, said she had been buying skincare products from Qoo10 since 2020, but stopped when she read news about the company’s troubles in July.
The 22-year-old university student shared that she contacted Qoo10 in August about $70 worth of Q*coins in her account, which had been credited as a refund for a previous purchase. While a customer service officer initially promised to look into whether she could withdraw the Q*coins, her follow-up e-mails went unanswered, and she believes she will not get her money back.
The Consumers Association of Singapore said it is engaging Qoo10 to resolve the 50 complaints received between Aug 1 and Nov 11 about delayed or undelivered orders and failure to withdraw money from the platform’s e-wallet system.
Dr Lau Kong Cheen, associate professor of marketing at the Singapore University of Social Sciences, said that Qoo10’s “weak financial foundation” was brought to light when the firm’s group chief executive Ku Young-bae was accused of fraud and embezzlement by South Korean prosecutors back in July.
This highlighted the firm’s poor financial management, especially in cash flow, said Dr Lau.
He added that the company has struggled to compete with other e-commerce platforms, even though Mr Ku claimed during a South Korean parliamentary hearing in July that the majority of Qoo10’s funds were spent on marketing.
Dr Lau said: “Customers have gained trust and also loyalty to platforms such as Lazada, Shopee, and Amazon with their high level of engagement that draws customers to make purchases.”
Associate Professor Ben Charoenwong from Insead Singapore said that Qoo10 “exemplifies” how the post-Covid-19 e-commerce boom may have masked fundamental vulnerabilities in digital marketplace business models, with the rapid expansion in online shopping creating pressure for aggressive growth.
Prof Charoenwong said: “As realised sales started to slow down, (Qoo10) became increasingly dependent on supplier financing to stimulate business activity – essentially using vendors as a source of working capital through delayed payments and gift certificate arrangements.”
Qoo10 still owes me money. What can I do now that the e-commerce platform is winding up?: askST
The Singapore High Court ordered embattled e-commerce platform Qoo10 to be wound up on Nov 11, with liquidators appointed to take over management of the insolvent company.
This comes after Korea Culture Promotion (KCP), which operates culture portal sites and issues culture gift certificates in South Korea, sought to wind up Qoo10 over nearly 76 billion won (S$72.4 million) in unpaid debt.
KCP also claims Qoo10 refused to honour its guarantees to secure more than 70 billion won in debt from its two e-commerce platform units, Tmon and WeMakePrice.
Six other creditors, including SCI Ecommerce, 21st Century Healthcare, Mister Mobile Trading and Shenzhen Lanmey Industries – which are together owed sums of $3.26 million and more than US$381,000 (S$510,000) – notified the court that they supported KCP’s winding-up application.
Small and medium-sized enterprises (SMEs) in Singapore selling on Qoo10 previously told The Straits Times that the platform, which also had operations in Malaysia, Indonesia, Japan and Hong Kong, failed to pay them on time. Vendors shipping items out of Singapore via Qxpress, the logistics arm of Qoo10, were also affected.
Q: What does Qoo10’s winding up mean for vendors and other creditors who did not file claims in court?
Creditors, whether big or small, who have not filed any claim in court against Qoo10 will no longer be able to do so.
But there remains an avenue for them to try to get some money back.
Mr Sean Chen, senior associate at Dentons Rodyk’s litigation and dispute resolution practice, said they can submit a document known as “proof of debt” to Qoo10’s liquidators, AAG Corporate Advisory. The document can be downloaded from the Ministry of Law’s website.
This document requires details such as the amount and description of the total debt that is apparently owed, as well as supporting documents, including invoices, receipts, contracts or messages.
“The liquidators will have to review these claims and make a decision whether to accept them or to reject them,” he said.
Mr Chen said that secured creditors, or those with legal rights over Qoo10’s assets such as vehicles, property, equipments or patents, can take steps to realise their security to pay down what is owed to them.
Other claimants, such as customers, will generally be treated as unsecured creditors.
Qoo10’s staff, who are not considered to be unsecured creditors, will be given higher priority by the liquidators and will be paid first.
“After the liquidators have paid out to the secured creditors and assuming that Qoo10 has sufficient assets, then the liquidators will have to pay all of the unsecured creditors’ claims,” he said.
If Qoo10 does not have sufficient assets to pay off all of the unsecured creditors’ claims, the liquidators will pay these unsecured creditors in accordance with the pari-passu rule (on equal footing, without preference).
“This means that the liquidators will have to treat all unsecured creditors equally and repay them an amount that is proportionate to their debt,” said Mr Chen.
Q. What about creditors who had earlier filed a complaint with other agencies, such as the Small Claims Tribunal?
Any pending cases, whether in the Small Claims Tribunal, as well as in the State Courts or High Court, will have to be paused or withdrawn.
Mr Chen added: “These creditors can submit their respective proof of debt to Qoo10’s liquidators for review and adjudication... If the liquidators accept their claims, then the creditors will be paid based on the same process.
“If the liquidators reject the creditors’ proof of debt, the creditors may decide whether to file an appeal against the liquidators’ decision.”
Mr Chen clarified that creditors who took Qoo10 to court will not receive repayments immediately just because they initiated the winding-up process.
He explained: “Once the company is bankrupted and liquidators are appointed, the liquidators will adjudicate all claims before making repayments to creditors simultaneously.”
This benefits smaller creditors, such as SME owners, he added.
“It’s costly to wind up a company... This way, smaller creditors won’t have to bear large expenses, even if Qoo10 owes them a relatively small amount.”
Q: What does the winding up mean for local versus foreign creditors? Most of the money mentioned in the High Court hearing are going to a South Korean firm.
Under Singapore law, no preferential treatment is given to creditors based on their nationality.
“This means that no matter whether you are a local or foreign creditor, the liquidators will have to distribute Qoo10’s assets based on Singapore’s insolvency law,” said Mr Chen.
Q: What role will the liquidators play?
Liquidators are court-appointed officers who act independently to manage a company’s assets.
Mr Chua Beng Chye, deputy head of the restructuring and insolvency practice at Rajah & Tann, said that duties of liquidators include recovering and selling assets, securing company records, reviewing debt claims, and investigating any potential misconduct by the company’s directors or officers.
“As part of their investigative function, they are empowered to summon and examine any officer or past officer of the company, the auditors, employees and anyone who they suspect to have possession of the company’s property,” he said.
Dentons Rodyk’s Mr Chen said that it is “not uncommon” for a creditor to request the court-appointed liquidators to look into the affairs of a wound-up company to uncover any wrongdoings that may have been committed by the company’s officers.
“If the court-appointed liquidators uncover that Qoo10’s officers’ mismanagement had caused Qoo10’s financial woes, then this may open up Qoo10’s officers to personal liability to all the creditors,” he said.
This means that liquidators could potentially go after the personal assets of Qoo10’s management, such as their bank savings, house or car.
“It is therefore in the public interest for the liquidators to thoroughly investigate Qoo10’s books.”
Source: Straits Times © SPH Media Limited. Permission required for reproduction.
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