What to do with gift cards when buying or selling a business
Are you buying or selling a business while gift cards are still in circulation? Then it’s important to make clear agreements about how to handle them. This prevents issues later on – and avoids disappointing customers who still hold a valid card.
Taking over the legal entity = taking over the gift cards
A gift card represents a claim against the entity of the business, such as a BV or VOF. If you take over that entity, you automatically take over the obligation to accept all valid gift cards.
If only the location is transferred – not the legal entity – the obligation does not transfer. The original legal party remains responsible for the outstanding gift cards. If that entity is dissolved, the consumer’s right to redeem the card expires as well.
A real-world example
In business acquisitions, it’s common to find a substantial amount of outstanding gift cards. Think of a restaurant, salon, or shop that has sold many gift cards over the years. During negotiations, it becomes clear that these cards still entitle customers to future products or services.
The key question then becomes: does this obligation fall to the buyer or the seller? The answer depends entirely on the chosen acquisition structure. That’s why having clarity upfront is essential.
How do you decide what happens to the outstanding balance?
For a smooth transfer, both buyer and seller must know exactly how many gift cards are still in circulation and what their total value is. This overview forms the basis for fair agreements and prevents disputes later on.
In practice, there are two ways to settle outstanding gift cards:
- Settling the amount in the purchase price (recommended)
The most efficient method is to include the outstanding gift card balance directly in the purchase price. Both parties agree on a percentage – often around 80% – of the total outstanding amount. This percentage reflects that not all gift cards will be redeemed and that the selling party has already received the money. The agreed amount is deducted from the purchase price, ensuring everything is settled immediately and preventing unnecessary ties between parties after the transfer. - Periodic reimbursement
The buyer accepts the old gift cards and periodically invoices the seller for the redeemed amounts. This is possible, but it is more administratively complex and keeps both parties connected until the last gift card expires. There is also a risk that the seller may eventually stop paying, while the buyer remains obligated to accept the gift cards. For these reasons, this option is chosen less often.
Our advice
Settle the outstanding balance directly in the purchase price and document the agreed percentage. It’s clear, fair, and prevents dependency after the transfer.
Need help?
Would you like advice on how to best handle gift cards in a business acquisition or sale? Feel free to contact us – we’re happy to think along with you.