- If looking to be paid for goods delivered or services already supplied, you are likely to be at the back of the queue on insolvency when distributions are made.
- Asking for “your” goods to be returned may not be straightforward, even though the customer may not have paid for them yet. Retention of title (ROT) claims are notoriously difficult to prove.
- While terminating the supply agreement may be an option, English insolvency law might require you to keep supplying the customer where the supplies are classed as essential. If the customer still doesn’t pay, then you can terminate, but you’ll need to wait 28 days first and, in any event, amounts due before the insolvency will not receive any additional protection.
- When a UK company goes into administration, that causes a stay on a broad range of actions that you might otherwise have considered – such as taking legal proceedings against the customer, enforcing security or even ROT rights. To do those, you will need the permission of the administrator or of the court, which can add to costs and delays.
- Sometimes a business may be sold on appointment of the administrator, the deal having been arranged in advance. There is no need for court or creditor approval. These pre-pack sales are a feature more or less unique to English insolvency law. The result could be that goods are no longer located where you thought they might be and, in any event, if they weren’t subject to a valid ROT claim, your claim would be that of a creditor, not an owner.
- How much due diligence is being done to identify troubled counterparties?
- Have contracts with them got decent payment protection measures?
- Would you be able to identify your goods if required for a retention of title claim?