When dealing with troubled sectors you may want to think about what
steps you can take to better ensure payment of amounts owed and to
ensure that legal and commercial departments are on the case.
If you have concerns about a customer’s credit
- do your due diligence including checking to see if a customer
has published its Payment Practices and Performance Report;
- think about group guarantees, advance payments, deposit
retention and Project Bank Accounts and try not to allow large
sums to build up;
- consider whether you are contracting with, or invoicing, the
right entity; and
- a properly incorporated retention of title clause will make a
significant difference to your rights.
Whilst recent changes restrict certain essential suppliers of utilities
and IT-related goods and services from withdrawing such supplies
when a customer goes into administration (or puts forward a
company voluntary arrangement), there is still scope for savvy
suppliers to link price increases or changes in payment terms to
non-insolvency events. Suppliers may also ask the administrator/CVA
supervisor for a personal guarantee for payment of any continued
While it is not something you can contract for beforehand,
awareness of this right can ensure your payment for post-insolvency
supplies is protected and you can also terminate the supply if they do
not provide that guarantee within 14 days of receipt of the request.
Whar else to bear in mind
Finally, remember insolvency law differs across countries (even
within the UK to a degree) and there is no single European or global
insolvency law. What works or does not work here will very often
be different elsewhere. Non-English law contracts, goods located
abroad, foreign customers – there are a range of factors which
could be relevant, so whenever there is a significant cross-border
element for your business, think about whether you need additional
or different protection.
Some of these steps are simple but, taken together, should help
contain the fallout when there is trouble in the supply chain.