31 March 2025
It is common for a supplier to deliver goods to a customer without requiring immediate payment. In doing so, the supplier runs the risk that the customer will not pay or may even be declared bankrupt.
If, as a supplier, you do not have a security interest or a preferential right, you will only be able to submit your claim as an unsecured creditor in the bankruptcy. In that case, it is uncertain whether you will recover any part of your claim. Payment to unsecured creditors will only occur once all estate claims (such as bankruptcy costs and the trustee’s fees) and preferential claims (such as those of the tax authorities) have been satisfied. Unfortunately, in many bankruptcies, there are insufficient funds in the estate to make any payment to unsecured creditors.
One way to reduce financial risks for you (or your business) is to agree on a retention of title. A retention of title means that you, as the supplier, remain the owner of the goods you delivered until the customer has paid the purchase price. Only after the customer has paid the full purchase price the ownership of the goods transfer to the customer.
The retention of title also applies if your customer is declared bankrupt. If you have delivered goods under retention of title, you generally have the right as a supplier to reclaim the goods from the trustee.
It is also possible to agree on an “extended retention of title.” For example, if you deliver not only goods but also services (such as installing the goods you supplied), you can stipulate that ownership of the goods will only transfer once the invoices for both the goods and the services have been paid.
If you wish to invoke a retention of title, it is important to inform the trustee as soon as possible after the bankruptcy is declared. This ensures the trustee is aware of your retention of title.
The trustee will then assess your claim. The trustee will check whether the retention of title has been properly agreed. In practice, this is where things often go wrong. For instance, retention of title is frequently included in general terms and conditions, but those terms may not have been properly incorporated in the agreement between the supplier and the customer. Or the terms were not provided to the customer at or before entering into the agreement. For example, you are too late if you only send the general terms with the invoice.
The trustee will investigate this and may ask you to provide evidence. If you cannot do so, the trustee will not acknowledge your retention of title.
Once the trustee has determined that there is a valid retention of title, you will typically be allowed to collect the goods on an appointed collection day. This is only possible if the goods you supplied are still present and have not been processed. You must also be able to prove exactly which goods you delivered. This can be problematic if another supplier has delivered identical goods to the same customer. Therefore, it is wise to clearly mark the goods you supply (for example, using stickers).
In some cases, the trustee may charge you a reasonable estate contribution for collecting your goods. After all, the trustee incurs costs in assessing the retention of title and in returning the goods to you. While this may seem unfair, current case law allows the trustee to do this.
Would you like to know more about what to consider when dealing with retention of title? Or do you need help arranging or enforcing it? Please feel free to contact us.
