February 17, 2011
A recent study from business information provider and credit reference agency Equifax shows that corporate insolvency decreased from 26,000 to 23,000 in 2010. Neil Munroe, external affairs director at Equifax, attributes the drop in corporate failures to pay freezes and tight control on invoice payments.
In addition to cost control and cash flow management, you may wish to protect your business by putting in place effective and properly incorporated retention of title provisions.
Under retention of title provisions your goods will remain yours, until the goods have been paid for in full. It is even possible to put in place retention of title provisions under which ownership of your goods will not pass to your customer, until your customer has paid all monies it owes you.
It is important that your retention of title provisions are correctly drafted so as to make them work for your business. It is furthermore important that your retention of title clause applies to (is incorporated into) your contract with your customer. Merely having a retention of title provision in your standard terms and conditions is not sufficient. You must ensure that you adopt the correct process to incorporate the provisions into your contract with your customer.
Retention of title provisions cannot only be enforced against your customer, but also against a liquidator or administrator (“the officeholder”), who will either have to pay for your goods or return them.
As the officeholder will have no knowledge of your Retention of Title provisions it is important that you act with great speed, once you find out that your customer has entered into, or is about to enter into, administration or liquidation. You must immediately inform the officeholder of your retention of title provisions and take steps to identify your goods.
If you cannot reach an agreement with the officeholder and provided that you can evidence incorporation of your retention of title provisions, then injunctive relief to prevent the officeholder from using your goods without payment may be available.
For further advice or to arrange a free review of your terms and conditions, please contact one of our solicitors in our Insolvency team, Petra van Dijk on 01295 204159 or Hitendra Patel 01295 204108.
