Retention of Title Clauses in Insolvency Events Such as Administration and Liquidation
As per the Sale of Goods Act 1979, the retention of title (sometimes called a ‘Romalpa Clause’) is the ability for a supplier to retain the title (official ownership) of goods after delivery to a customer. This is a legal means by which a supplier can protect themselves against non-payment, by retaining ownership of the goods until the customer actually pays them. This must be contractually stipulated for it to take effect.
What happens in Insolvency?
If a company is insolvent, it is the insolvency practitioner’s responsibility to deal with any suppliers claiming their retention to a title on goods within company premises. Before releasing anything, the IP would have to be confident of the suppliers claim, the veracity of his retention of title conditions, and that the claims can be matched specifically to unpaid invoices (unless the clause extends to goods ‘supplied at any time’).
Going into Administration Protects Against Repossession
Although administration offers no statutory protection against retention of title, the Insolvency Act 1986 does offer companies in administration some protection against the repossession of goods. The law stipulates that, if an administration order is in force, suppliers are unable to repossess goods based on a retention of title agreement without a court order or the consent of the administrative receiver.
Company administrators are required to check all contractual documentation relating to goods in the possession of an insolvent party. This includes seeking the views of the directors in identifying any goods which may be subject to a retention of title claim.
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