High Street Collapse - Don't get caught out!

Tuesday 14th August 2018

Poundworld, Toys R Us, Maplin and now House of Fraser. Recent high profile administrations in the retail sector should be a salient reminder to business to ensure that steps are taken to mitigate against the potentially drastic impact which could be caused by the insolvency of any associated business.

The management of the commercial relationship with any distressed business needs to be handled with great care. Efforts need to be made to balance supporting the business (and continuing a potentially profitable enterprise) against limiting your own business exposure.

At the same time, there are legal issues which should be borne in mind which could significantly improve prospects if an administrator is appointed. A couple of examples are:

Your Terms: It is essential to ensure the suitable terms are agreed with any distressed business. Do your terms have any provisions which protect you in the event of insolvency? Are those terms agreed with the distressed business? Are any agreed terms up to date? Can you prove that the terms have been agreed?If the answer to any of these is no, can you revise the terms agreed as part as an agreement to continue to support the business. If yes, make sure that there is a record of this agreement.

Retention of Title (ROT): Any supplier should try to agree to retain title (ownership) of goods supplied until all sums owed by the customer have been paid.

ROT provisions will be contained in most if not all supplier terms and conditions but have those terms been agreed (and can you prove this)? Do they cover all debts? Do they automatically take effect at the crucial time? Do you know where your stock is generally stored – as you may have to go back and get it!

Recent events remind us that businesses of all shapes and sizes can fail. Careful planning for such an event is essential but knowledge of the options open to your business after an insolvency event is just as important.

The Commercial team at Gordons can help you be prepared for the worst happening and Wayne Parker and his insolvency team can help you to manage the situation if it does.