When cash is tight and pressure from suppliers is growing, the legal detail in your contracts can suddenly feel very real. One of the clauses that often crops up at this point is “retention of title”. If suppliers start saying they still own your stock, it is natural to worry what that means for your business, your creditors and your own position.
This guide explains retention of title in plain English, what happens to supplier claims in liquidation, and how you can protect yourself by acting early and getting regulated, practical support.
Retention of Title (ROT): Key Takeaways
A retention of title clause means your supplier still owns certain goods until you pay for them in full, even if they are already in your warehouse.
In liquidation, valid retention of title claims can remove stock from the asset pot, which reduces what is available for other creditors.
Complex clauses, such as “all monies” or mixed goods clauses, are tested carefully and often fail if wording or records are weak.
Your duty is to protect creditors as a whole, not to favour particular suppliers or move disputed stock once insolvency is likely.
Clear records, honest communication and early advice from a licensed insolvency practitioner will do more to protect you than trying to “fix” things alone.
If you are also a supplier, the real strength of your own retention of title clause comes from clear drafting and good paperwork, not just having the words in a contract.
What Is Retention of Title?
In simple terms, a retention of title clause says that the supplier keeps legal ownership of the goods until you pay for them in full, even if those goods are already in your warehouse or on your shelves.
So you might physically hold the stock. You may even have started to use or sell it. On paper, though, the contract says the supplier still owns it until the invoice is cleared.
There are a few common types of retention of title clause.
A simple clause says ownership of specific goods stays with the supplier until that specific invoice is paid.
An “all monies” clause says the supplier keeps ownership of all goods supplied until you have paid everything you owe them, not just one invoice.
A proceeds of sale clause tries to give the supplier rights over money you receive after selling their goods on.
A mixed goods clause tries to deal with materials that are blended or used in a process, for example where raw materials become part of a finished product. In practice, these are much harder to enforce, because it becomes difficult to point to a specific item and say “that still belongs to the supplier”.
The more complex the clause, the more closely it will be scrutinised if insolvency follows. In some cases, particularly where clauses try to control proceeds of sale or all future stock, the wording can be treated as a type of security. If that has not been properly set up and registered, it may not work as intended in an insolvency situation.
At the point where you can no longer pay debts as they fall due, these clauses stop being legal small print and become part of how your remaining assets are dealt with.
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Retention of Title in Insolvency: Why It Matters
Company failures in England and Wales have been running at elevated levels. Recent government statistics have shown thousands of company insolvencies every month, with numbers at or near their highest levels for around 30 years. Creditors’ voluntary liquidations make up the majority of those cases.
When a company goes into liquidation, creditors are paid in a set order. Secured and preferential creditors come before unsecured creditors such as most trade suppliers. In many liquidations there is little or nothing left for that unsecured group.
A valid retention of title clause can change this picture for a supplier. Instead of being just another unsecured creditor, they can argue that certain goods never belonged to the company at all. If they succeed:
Those goods are usually taken out of the pot of assets available to other creditors.
The supplier may be allowed to collect them or agree a payment in return for leaving them with the liquidator.
For you, that can mean less stock for the liquidator to sell and a smaller asset pool. It can also highlight potential personal risks if you have guarantees, an overdrawn director’s loan account, or have been relying on that stock to support continued trading.
It is one reason why early, honest discussions with a licensed insolvency practitioner are so important if you see trouble coming. Good advice helps you understand not just what the clauses say, but what they actually mean in real life if the company fails.
How Supplier Retention of Title Claims Work in Liquidation
Once you decide that liquidation is the right route, you will be guided through the liquidation process step by step.
When a liquidator is appointed, they will typically:
Secure the company’s premises, stock and records.
Write to creditors to notify them of the liquidation.
Ask creditors to submit details of what they are owed and any special claims.
Suppliers who believe they have a valid retention of title clause will usually say so early. The liquidator or Official Receiver will then ask for documents such as terms and conditions, signed contracts, invoices, delivery notes and statements of account.
They will review:
Whether the clause was properly incorporated into the contract.
Whether it is clearly drafted and enforceable.
Whether the goods can be identified and linked to unpaid invoices.
Whether goods are still on site, or have been sold, processed or mixed with other items.
Common reasons a claim fails include:
Terms were printed on the back of invoices but never agreed in advance.
There is no clear trail from specific goods to specific unpaid invoices.
Goods have been mixed, processed or relabelled so they cannot be identified.
The clause tries to go too far, for example by attempting to control proceeds of sale, without being set up as a proper security.
If the claim is accepted, the supplier’s goods are normally ring-fenced and either returned or dealt with by agreement. If it is rejected, the supplier remains an unsecured creditor like most others.
As a director, you do not have to make the legal decisions on these claims yourself. The liquidator will handle them. Your job is to cooperate, provide honest information, and avoid doing anything with stock that cuts across those rights.
What Does This Mean for a Director?
When you are already under pressure, it can feel deeply frustrating to see stock labelled as belonging to suppliers instead of helping reduce the company’s debts. However, ignoring retention of title clauses or trying to sidestep them can make things worse.
Valid claims reduce the free assets available to creditors as a whole. That can matter if you are worried about:
Personal guarantees to lenders or landlords.
An overdrawn director’s loan account.
Personal exposure on a bounce back loan or other borrowing.
Once you know, or ought to know, that the company is insolvent, your primary duty is to creditors as a group. Continuing to trade, or using stock that may be subject to retention of title, can raise questions about wrongful trading and misfeasance. Trying to favour particular suppliers, or returning goods without proper advice, can also be seen as giving preference.
The liquidator must treat all creditors fairly and follow the law. That includes dealing properly with retention of title claims. Attempting to move, sell or hide stock that might be caught by a clause, once you know the company is insolvent, can be treated as misconduct.
Keeping simple records of key decisions, such as board notes showing when you took advice and what options you considered, can help show that you have taken your duties seriously.
If you are already facing pressure from HMRC, suppliers or bailiffs, early insolvency advice can help you stay on the right side of your duties and avoid unnecessary personal risk.
At Anderson Brookes, we act as trusted, regulated advisers. We explain your legal position clearly, help you understand the risks around specific assets and claims, and support you through the decisions ahead so that you are not handling any of this alone.
Get in touch with Anderson Brookes on 0800 1804 935 or email advice@andersonbrookes.co.uk. We can help you with retention of title claims and insolvency.
Retention of Title: Practical Steps You Can Take
If suppliers begin referring to retention of title, or threaten to come in and “take their goods back”, it is important not to panic or act impulsively.
You can take some simple steps.
Stay calm and gather information
Ask for copies of their terms and conditions and any retention of title wording in full. Keep all correspondence and make a note of any calls.Protect stock and records
Make sure stock lists, delivery notes and invoices are kept safe and up to date. This will help the liquidator assess any claim fairly. Complete records also help protect you if there is later any criticism of how assets have been handled.Create a simple register of ROT goods
Where you are aware of suppliers with retention of title clauses, keep a basic list that records the supplier, the relevant terms, recent deliveries and payment status. This does not have to be complex. It simply shows that you know which goods might be affected and are taking reasonable care.Separate and label disputed stock where possible
If it is practical, keep goods that may be subject to retention of title separate from general stock and label them clearly. This makes it easier for the liquidator to verify claims and reduces arguments later about what belongs to whom.Avoid moving, selling or favouring suppliers
Once you know the company is insolvent, moving or selling stock that might be subject to a valid clause can cause serious issues. Returning goods or paying one supplier in preference to others without advice can also be risky. Before you take any such steps, speak to an insolvency specialist.Speak to a specialist promptly
Instead of negotiating alone, involve a licensed insolvency practitioner early. We can assess the position, advise what is and is not safe to do, and manage communications with suppliers so that you are not caught in the middle.
By acting in a measured way and getting advice before you make any big decisions, you protect yourself as well as the creditors.
What If You Are the Supplier and Your Customer Is Going into Liquidation?
You may also trade on credit with your own customers. If a major customer becomes insolvent and you rely on a retention of title clause, you will be on the other side of this process.
In that situation it helps to:
Check that your clause is clearly written and was agreed before or at the point of contract, not buried in later paperwork.
Confirm that your invoices and delivery notes refer to those terms.
Make sure you can identify which goods remain on site and which invoices are unpaid.
You should notify the appointed liquidator as soon as you learn about the insolvency, set out your claim clearly, and provide documents promptly. You may be asked to complete a standard retention of title questionnaire to help the office holder review your claim.
Even with a good clause, there is no guarantee of success. Goods may have been resold, mixed into new products or simply cannot be traced. There is also a commercial question. The cost of legal advice and negotiation can sometimes be close to the value of the stock in dispute, especially where margins are tight.
In practice, office holders will test claims carefully, because every successful retention of title claim reduces the assets available to other creditors. That does not mean they will automatically reject your claim, but you should expect them to look closely at the paperwork and the stock position.
Retention of Title and Company Assets
Some directors are tempted to avoid a formal liquidation and instead apply for voluntary strike off using a DS01 form. On the surface this can look quicker and cheaper.
However, if your company has creditors, especially those who might raise retention of title or other asset issues, it is vital to check that your DS01 form has been filled out correctly and to understand what happens to company assets after strike-off.
Creditors, including suppliers, can object to a strike off. In some cases the company can be restored to the register so that claims can be pursued. Authorities can also investigate director conduct after a company has been dissolved, especially where there are concerns about unpaid creditors or missing assets.
If you are considering strike off but there are unpaid suppliers, stock on site or potential retention of title issues, taking advice before submitting any forms is highly advisable.
Making Sense of Legal Language
Retention of title clauses often sit alongside other legal terms that can feel confusing when you first encounter them in a letter from a supplier or a court document.
If you are unsure about phrases such as “unsecured creditor”, “floating charge” or “preference”, you can refer to our plain-English guide to key terms in insolvency, or simply ask us to talk you through them. You are not expected to become a legal expert overnight.
The law also sets out when ownership of goods normally passes from seller to buyer. A retention of title clause changes that default position, but only if it has been properly agreed and is clear. The detail can be technical, so it helps to have someone on your side who can explain how it works in practice rather than in textbook language.
The key point is that you do not have to decode this language alone.
Frequently Asked Questions About Retention of Title in Liquidation
Does a retention of title clause always work in liquidation?
No. Even if a clause is written into terms and conditions, it may not be enforceable. The liquidator will look at how and when it was agreed, how clear it is, and whether the goods it refers to can be identified and linked to unpaid invoices. Many claims fail at that stage.
Can a supplier just turn up and remove their goods?
Suppliers cannot simply walk into your premises and remove stock without consent or a court order. Once a company is in liquidation, control passes to the liquidator. Any request to collect goods should go through them, and they will check whether the claim is valid first.
What if stock has been mixed, relabelled or sold on already?
If goods have been used in a manufacturing process, mixed with other items or relabelled, it is often very difficult for suppliers to show that specific items are still theirs. In many cases, their claim then fails and they remain unsecured creditors instead.
How far back can suppliers go with claims?
There is no fixed cut off in the way there is for some other claims. The key question is whether the supplier can show that goods are still on site, still identifiable and still unpaid, with a valid clause that covers them. In practice, the older the supply, the harder this usually becomes.
Will retention of title claims delay the liquidation?
They can slow parts of the process, especially where there is a lot of stock and several suppliers involved. The liquidator has to investigate the claims before selling or distributing assets. However, routine claims are a normal part of many liquidations and are handled as efficiently as possible.
When should I speak to an insolvency practitioner about this?
You should seek advice as soon as you:
Know you cannot pay suppliers or HMRC on time.
Receive serious creditor pressure, such as statutory demands, threats of winding up, or visits from enforcement officers.
Hear suppliers referring to retention of title and you are unsure what that means for you.
Speaking to a licensed insolvency practitioner early gives you more options and more control.
Quick Checklist for Directors
You can use this as a simple step by step checklist if suppliers mention retention of title or you know you are close to insolvency.
Review supplier contracts
Check which suppliers have retention of title clauses in their terms.
Make a short list of those suppliers and keep copies of their terms together.
Create a basic ROT register
Note each supplier with a clause, recent deliveries and what is still unpaid.
Update it as new deliveries arrive or payments are made.
Tidy up records
Make sure invoices, delivery notes, stock lists and statements are complete and easy to find.
Keep everything in one place so a liquidator can check claims quickly.
Separate and label stock where you can
Where practical, keep goods that may be subject to retention of title separate from general stock.
Use simple labels or a clear area of the warehouse so they can be identified.
Do not move or sell disputed goods
Once you know insolvency is likely, avoid selling, moving or returning goods that might belong to suppliers under a retention of title clause, unless you have taken advice.
Avoid favouring particular suppliers
Do not make one off payments or special returns to individual suppliers at the expense of others without professional guidance.
Remember your duty is to creditors as a group, not just the loudest voices.
Keep communication calm and written where possible
Acknowledge supplier concerns and confirm you are taking advice.
Keep notes or copies of calls, emails and letters so there is a clear record.
Speak to a licensed insolvency practitioner early
Share your ROT register, stock information and main concerns.
Ask for clear advice on what is safe to do and what should now wait for a formal process.
Record key decisions
Keep short board notes explaining when you realised there was a problem, what options you considered and when you decided to seek help.
This helps show that you have taken your responsibilities seriously.
Worried About Supplier Claims?
Retention of title clauses can feel intimidating, but they are just one part of the wider picture. The real priority is protecting yourself, your staff and your future while dealing fairly with creditors.
If you are worried about supplier threats, enforcement action or increasing debt, we can:
Review your company’s position in full, including assets, stock and creditor pressure.
Explain clearly how retention of title and other creditor claims are likely to be treated.
Help you weigh up rescue options against a controlled creditors’ voluntary liquidation.
Guide you through a fast, legal closure process so you can move on with peace of mind.
You do not have to make these decisions alone or second-guess what the law requires. Contact Anderson Brookes for free, confidential guidance from a regulated specialist before you take your next step.
Call 0800 1804 935 today, email advice@andersonbrookes.co.uk or use our contact form. Our consultations are completely free, and we’re here to help you.
