Customer Insolvency: What Suppliers Can Still Secure
Insolvency of a customer: retention of title, supply contracts and avoidance – an overview for suppliers
According to media reports, a nationally known retail chain has filed for insolvency again; business operations are continuing for now and a preliminary insolvency administrator has been appointed. In such cases suppliers immediately face the question: what happens to outstanding invoices, delivered goods and ongoing contracts? We give an overview of the key points.
Outstanding Invoices: Usually Only a Quota
Claims arising from deliveries made before the opening of insolvency proceedings are, as a rule, ordinary insolvency claims (einfache Insolvenzforderungen). After the opening they are filed with the insolvency administrator (§ 174 InsO) and satisfied only with an often low quota out of the remaining assets (the “estate”, Masse). Suppliers who hold security are in a better position.
Retention of Title: The Most Important Security
Under a retention of title (Eigentumsvorbehalt), ownership of the goods passes only upon full payment (§ 449 Abs. 1 BGB). If the goods are still with the customer, they continue to belong to the supplier, who can in principle reclaim them (segregation, Aussonderung, § 47 InsO). However, surrender requires withdrawal from the contract (§ 449 Abs. 2 BGB). Even in the preliminary proceedings the court may order that such goods may not be reclaimed for the time being if they are of significant importance for continuing the business; any loss in value must then be compensated on an ongoing basis (§ 21 Abs. 2 Satz 1 Nr. 5 InsO).
After the opening of proceedings, the insolvency administrator does not have to decide immediately whether to perform the contract in respect of goods subject to retention of title. The administrator may wait until immediately after the reporting date (Berichtstermin), the first creditors’ meeting (§ 107 Abs. 2 InsO). This does not apply if a significant loss in value is expected until then and the supplier has drawn the administrator’s attention to this – an important point for seasonal goods.
A simple retention of title is lost as soon as the goods are resold, processed or mixed. An extended retention of title (for example, the assignment of the claim arising from the resale) generally gives, in insolvency, a right to preferential satisfaction from the proceeds (separation, Absonderung, § 51 Nr. 1 InsO). Whether it has been validly agreed depends on the supplier’s general terms and conditions and on whether they were incorporated.
Ongoing Supply Contracts: Termination Clauses Often Do Not Help
Where a contract has not yet been fully performed by either side when proceedings are opened, the insolvency administrator may choose whether to perform it (§ 103 InsO). Agreements that exclude or restrict this right of election in advance are invalid (§ 119 InsO). The Federal Court of Justice (Bundesgerichtshof) has therefore held clauses invalid that terminate contracts for the continuous supply of goods or energy because of an insolvency filing (BGH, judgment of 15.11.2012 – IX ZR 169/11). It later added that such clauses may exceptionally be valid if there were legitimate reasons when the contract was concluded; however, clauses in favour of the party entitled to payment – typically the supplier – are, according to that decision, regularly invalid (BGH, judgment of 27.10.2022 – IX ZR 213/21). It is usually more sensible to link termination rights to default in payment.
New deliveries in the preliminary proceedings become preferential estate liabilities (Masseverbindlichkeiten) only if a preliminary administrator with power of disposal has created them (§ 55 Abs. 2 InsO) or the court has authorised this; in preliminary self-administration, the debtor itself needs such a court authorisation (§ 270c Abs. 4 InsO). The mere consent of a preliminary administrator without power of disposal is not sufficient. Suppliers should therefore deliver only against prepayment or after written proof of such a power or authorisation.
Avoidance: Payments Received Are Not Always Safe Either
The insolvency administrator may reclaim payments and security that the supplier received in the last three months before the filing if the customer was insolvent (unable to pay its debts) at the time and the supplier knew this; knowledge of circumstances that compellingly indicate this is sufficient (§ 130 InsO). If the customer acted with the intent to disadvantage its other creditors and the supplier knew of this intent, avoidance reaches back up to four years for payments and security (§ 133 Abs. 1, 2 InsO). Where the supplier granted payment by instalments or any other payment facility, it is rebuttably presumed that the supplier did not know of the customer’s inability to pay (§ 133 Abs. 3 Satz 2 InsO). Cash transactions (Bargeschäfte), that is, the prompt exchange of equivalent performance, are largely protected (§ 142 InsO).
Practical Checklist for Suppliers
Review your general terms of supply for a valid (extended) retention of title and ensure they were incorporated.
Document goods subject to retention of title, assert your rights against the administrator in writing and point out any threatened loss in value.
File claims with the administrator on time after the opening of proceedings and state any security.
Make new deliveries only against prepayment or on proof of authority or court authorisation.
Keep payment terms short so that delivery and payment can qualify as a cash transaction.
Review credit limits and trade credit insurance (including notification deadlines) regularly.
Conclusion
In the insolvency of a customer, much is already decided at the stage of contract drafting. Suppliers who keep retention of title, payment terms and avoidance risks in view can limit their losses. Please do not hesitate to contact us if you have any questions.
Status: 17 October 2026
NIETZER Rechtsanwälte · Attorneys at Law (USA) · Heilbronn · www.unternehmensrecht.com
This article is for general information purposes and does not replace legal advice in an individual case.
