Dealing with suppliers, customers and ROT claims
Produced in partnership with Tom Shepherd of 4 New Square

The following Restructuring & Insolvency practice note produced in partnership with Tom Shepherd of 4 New Square provides comprehensive and up to date legal information covering:

  • Dealing with suppliers, customers and ROT claims
  • Suppliers
  • Utilities suppliers
  • Retention of title (ROT) claims by suppliers
  • Onward sales to third parties
  • Goods that no longer exist
  • Customers

Dealing with suppliers, customers and ROT claims

Although suppliers are generally unsecured creditors (unless they establish a valid retention of title (ROT) claim) they may be key to a successful turnaround or pre-pack sale. Equally, the support of customers is often an essential part of a successful turnaround business plan.

In this Practice Note we discuss how a company in financial difficulties should deal with a variety of suppliers and customers, and how to approach ROT claims put forward by suppliers.

Suppliers

The initial due diligence on the company will identify key suppliers ie those who are sole suppliers of products/services essential to the business or where there would be a long lead time to switch suppliers (eg credit card machines, IT systems or computer and accounting software often embedded into the company's business). The company will prioritise dealing with these suppliers through a proper communications plan.

Suppliers providing non-key products/services and those charging excessively (where contracts will need to be renegotiated or replaced by cheaper suppliers) will be dealt with separately.

Ideally the company will pro-actively reach out to key suppliers and engage in discussions to diffuse any market or press speculation (see Practice Note: Restructuring—initial steps).

The company should reassure suppliers that it is business as usual, and it will continue to pay its invoices. Suppliers may attempt to renegotiate payment terms and insist on cash on delivery

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