Under Irish law, the inclusion of a valid and enforceable retention of title clause means that a supplier of goods retains title to the goods until certain conditions have been fulfilled, most usually payment. Retention of title clauses are used to offer some protection to a supplier of goods on the insolvency of a purchaser. However, suppliers are often unaware that where the purchaser has entered into examinership the enforcement of retention of title clauses is not straightforward.

When a company enters into examinership, it has been granted a period of protection by the Court whilst a scheme of arrangement is formulated for the survival of the company. During the protection period (70 -100 days) legal action or enforcement measures cannot be taken against the company. With regard to retention of title goods, the law specifically provides that such goods cannot be re-possessed by the supplier without the consent of the examiner.

The examiner’s proposals for a scheme of arrangement will generally treat retention of title suppliers as a separate class of creditor. Typically, the proposals will provide a mechanism for adjudicating retention of title claims and  the company, on exiting the examinership process, can elect to use and pay for agreed retention of title goods in full or return those goods to the supplier.

In practice, the independent accountants report (a necessary proof for a company to enter into examinership) may deem the use of the goods subject to the retention of title necessary for the survival of the company as a going concern. In such circumstances the independent accountant may recommend that the supplier be paid in full. Alternatively, it is open to the examiner to certify the use of those goods as a cost or expense of the examinership, necessary for the survival of the company. Such costs or expenses, once certified by the examiner, will not be impaired and the supplier should receive payment in full of this certified amount.

Therefore, a retention of title supplier who becomes aware that a purchaser has entered into examinership should notify the examiner of the retention of title claim as soon as possible.  If the return of goods is practical, the examiner’s consent to re-possess the retention of title goods should be sought. If the examiner does not consent to the re-possession, the examiner should be requested to certify the use of retention of title goods as an expense of the examinership.

Contributed by Craig Sowman.

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