Retention of title (ROT) meaning

The outcome of an administration will frequently hinge on the worth of the company’s assets and the administrator’s capacity to handle those assets freely so as to secure the best possible result for creditors as a whole. The administrator is granted extensive powers to deal with property, including assets encumbered by various forms of security and quasi-security (for example, hire purchase or retention of title arrangements). A key advantage of administration is the protection created by the moratorium against enforcement by creditors, which permits the administrator to proceed without the constraints the company may have experienced before administration. The administrator may intend to sell or otherwise deploy charged property in order to meet one of the purposes of the administration, while, by contrast, a creditor may wish to enforce its security and recover what it is entitled to from a company it regards as at risk. These competing requirements need to be held in balance between administrator and creditor...

This Practice Note examines retention of title clauses, also described as reservation of title, ROT or Romalpa clauses. It reviews how these clauses may safeguard a creditor-seller against a debtor-buyer’s insolvency, as well as their limits. It outlines the principal features of such clauses and distinguishes between basic and extended forms, including ‘all monies’ and ‘proceeds of sale’ provisions. It also addresses practical issues around incorporating ROT terms, enforcement, and other protective avenues open to a seller. Simple retention of title clauses Extended retention of title clauses, including ‘all monies’ and ‘proceeds of sale’ clauses What is a retention of title (ROT) clause? At its most straightforward, a retention of title clause is a contractual term enabling the seller to keep title to goods it has supplied until the buyer has paid in full or, where permitted, resold them to a third party (Aluminium Industrie Vaassen v Romalpa Aluminium). A retention of title clause is also known as a reservation of title...

This glossary sets out numerous expressions frequently encountered in the restructuring arena. Words appearing in the definitions in bold are explained in other entries in this glossary. For further banking terminology, see the principal Banking & Finance Glossary. Restructuring glossary—A Acceleration: Acceleration means the agent, acting on directions from the majority lenders after an event of default, takes formal action, for example calling for early repayment of the facility. Ad-hoc committee: A temporary creditors’ group (often contrasted with a formal committee) that lacks any entitlement to official recognition. Administration: A process under the IA 1986 in which a financially distressed company is operated by an administrator as a going concern before longer-term outcomes, such as break-up and sale, are pursued. Administrator: An Insolvency Practitioner named by the court, a Qualifying floating charge holder, the directors or the company, to take control and fulfil one of the purposes in IA 1986, Sch B1. Administrative receivership: Arises when a company breaches the terms of...