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LEGAL NEWS - How to secure sold goods in Denmark

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20. June 2017

The security of your goods in Denmark is regulated differently than in Austria. The Danish law does not have an “extended retention of title” as in Austria or other countries, for example Germany. This often leads to misunderstanding and the false feeling of security while selling goods to Denmark. In the following you therefore find a short description of the possible ways to secure your goods sold to Denmark. Unfortunately none of the possible securities are as advantageous as the Austrian “extended retention of title”.

1. The simple retention of title

A simple retention of ownership can be used if goods are sold to customers or the goods are not sold to be used in production or to a reseller. 

A simple retention of ownership is subject to stricter rules of proof in Denmark than in Austria and is only effective if the following conditions are fulfilled:  

1.1) Agreement on the retention of title 

The retention of title must be clearly and expressly agreed between the parties at the latest upon delivery to the buyer. In order to have a clear documentation, the retention of title should already be included in the purchase contract. A clause in the general terms and conditions stating that goods are sold under retention of title is not sufficient and will not bind the Danish buyer or assignees. When the goods are handed over to the buyer it expressly should be written on the delivery note that the goods are sold under retention of title and that the goods remain the property of the seller until complete payment.   

1.2) Identification of the goods

The seller has to proof which goods are covered by the retention of title. Therefore the seller has to be able to identify the goods among other goods of the buyer. In order to ensure that the goods are covered by the retention of title and can be identified, the goods should be marked with an identification feature both in the purchase contract and on the delivery note.   

Even if the above mentioned conditions are fulfilled there are limits to the retention of title that mean, that the retention of title is almost not used in Denmark. The limits are following: 

  • A retention of title clause cannot be asserted in the event of insolvency of the buyer, if the buyer is a retailer selling the same or similar goods or utilizing the goods for production.
  • The purchase price has to exceed DKK 2.000 per purchase contract
  • The purchase contract cannot constitute a loan with a variable loan sum. This means that only the purchase price can be secured by the retention of title. It is not possible to secure older or future receivables by the retention of title agreement. 

2. Consignment agreement

If the goods are sold to a retailer or are sold in order to be used in production a simple retention of title can often not be enforced against an assignee. 

In this case a security similar to the “extended retention of title" can be reconciled within the scope of a consignment reservation. The consignment reservation is associated with an increased administrative burden for the seller and is therefore rarely used. 

The requirements to be met for a valid consignment agreement are the following:  

2.1) Agreement on Consignment

The reservation must, like the retention of title, be clearly and expressly agreed between the parties at the latest upon delivery to the buyer. A clause in the general terms and conditions stating that goods are sold under a consignment agreement is not sufficient and will not bind the Danish buyer. When handing over the goods to the Danish buyer it also must be expressly mentioned that the goods are sold under a consignment reserve and that the property of the goods therefore remains the sellers until complete payment. The delivery note including the consignment reserve must be signed by the buyer.   

2.2) Identification requirement

The seller has to be able to proof which goods are covered by the reservation. The requirements for this proof are, like for the retention of title, controversial in practice. In order to ensure that the goods are covered by the retention of title and can be identified the goods should be marked with an identification feature both in the purchase contract and on the delivery note. 

2.3) Separation

The goods sold under a consignment agreement must be kept separate from the rest of the buyer’s warehouse. The seller must ensure that the buyer continues to hold the (unsold) goods covered by the consignment reservation separately from the rest of the buyer’s warehouse.     

2.4) Balance

The buyer must notify the seller on the sale of the goods on a regular basis. This can either be done after each sale or in short regular intervals. The seller must ensure that the buyer settles on a regular basis. According to Danish case law control at intervals of 3-4 month is considered as sufficient. However it will depend on the circumstances, hereunder the amount of the sales, how often the seller should control the consignment stock.    

2.5) Consignment

Finally, a consignment account must be maintained by the buyer. However Danish case law accepts the lack of a consignment account if the seller can proof that the necessary control measures where observed. 

In contrast to a purchase on commission, the consignment buyer (consignor) acts in his own name and for his own expenses. If the consignor sells the goods to a third party, the seller only has the right to segregate the purchase price against the third party (the purchaser of the goods covered by the consignment agreement) if this is expressly agreed between the seller and the consignor. It is therefore crucial to adhere this clause in a consignment contract. 

3. Floating charge / receivables floating charge (“virksomhedspant”/”fordringspant”)

In addition to the above mentioned two possibilities, a floating charge can be agreed between the parties. This floating charge can either cover all assets of the company or only cover the companies trade receivables. The floating charge is created by a way of mortgage and has to be registered in the Personal Registry (“personbogen”). The floating charge or receivables floating charge is often used by banks which means that it is often not possible to agree upon a floating charge or a receivables floating charge. It will also depend on the size of the seller and the value of the goods sold, whether floating charge or receivables floating charge is an option.   

Finally, if none of the above should be the perfect option, you still may ask for either pre-payment or a bank guarantee or personal guarantee from your buyer in order to secure payment for your delivery. It is thus recommendable to get information on the financial standing of your business partners in advance and also during a business relationship to pay attention to any signs that may indicate any solvency problems of your partner and then to adapt/renegotiate payment methods and delivery terms.

For any further questions please contact attorney at law Alexandra Huber at ah@leaddenmark.com

Last modified
20. June 2017
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