Q&A – Shipper – insolvency

Question: I have stock stored at a fine art shipper in England and I am concerned that they might go into administration.  What happens to my stock if they do?

Answer:

If a shipper in England goes into administration, an administrator will be appointed to run the company’s affairs with the purpose of rescuing the company, achieving a better result for creditors than in a winding up, or selling the company’s assets to make a distribution to creditors. The administrator’s powers include, for example, the right to dispose of the company’s property and to set aside transactions at an undervalue or preference. However, the administrator cannot dispose of assets that do not belong to the company unless this is permitted under the Insolvency Act 1986 or by the Court.[1]

The administrator will likely notify customers with sums owing that it will exercise a lien over artworks and related documents until sums owing are paid.

If you are concerned that your shipper is in financial difficulty, you should refer to your shipping contract to check what rights the shipper (or administrator appointed to run the shipper) has over the artworks. You will also need to consider what actions need to be taken to protect the artworks stored at the shipper.  You may want to settle quickly any sums owing to the shipper, to avoid the administrator exercising a lien over the artworks.  You may also want to make arrangements to regain possession of the artworks.

Importantly, you should consider whether the shipper hold any documentation that may be useful in the future, for example export licences, import licences, CITES permits and VAT documentation.  You should ask the shipper to assemble the originals for your collection.  If the shipper is wound up, after a period of time it might become difficult or impossible to access the shipper’s archives, and if a relevant document is missing, there could be trouble ahead. 

As a shipper is likely to hold artworks for multiple customers at any one time, consider whether the packaging of your artworks is correctly labelled and includes clear identification of the consignor to the shipper. This will assist the administrator identify artworks that must be made available for your collection.

If the shipper goes into administration, you will want to notify your insurers because they may take a different view of the risk of loss and damage to artworks held by a business in administration. 

Please note that each country applies different insolvency rules.  If you have stored stock with shippers in other jurisdictions, seek local legal advice if you are concerned that shippers in those jurisdictions might become insolvent.  In certain jurisdictions, you may need to take additional steps to protect your stock in the event of a shipper’s insolvency.


[1] For example, an administrator, with the prior approval of the court, can dispose of property in the possession of the company under a hire-purchase agreement.