Why retention of title is a key tool for B2B sales
In business-to-business relationships, payment on credit is the norm: immediate delivery, collection at 30, 60 or 90 days. This asymmetry exposes the seller to the risk of customer insolvency, especially when delivered goods are high in value or not easily resalable. Retention of title (Eigentumsvorbehalt) allows the buyer to take possession of the goods while the seller retains ownership until the price is paid in full.
In Switzerland, retention of title over movable property is governed by the Civil Code (CC, Art. 715 and 716) and the registration ordinance (EigVV); sales contracts fall under the Code of Obligations (CO), while bankruptcy, enforcement and composition proceedings are covered by the Federal Act on Debt Enforcement and Bankruptcy (DEBA). Unlike German law, Switzerland does not recognise the «simple» and «extended» forms under the BGB: registration in the register of the debt enforcement office at the buyer's domicile is an essential condition for effectiveness against third parties and in insolvency proceedings. Many SMEs include the clause in their general terms and conditions without completing registration or without assessing the accounting consequences.
This guide explains how to structure retention of title in a Swiss B2B context, what steps to follow to recover goods in the event of non-payment, and how to reflect the transaction in inventory, receivables and e-invoicing with tools such as Accountex.
Legal basis: CC, CO, DEBA and the difference between registered and unregistered retention
Swiss law does not distinguish between «simple» and «extended» retention as in Germany. Practical effectiveness depends primarily on registration in the register of retention of title agreements:
| Aspect | Registered retention (Art. 715 para. 1 CC) | Unregistered retention (contractual agreement only) |
|---|---|---|
| Subject of the security | Delivered goods for which the secured receivable is indicated in the register | Agreement between the parties, without publicity towards third parties |
| Required form | Written contract with the information required under EigVV; registration with the debt enforcement office at the buyer's domicile | Contractual agreement (written form strongly recommended); no registration |
| Registration | Mandatory for effectiveness erga omnes (Art. 715 para. 1 CC); excluded for livestock | Not carried out: effectiveness limited to the parties only |
| Priority in insolvency | Right of separation (Aussonderungsrecht, Art. 242 et seq. DEBA) if registered before bankruptcy is opened | No separation from the estate: unsecured claim |
| Costs | Cantonal registration fees; cancellation upon payment or for other cause (Art. 12 EigVV) | Limited to drafting the contract |
| Ideal for | B2B supplies on credit with significant value or high insolvency risk | Occasional low-risk relationships, with awareness of limited protection |
A point often overlooked: retention of title does not automatically suspend the transfer of risk. Under Art. 185 CO, unless otherwise agreed, benefits and risks pass to the buyer upon perfection of the contract (sale of specific goods) or, for a sale by description, when the goods are identified and, if shipment is provided for, delivered to the carrier. This has insurance and accounting implications independent of the legal ownership of the goods. In instalment sales, Art. 716 CC furthermore limits the seller's right to demand return of the goods.
The «extended» or «prolonged» forms typical of German or Austrian law are not recognised in Switzerland; to secure cumulative receivables or derivative products, it is advisable to consider alternative instruments, such as assignment of receivables or real security.
Contractual clauses: what an effective Eigentumsvorbehalt must contain
For B2B sales, retention of title is typically included in general terms and conditions of sale, the order confirmation or the framework agreement. To be operative, the clause must be clear, identifiable and consistent with Swiss commercial practice:
Essential elements of the clause
- Explicit statement that ownership remains with the seller until the price is paid in full
- Reference to the possibility of reclaiming the goods in the event of default or insolvency, subject to the right of withdrawal under Art. 214 CO
- Buyer's obligation to store and insure the goods until transfer of ownership
- Prohibition of assignment, pledge or substantial transformation without written consent
- Identification of the goods (order number, invoice, item code) and the amount of the secured receivable for registration
Common mistakes among SMEs
- Generic clause not referenced on the invoice or delivery document
- Agreement reached but never registered with the competent debt enforcement office
- Failure to verify that the customer accepted the GTC (order without explicit reference)
- Confusion between retention of title over movable property and real rights in immovable property
- No internal tracking: unable to identify which items are still owned by the seller
In B2B relationships, tacit acceptance of general terms and conditions is permissible if the buyer is accustomed to dealing with the seller and does not contest the GTC at the time of ordering. For new customers or high-value relationships, it is prudent to obtain explicit written acceptance and archive it together with the framework agreement, preferably before delivery of the goods.
Recovery of goods: operational procedure and practical limits
When the customer fails to pay on the due date, registered retention of title allows the seller to reclaim (Herausgabe) goods not yet paid for. In the event of default, the seller may also withdraw from the contract (Art. 214 CO) and demand their return. The procedure requires documentary rigour and timely action.
Step 1 — Establish default: send a formal reminder with a payment deadline. Reclamation presupposes a breach by the buyer. Document the delivery date, invoice number, outstanding amount and the text of the applicable clause.
Step 2 — Identify and locate the goods: verify that the goods are still identifiable and in the debtor's possession. If they have been resold, transformed or mixed with other stock (commingling), reclamation may be impossible or limited to the net resale value.
Step 3 — Written reclamation: notify the debtor (and, if necessary, the bankruptcy trustee) of the exercise of the right of reclamation, indicating the affected items. In the event of resistance, the seller may proceed with real enforcement (Art. 151 et seq. DEBA) for release of the goods.
Step 4 — Recovery and post-recovery management: once recovered, the goods return to the seller's warehouse. Assess their condition (new, used, damaged) and update inventory. If the goods can no longer be resold at the original price, the residual loss remains a receivable against the debtor.
Caution: commingling and transformation
If the buyer has incorporated the goods into a finished product (e.g. components in an installed system) or mixed them with fungible material, the right of reclamation may be extinguished. For high-risk B2B supplies, consider clauses prohibiting transformation without consent or complementary instruments such as assignment of resale receivables, within the limits permitted by federal case law.
Bankruptcy, composition and moratorium of the debtor
Retention of title delivers its greatest value when the B2B buyer enters financial difficulty. Here is how it applies in the main scenarios provided for under Swiss debt enforcement and bankruptcy law (DEBA):
| Scenario | Effect on retention of title | Recommended action for the seller |
|---|---|---|
| Simple default (solvent customer) | Free reclamation; no competition with other creditors | Reminder, reclamation, possible real enforcement proceedings |
| Debt enforcement (attachment) | With valid registration, the goods do not belong to the debtor's attachable estate | Third-party opposition proceedings (Art. 106 et seq. DEBA) if the enforcement office seizes the goods |
| Bankruptcy (Art. 197 et seq. DEBA) | Right of separation (Aussonderungsrecht, Art. 242 et seq. DEBA) if registered before opening | Timely notification to the trustee with proof of registration and identification of the goods |
| Composition moratorium (Art. 293 et seq. DEBA) | Suspension of enforcement; registered retention remains valid | Monitor the restructuring plan and promptly assert the right of separation |
| Composition (Art. 308 et seq. DEBA) | Retention remains valid; watch for proposals for compulsory satisfaction on the residual receivable | Assess whether to recover the goods or accept composition on the uncovered receivable |
In bankruptcy, deadlines are tight: the seller must assert the right of separation (Aussonderung) without delay, attaching the contract, invoices, delivery documents and certificate of registration in the register. Registration must predate the opening of bankruptcy; otherwise the claim remains unsecured in the bankruptcy estate.
Impact on inventory, receivables and invoicing
Retention of title directly affects accounting and operational management. Although it is an institution of property law, its accounting consequences must be handled consistently:
Inventory and balance sheet
Until the buyer has paid in full, legal ownership of the goods remains with the seller if retention is validly registered. In accounting, this may mean that goods delivered but unpaid have not definitively left the seller's assets, depending on the policy adopted and the transfer of significant risks.
Many Swiss SMEs, where registered retention of title applies, maintain an inventory sub-account «on consignment» or «with retention of title» to track open items. Upon collection, the definitive transfer of ownership is recorded and any adjustment to inventory outflow is made.
Receivables and collections management
In parallel, the seller records a trade receivable from the customer for the invoiced amount. The receivable and retention of title coexist: the receivable is the claim for payment, retention is the real security over the goods.
In Accountex, it is advisable to mark invoices with retention of title (notes field, tag or dedicated category) and link them to the shipped inventory item. This simplifies monitoring of the ageing schedule, selective reclamation and year-end reconciliation.
VAT: under Art. 2 VAT Act, the sale of an asset constitutes a supply even if retention of title is registered. Tax liability follows the usual rules (generally upon issuance of the invoice or upon collection, depending on the method applied); retention does not defer the tax obligation. Verify that the invoiced amount corresponds to market value and that the clause is referenced on the invoice or in the GTC accepted by the customer.
Year-end closing: at year-end, reconstruct the list of open items with retention still outstanding. If the goods are unpaid and reclaimable, assess whether to reintegrate them into physical inventory or record an adjustment with an explanatory note in the financial statements. The auditor will focus on consistency between physical inventory, accounting records and contractual clauses.
Operational checklist for SMEs and fiduciary firms
To make retention of title an effective tool — and not merely a clause forgotten in the GTC — adopt a structured routine:
Assess the customer's risk profile
For new customers, high amounts or cyclical sectors, provide for registration in the register under Art. 715 CC. For occasional low-risk items, assess whether inter partes contractual protection is sufficient.
Integrate the clause into every commercial document
General terms and conditions, order, confirmation, delivery note and invoice must reference retention. Archive the customer's acceptance in the CRM or ERP system.
Track items in accounting
Use categories, cost centres or sub-accounts for goods «with retention». Reconcile open receivables and consignment inventory monthly.
Define an internal recovery procedure
Responsibilities, reminder timelines, reclamation templates and contact with the debt enforcement office must be documented before an emergency arises.
Manage registration in the register
Verify that registration takes place with the office at the debtor's current domicile and proceed with new registration in the event of relocation (Art. 3 EigVV: provisional effectiveness for three months). Cancel registration upon payment and update the administrative calendar.
Retention of title does not replace careful trade credit selection, but it effectively complements it. Integrated into invoicing, inventory and receivables recovery workflows, it becomes a concrete element of risk management for every Swiss SME that sells on credit in the B2B market.