Why time works against the estate with food raw materials
Machinery and equipment lose value slowly in insolvency proceedings. Food raw materials lose value fast — and from several directions at once. The best-before date runs down and narrows the circle of buyers with every week. The warehouse costs rent, chilled goods cost energy, and both are ongoing liabilities of the estate. The employees who know what is in which silo and where the specifications are filed leave the business. And seasonal goods have a sales window that does not follow the state of the proceedings.
Chilled and frozen goods carry an additional risk: if the refrigeration is switched off or the cold chain is interrupted, the value of the goods is immediately zero, and an asset becomes a disposal case with costs for the estate. Whoever takes over a cold store should therefore secure the energy supply and the temperature records first — even before the valuation.
In a plant closure without insolvency the pressure is lower, but the logic is the same: every day the raw material stock sits in the warehouse after production has ended costs money and remaining shelf life. The sale belongs in the wind-down plan, not at its end.
Retention of title, security rights, release
A raw material warehouse rarely belongs entirely to the estate. Raw material suppliers usually deliver under retention of title; the following describes the mechanics under the German Insolvency Code (Insolvenzordnung, InsO) — other EU jurisdictions have similar but not identical rules. Under a simple retention of title, the supplier can demand that the goods be handed over out of the estate (§ 47 InsO); under an extended or expanded retention of title and under security transfers in favour of banks, the creditor has a right to preferential satisfaction from the proceeds (§§ 50, 51 InsO). Movable assets in the administrator's possession may be realised by the administrator themselves (§ 166(1) InsO); after deduction of cost contributions (§§ 170, 171 InsO), the proceeds go to the secured creditor.
Add to that constellations that are common in food manufacturing: materials supplied by a client for contract manufacturing, goods on consignment, raw materials a customer has already paid for, and private-label packaging that belongs to a retailer or carries its brand. All of this must be handed over, or may only be realised with the consent of the party entitled to it.
Before the sale, the administrator therefore needs the stock divided into three groups: freely realisable, realisable with the consent of the secured creditor, to be handed over. The consents — the release — belong in the file in writing before the buyer collects. A buyer wants unencumbered title; they cannot and will not check whether the seller has the power to dispose. In the preliminary phase of the proceedings, sales are possible where spoilage is imminent, but need coordination with the preliminary administrator or the court. In debtor-in-possession proceedings, management decides together with the supervising trustee.
How raw material stocks are valued
The book value says little about the realisation proceeds. What counts is the value to a buyer who can use or place the goods now — and that follows from a few factors: product type and marketability, remaining shelf life, condition and available analyses, packaging type and units, single-product lots, quantity per line item, location and loading conditions, chilled or dry goods, and whether the goods are labelled and thus tied to a brand or a country.
In almost every stock, a few line items carry the revenue and many small line items carry the effort. For the administrator, a package sale is therefore usually more efficient than selling item by item: one buyer takes over the entire stock including the weak items at a package price, and the warehouse is cleared with one contract and one collection. Whatever is left over would otherwise have to be disposed of by the estate — at costs that quickly eat up the proceeds from the good items.
For the valuation, the buyer needs a stock list with article, quantity, packaging, best-before date, batch number and storage location, plus specifications, available analyses and photos. What is missing is replaced by an inspection or a sample. Which documents count in detail and what may be missing is covered in the article on documents for selling.
Direct buyer or auction?
Auctions have their place for machinery, equipment and fixtures. With food raw materials, their duration works against the estate, and their structure does not fit the goods:
| Direct buyer | Online auction or public sale | |
|---|---|---|
| Time to clearance | Offer usually within a few working days of receiving the documents, collection directly after contract and payment. | Lead time for catalogue and viewing, duration of the auction, receipt of payment, then collection by many individual buyers. |
| What is sold | The entire stock as a package, including the weak items. | The attractive lots go, the rest stays behind and has to be disposed of. |
| Handling | One contract, one invoice, one point of contact. The buyer organises transport and loading. | Many individual buyers, many collection dates, default risk if lots are not collected, commission. |
| Technical assessment | The buyer values by analyses, remaining shelf life and utilisation route — and knows the end buyers. | Bidders judge by photo and catalogue text. |
| Discretion | The goods are not shown publicly with company or brand names. | Public, with photos and designation — a problem for branded goods and for the debtor's customers. |
A direct buyer is not an intermediary: they buy the goods themselves, act as the contracting party and carry the sales risk. For the administrator, that means a binding package price before collection, rather than a result that is only known after the last hammer falls.
The process in five steps
This is how the sale of a raw material stock from an insolvency or plant closure works in practice:
- 1. Record the stock. Stock list per line item with article, quantity, packaging, best-before date, batch, storage location and storage condition. Add available specifications, analyses and photos. Secure refrigeration and temperature records.
- 2. Clarify rights. Assign retention of title, security rights, client-supplied materials and trademark rights per line item. Obtain releases from secured creditors in writing. Separate saleable items from those to be handed over.
- 3. Approach the buyer. Send the list and documents to the buyer. The buyer values, asks questions, inspects or samples where the paperwork is not enough — chilled goods and goods with a short remaining shelf life first.
- 4. Offer and contract. Package price for the released items. In the contract: exclusion of warranty, as is customary for sales out of an insolvency, payment before collection or concurrently, place of handover, collection period, responsibility for loading.
- 5. Collection and settlement. The buyer organises transport and loading, issues delivery notes per batch and settles with the estate. The records go into the administrator's realisation documentation.
Labelled branded goods and private label
Finished goods and labelled raw materials need a second look. If the goods carry the debtor's brand, the administrator can as a rule realise them — often with sales restrictions if the business is being transferred to a new owner who continues the brand. If they carry the brand of a customer or a retailer, the brand owner decides on the sale; without its consent, the route runs through neutralising or unpacking and realisation as a raw material or as feed.
Goods past their best-before date and goods whose remaining shelf life is no longer enough for retail are not lost: they can go to processors as a raw material or into feed manufacturing as former foodstuffs. Both are regular routes with suitable documentation — and considerably cheaper than the disposal that would otherwise burden the estate.