1 The Three-Week Rule – a 21-Day Limit and a “Credit Stop”
Monitor due dates: According to settled case-law of the German Federal Court of Justice (BGH), an invoice that remains unpaid for more than 21 days is a red flag for the customer’s insolvency.
Suspend further deliveries / require 100 % pre-payment: Once the 21-day period has elapsed, stop “financing” the customer; release new shipments only against an immediate cash payment (Bargeschäft). Because payment and counter-performance occur almost simultaneously, the practitioner’s ability to challenge the transaction later is greatly reduced.
Internal documentation: Record every decision to halt deliveries or switch to pre-payment (CRM entry, meeting minutes). These records will later help rebut any allegation that you were aware of the customer’s insolvency.
2 Retention of Title – Double Protection for Your Payment
Contractual standard: All goods shipped to Germany should be sold exclusively under a retention-of-title clause (Eigentumsvorbehalt). Do not sign master or individual contracts—or confirm purchase orders—that weaken or exclude the clause (e.g. by transferring ownership upon delivery).
Repeat the clause: Insert it not only in your GTCs but also on the order confirmation, delivery note, and invoice.
Insolvency effects
Aussonderungsrecht (right to exclude assets from the estate):
If the goods are still identifiable and have not been resold or processed, they remain outside the insolvency estate. The supplier may request that the practitioner hand the goods over pursuant to § 47 InsO. The practitioner can block this request only by declaring under § 103 InsO that the contract will be performed and by paying the full purchase price—in effect “buying out” the goods.
Absonderungsrecht (right to preferential satisfaction):
If the goods have already been resold or processed and a valid extended retention of title (verlängerter EV) with assignment of the resale proceeds was agreed, the supplier can no longer demand hand-over of the goods. Instead, the supplier is entitled to a priority share of the resale proceeds or of any assigned receivables (§§ 50–51 InsO). Should those proceeds be insufficient, the shortfall is filed as an ordinary insolvency claim.
3 Ongoing Credit Monitoring
Quarterly solvency reports: Independent ratings help demonstrate that no obvious signs of insolvency existed when you accepted payment.
Thresholds: In consultation with German counsel, define the rating score at which orders automatically switch to pre-payment or are stopped altogether.
4 Internal Audit of “21 +” Payments
Scope: Review all payments received more than 21 days past due for at least the last three years.
Purpose: Identify customers where the claw-back risk is heightened and adjust terms early (pre-payment, credit limits, retention-of-title wording).
Additional benefit: The data strengthens negotiations on trade-credit insurance and the setting of credit limits.
5 Ring-Fence Strategy – Selling Through a German GmbH
Risk isolation: Supplying customers via a dedicated German limited-liability company (GmbH) can confine extraordinary liabilities to the subsidiary and shield the parent company’s assets.
Open issues:
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Customer acceptance and any security they may demand
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Integration into existing insurance programmes
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Tax and transfer-pricing implications
Recommendation: Conduct a feasibility review (legal, tax, commercial) before implementation.
Conclusion
Combining the 21-day limit, a strict retention-of-title regime (Aussonderungsrecht / Absonderungsrecht) and continuous credit monitoring is the most effective way to fend off later repayment claims by a German insolvency practitioner. Where sales volumes are large, setting up a separate GmbH can serve as an additional ring-fence—provided the project is carefully structured and key stakeholders agree.