Suppliers deemed to be critical to the survival of an insolvent business can be compelled to continue supplying, even over their objections. In a recent British Columbia decision, Soccer Express Trading Corp. (Re), Adidas Canada was ordered to continue selling inventory to their struggling customer, a retailer and wholesaler of sporting equipment, apparel and related items.
Soccer Express had offered enhanced payment terms to Adidas to encourage continuing supply, but these terms weren’t satisfactory to Adidas. The relationship, although deep and long standing, had at this point become “extremely toxic” and Adidas had made it clear that it would not supply unless ordered to do so. This position perhaps made the issue easier for the Court to address. Having concluded that Adidas was a critical supplier, the Court proceeded to order the continued supply.
As is usually the case in such orders, the Court granted security to Adidas to cover this continued supply, here a Critical Supplier Charge, with super priority over all but a small administrative charge, for the amount owing to Adidas from time to time.
Critical supplier fights can be critical to the supplier as well as the insolvent company, and experienced advice is important to protecting interests.