Regulation on combating late payment
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Summary
This is a legislative proposal to replace Directive 2011/7/EU on combating late payment in commercial transactions with directly applicable EU rules. It aims to reduce payment delays and improve cash flow for businesses, in particular SMEs, by setting stricter payment terms and strengthening enforcement and remedies for late payment. The proposal also seeks to curb unfair payment practices in business-to-business and business-to-public authority transactions.
Who is affected?
Businesses engaging in commercial transactions in the EU (especially SMEs) and public authorities that purchase goods or services are affected. Creditors and debtors in B2B and B2G transactions would need to comply with the new payment-term limits and late-payment consequences.
Scope
Applies to payments in commercial transactions for the supply of goods or provision of services in B2B and B2G relationships within the EU, setting maximum payment terms and consequences for late payment.
Key Points
- Replaces the current Late Payment Directive (Directive 2011/7/EU) with a directly applicable Regulation.
- Introduces stricter maximum payment terms in commercial transactions (B2B and B2G) and limits the possibility to contractually extend them.
- Strengthens creditors’ rights to statutory interest and compensation for recovery costs in case of late payment.
- Provides for stronger enforcement mechanisms, including the role of national enforcement authorities and penalties for non-compliance.
- Targets unfair payment practices and aims to improve payment discipline and liquidity, particularly for SMEs.
Key Deadlines
- — Commission legislative proposal published
- — Committee referral announced in Parliament, 1st reading
- — Vote in committee, 1st reading
- — Committee report tabled for plenary, 1st reading
- — Decision by Parliament, 1st reading
Frequently Asked Questions
Who must comply with the Regulation on combating late payment?
All businesses engaged in commercial transactions within the EU, especially small and medium-sized enterprises (SMEs), as well as public authorities purchasing goods or services, must comply with the Regulation.
What types of transactions are covered by this Regulation?
The Regulation applies to business-to-business (B2B) and business-to-government (B2G) transactions involving the supply of goods or provision of services within the EU.
What are the key obligations under the Regulation?
Key obligations include adhering to stricter maximum payment terms, ensuring timely payment, and providing statutory interest and compensation for recovery costs in case of late payment.
How does this Regulation differ from the previous Directive 2011/7/EU?
Unlike the Directive, which required national transposition, this Regulation will be directly applicable in all EU Member States, introduce stricter payment term limits, and strengthen enforcement and remedies for late payment.
What are the penalties for non-compliance with the Regulation?
Penalties may include mandatory payment of statutory interest, compensation for recovery costs, and additional sanctions imposed by national enforcement authorities for persistent non-compliance.
How does the Regulation address unfair payment practices?
The Regulation limits the ability to contractually extend payment terms and introduces measures to prevent and penalize unfair payment practices, thereby improving payment discipline.
What enforcement mechanisms are included in the Regulation?
The Regulation provides for national enforcement authorities with the power to investigate, impose penalties, and ensure compliance with payment term rules.
When will the Regulation become applicable?
As the Regulation is still a legislative proposal, it will become applicable after adoption by the EU institutions and publication in the Official Journal, with a transition period likely specified in the final text.
How does this Regulation interact with national laws on payment terms?
As a directly applicable Regulation, it will override any conflicting national laws on payment terms in commercial transactions, ensuring uniform rules across the EU.
What practical steps should businesses take to comply with the Regulation?
Businesses should review and update their payment policies, ensure contracts comply with the new maximum payment terms, and implement procedures for timely invoicing and payment monitoring.
Key Terms
- Maximum Payment Terms
- The longest period allowed by law for settling payments in commercial transactions, as set out by the Regulation.
- Statutory Interest
- The legally mandated interest rate that must be paid by debtors on late payments under the Regulation.
- Compensation for Recovery Costs
- A fixed minimum amount and any additional reasonable costs that creditors can claim from debtors to cover expenses incurred in recovering late payments.
- Business-to-Business (B2B) Transactions
- Commercial transactions between private sector companies, covered by the Regulation’s payment term rules.
- Business-to-Government (B2G) Transactions
- Commercial transactions where businesses supply goods or services to public authorities, subject to the Regulation’s payment provisions.
- Unfair Payment Practices
- Contractual or practical arrangements that unduly delay payments or circumvent the Regulation’s rules, targeted for elimination by the Regulation.
- National Enforcement Authorities
- Public bodies designated by each Member State to monitor, investigate, and enforce compliance with the Regulation.
- Directly Applicable Regulation
- An EU legislative act that becomes law in all Member States without the need for national transposition.
- Creditor
- The party (business or authority) entitled to receive payment for goods supplied or services rendered in a commercial transaction.
- Debtor
- The party (business or authority) obliged to make payment for goods or services under a commercial contract.