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SMEs: Damaging late payment culture due to end on 16 March

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Every day across Europe, dozens of SMEs go bankrupt as their invoices are not paid. As a result jobs are lost and business opportunities remain unexploited, stalling our return to economic growth. To end late payments the European Union therefore adopted Directive 2011/7/EU on combating late payment in commercial transactions.

"SMEs find it particularly difficult to stand up for their right to prompt payment. Late payments mean SMEs lose time and money, and disputes can sour relations with customers. This damaging late payment culture has to end. It is now time for Member States to implement the Late Payments Directive into their national law - giving SMEs the vital support they need in these difficult times and helping them fulfil their key role in European job creation.”

By 16th March 2013 Member States will need to have integrated the revised Late Payments Directive into their national law. It obliges public authorities to pay for goods and services within 30 calendar days or, in very exceptional circumstances, within 60 days. Businesses should pay their invoices within 60 calendar days, unless they expressly agree otherwise and if it is not grossly unfair to the creditor.

European Commission Vice President Antonio Tajani, Commissioner for Industry and Entrepreneurship, said: "SMEs find it particularly difficult to stand up for their right to prompt payment. Late payments mean SMEs lose time and money, and disputes can sour relations with customers. This damaging late payment culture has to end. It is now time for Member States to implement the Late Payments Directive into their national law - giving SMEs the vital support they need in these difficult times and helping them fulfil their key role in European job creation."

More information on the Late Payments Directive and information seminars in Member States

The new rules are simple:

  • Public authorities must pay for the goods and services that they procure within 30 calendar days or, in very exceptional circumstances, within 60 calendar days.
  • Contractual freedom in businesses commercial transactions: Enterprises should pay their invoices within 60 calendar days, unless they expressly agree otherwise and if it is not grossly unfair to the creditor.
  • Enterprises are automatically entitled to claim interest for late payments and can also automatically obtain a minimum fixed amount of €40 as a compensation for payment recovery costs. They can also claim compensation for all remaining reasonable recovery costs.
  • The statutory interest rate for late payment is increased to at least 8 percentage points above the European Central Bank's reference rate. Public authorities are not allowed to fix an interest rate for late payment below this threshold.
  • Enterprises can challenge grossly unfair terms and practices more easily before national courts.
  • More transparency and awareness raising: Member States must publish the interest rates for late payment so that all parties involved are informed.
  • Member States are encouraged to establish prompt payment codes of practice.
  • Member States may continue to maintain or to bring into force laws and regulations which are more favourable to the creditor than the provisions of the Directive.

The new measures are optional for enterprises, insofar as they acquire the right to take action but are not obliged to do so. In some circumstances, a business may wish to extend the payment period for some days or weeks to keep a good commercial relationship with a specific client. But the new measures are obligatory for public authorities. They should lead by example and show their reliability and efficiency by honouring their contracts.

Background

The European Late Payment Directive was designed to combat late payment of commercial transactions. Its parent act, the Small Business Act (SBA), reflects the Commission's will to recognise the central role of SMEs in the EU economy and stressed that effective access to finance is one of the major challenges faced by SMEs (MEMO/12/742).

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