If you’re an SME (small and medium-sized enterprise) doing business with large companies, then you’ll be glad to hear that the payment period for large companies has been shortened.
Previously, it was common for large companies to have payment terms that stretched up to 90 days or even longer. This resulted in a massive cash flow burden for SMEs, who are typically less equipped to manage extended payment periods. The good news is that many large companies are now shortening their payment terms to 30 days.
The payment period
This amendment ensures that large companies can agree on a payment period of up to 30 days in their commercial relationship with SMEs. When an enterprise has more than 250 employees, or an annual turnover of more than EUR 50 million and the annual balance sheet total exceeds EUR 43 million, the company is considered to be a large enterprise. As a result of this amendment, parties cannot agree on a longer payment terms than 30 days, since a longer payment term is void (legally invalid). This means that a payment term of 30 days still applies by operation of law. In the event a large company would be exceeding the term of payment, it owes statutory commercial interest from the day it is exceeded.
The commercial interest can still be claimed five years later, so this does not necessarily have to be done right away. Thus a SME company can still claim statutory commercial interest later on. This could be smart if a SME company aims and prefers to maintain a proper the business relationship and it does not yet wants to claim statutory commercial interest. So there is indeed a sanction for large companies, which these companies would rather prefer to avoid.
Why was this legislative change made?
This new rule was initiated to protect SMEs. SMEs are often operating in a dependent relationship with large companies, which means that their negotiating position is not equal. This often forces them to agree with payment terms that are longer than they wish. During the corona crisis, this dependent position became increasingly visible, as some large companies unilaterally adjusted the agreed payment terms. This posed financial problems for SMEs and led to headaches among them.
To whom and when does this legal rule apply?
This change in the law applies to large enterprises that have concluded an agreement in the capacity of buyer with a SME in the capacity of supplier. Thus this rule therefore does not apply between large enterprises or between SMEs, because they do have an equal bargaining position. Because this rule took effect on July 1, 2022, it means that all agreements concluded thereafter may contain a payment term of up to 30 days. Existing agreements can still be amended up to one year after entry into force. However, as of July 1, 2023, a payment term of a maximum of 30 days shall be agreed and recorded in all agreements.
As a SME, therefore make sure that a payment term of up to 30 days is agreed upon when entering into agreements. If the large company wants to agree on a longer payment term, please know that this agreement is legally void and that a 30-day payment period still applies. Also remember that you may therefore claim statutory commercial interest the moment a large company exceeds these 30 days! Currently, the legal commercial interest rate is 10.5%.
Are you a large corporation? Even then it is wise to review your existing agreements to assess whether these need to be adjusted. Always pay close attention to the payment term of up to 30 days, because before you know, you will be obliged to pay the statutory commercial interest. Your SME supplier can claim this legal commercial interest up to 5 years.
Any questions about the payment period, or do you want to know what we can do for your company? No worries! Just get in touch with us!
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