Just when you thought that you were working your way out of
recession and beginning to improve your cashflow, the European
Parliament may have just put a spanner in the works.
A European Commission and European Council proposal has been
approved by European Parliament with the intention bringing stiffer
penalties for those public authorities and companies who fail to
meet payment deadlines.
The new directive is bad news for those public authorities or
companies who maintain their cashflow by paying their suppliers
late.
A European Commission and European Council proposal was approved
by European Parliament with the intention bringing stiffer
penalties for those public authorities and companies.
So what will the directive change?
The Directive will make payment due on 30 days across the board,
although those companies who carry out business with other
companies will be able to extend their contractual period 60 days.
Should such contractual provision not be in place, the time period
in which to pay bills remains at 30 days.
The Directive does provide that contracts will not be able to
extend that period beyond 60 days "unless otherwise expressly
agreed in the contract and provided it is not grossly unfair to the
creditor"
Can I alter the statutory penalties and interest in my Terms of
Business?
Parties will be unable to alter the levels of the statutory
penalties and interest, regardless of any provisions within their
Terms of Business.
The penalties and punitive interest rate will be similar to
those under current UK legislation, with outstanding invoices
incurring interest at a rate of 8% above the European Central
Bank's reference rate. Fixed fee compensation will be in the form
of fixed fees set at a minimum of €40 but can cover all reasonable
costs.
The European Commission said that it believed that, the new
legislation would generate an extra €180 billion which would be
made "available to businesses".
Why has the European Commission taken these steps?
The European Commission said that the new Directive would make
it easier for companies to challenge unfair behaviour by its
debtors in the courts, and that it would force countries to adopt
'prompt payment codes'.
The new Directive is likely to be music to the ears of all
companies, especially small and medium sized enterprises (SMEs).
Improved certainty and clarity as to when interest can be charged
on outstanding invoices will help businesses to use the provisions
of the Directive to their advantage.
When will the UK have to adopt the changes?
It is believed that the Directive will be adopted in the near
future, with member states enforcing the legislation within of
adoption. The adoption deadline will not be extended beyond the
start of 2013.
For further information on the issues raised in this legal tip
and for all commercial law requirements, we would be happy to meet
with you. Our free Legal MOT offers you the opportunity to meet
with one of our specialists for no charge.
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Please contact us on 08458 678978 or visit our website: www.acumenbusinesslaw.co.uk.