Legislator tightens screws on late paying companies - payment periods limited to 60 days maximum including verification perio…

The law of 2 August 2002 (FR/NL) on combating late payment between companies will soon celebrate its 20th anniversary. Surprisingly, despite its age, the legislator still makes regular adjustments to it.

In fact, the law, which was initially intended to protect creditor companies against slow debtors, has, in practice, encountered certain shortcomings that the legislator intends to rectify.

Currently, the law provides for a payment term of 30 calendar days if the parties themselves have not agreed on a payment term. The parties can always derogate from this payment term. However, the law provides that the maximum payment term may only be 60 calendar days where the creditor is an SME and the debtor is not. In other situations e.g. large debtor company vs large creditor company, the parties can agree on a payment term that is longer than 60 calendar days.

In practice, some debtor companies — often large companies with strong bargaining power — use mechanisms to artificially extend the 60-day period.

It is these mechanisms that the law of 14 August 2021 seeks to combat, namely:

1. The verification period

The legislator provided for a ‘verification period’ for deliveries and invoice documents.

A side effect of this verification period is that it extends the maximum period by a further 30 to 90 days. These extended periods pose serious threats to the cash flow of SMEs.

2. Information to establish the invoice

The legislator realised, as studies show, that certain debtors too often had the unfortunate tendency to not provide all required invoicing information. In so doing, they ‘played’ with the time period in which the goods or services could actually be invoiced by the creditor. This resulted in payment periods that were artificially prolonged.

3. Concern about charging interest

Another pitfall of late payments in commercial relationships is the thorny issue of claiming interest and compensation for late payments from debtors. Whether this is due to wanting to preserve the commercial relationship between the parties or for fear of aggravating the situation, many creditors ignore the interest they could legitimately claim from their debtors.

New rules for B2B invoices

In view of these pitfalls, the legislator has decided to amend the law of 14 August 2021 :

(1) to include the verification period in the legal payment period, which is set at maximum of 60 days, so that verification can no longer serve as an excuse for postponing payments.

(2) so that the parties may not contractually fix the date of receipt of the invoice. Debtors are obliged to provide creditors with the necessary information to draw up invoices (e.g. purchase order number, etc.) at the latest at the time of the receipt of goods or the provision of services.

(3) so that after the 60-day period, unless debtors can prove that they are not responsible for the delay, compensation will be due and interest will automatically and without notice of default be accrued on creditors’ claims (at the contractual interest rate or, if not provided, at the legal interest rate provided in the Law of 2 August 2002). Again, if no contractual penalty is provided, a lump sum of 40 euros will automatically be added as compensation for collection costs incurred by creditors.

The amending law was published in the Belgian Monitor on 30 August 2021 and will enter into force on six months to the day after this publication, i.e. on 1 February 2022. From this date onwards, contractual provisions between companies which provide for a payment period of more than 60 days, or for a verification period in addition to a 60-day payment period, will be considered null and void, and the legal payment term of 30 calendar days will apply.

Under the new law a derogation can be granted for certain sectors by Royal Decree. However, it remains to be seen whether derogations will follow.

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