Late Payment Legislation Changes
The 16 March 2013 saw the Late Payment of Commercial Debts Regulations 2013 coming into force. The new regulations apply to commercial contracts for the supply of goods or services entered into on or after that date. The changes come about as a result of a European Directive aimed at tackling the problem of commercial organisations and public authorities managing cash flow by simply delaying payment of debts beyond agreed contract terms or if none beyond 30 days
As from the 16 March 2013 it will no longer be possible to contract out of the effect of the regulations. A creditor can, however, still choose not to enforce payment of charges or interest under these regulations if its customer is a commercial organisation. A public authority which is late in paying its debts must, however, pay the charges and interest provided for in these regulations.
The right to receive payment of charges and interest generally kicks in after 30 days although the regulations do permit (in exceptional circumstances) parties to agree payment terms of up to 60 days. In the event that payment is not made within any agreed term between 30 and 60 days the creditor is entitled to interest after 30 days no matter what extended terms may have been agreed between the creditor and its customer.
As to the rate of interest, whilst the new directive permits each government to set its own rate of interest for late payment the minimum rate will now be 8% above the European Central Bank rate.
Those engaged in the buying and selling (business to business or business to public authority) need to ensure that they are aware of these regulations and ensure that their contract documents etc. are compliant with the new regulations.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.