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Europe tightens late payment rules

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26th Oct 2010
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The European parliament this month tightened its late payment directive to cap the maximum contractual payment period at 60 days.

The new directive was passed by parliament on 13 October and following publication in the European journal, it will then need to be ratified by individual countries. This is expected to happen across the continent by 2013.

The main conditions of the new directive are as follows:

  • Public authorities will have to pay for the goods and services that they procure within 30 days.
  • Companies will have to pay their invoices within 60 days, unless they expressly agree otherwise – so long as the terms are not “grossly unfair”.
  • Enterprises will automatically be entitled to claim interest for late payment and a €40 minimum amount for recovery costs. They can claim compensation for all remaining reasonable recovery costs.
  • The statutory Interest rate will be increased to at least 8 percentage points above the European Central Bank’s reference.

The European Commission estimated that when the directive comes into force, it should make an additional €180bn available to businesses.

Closer to home, the Burton Mail reported that US brewer Molson Coors had informed its suppliers that it was increasing its payment period from 60 to 90 days.

Molson Coors finance director David Heede told suppliers said the move was to align with its global standard payment terms and that it had given “fair and lengthy notice” of the move.

Local MP Andrew Griffiths raised the issue in parliament. “Small businesses in Burton and across the country are suffering as a result of larger firms unilaterally extending payment terms from 30 days to 60 days — or to 90 days in some cases,” he said.

“Given that those firms are struggling as a result of difficulties in accessing finance from the banks, can we have an urgent debate to see what we can do about that double whammy, and to support small businesses across the country?”

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