In March of last year, a bill was introduced by the State Secretary of Economic Affairs and Climate to halve the current maximum allowed payment period for small and medium-sized businesses. The bill should curb the dominance of big business and reduce the financing deficit of small and medium-sized enterprises. The proposal received a large majority in both the Senate and House of Representatives.
The law change limits the maximum payment period between large companies and smaller companies from 60 to 30 days. On July 1, 2022, this law(Act of March 30, 2022 amending Book 6 of the Civil Code in connection with reducing the statutory payment period to 30 days(Stb. 2022, 146) will enter into force. After this Amendment Act comes into force, new commercial agreements between a large enterprise as debtor and small and medium enterprise as creditor may not, in principle, contain payment terms of more than 30 days, or at least the inclusion of such a provision in the agreement is void. Then a period of 30 days will always apply by operation of law.
For contracts already existing on July 1, 2022, longer payment terms with a maximum of 60 days may be used for one more year. A transition period is thus applied to existing contracts. In practical terms, you would do well from now on to only agree payment terms of up to 30 days, because in the legal relationship between buyers and suppliers it is not always clear when a “new” contract begins and an “old” contract ends. So update your terms and conditions in time, if necessary.
Incidentally, the above new maximum payment period applies only between small and medium-sized companies as creditors on the one hand and large companies as debtors on the other. In principle, two major trading parties can still use a 60-day payment period. Your business qualifies as a micro, small or medium business if it meets two of the three requirements below:
- The value of assets according to the balance sheet does not exceed 20 million euros;
- net sales for the fiscal year do not exceed 40 million euros;
- the average number of employees for the fiscal year is less than 250.
Conversely, if the debtor does not meet two of the three requirements above, it qualifies as a “large company.
In short, as of July 1, 2022, new agreements between small and medium-sized enterprises as creditors on the one hand and large enterprises as debtors on the other hand will no longer be allowed to contain payment terms of more than 30 days. Existing contracts are subject to a one-year transition period.
This article was written by Nick Buijze, legal assistant.