Belgian legislator imposes payment terms in commercial transactions between large enterprises and SMEs
25 Nov 2019
Effective from 29 April 2020, the payment term in commercial transactions between companies and small & medium enterprises (SMEs) will be limited to a maximum of 30 or 60 days. The control and verification term will be limited to a maximum of 30 days.
Why?
In practice, it has been noticed that, given the dominant position of large(r) enterprises, SMEs often have to agree to payment terms that are longer than those provided for by law and longer than what the SME considers comfortable. In order to protect SMEs against cash-flow problems and give them more certainty, the legislator has provided for stricter payment terms.
When?
The payment conditions apply where the creditor is an SME and the debtor is a large enterprise.
An SME is a company that does not exceed any of the following criteria whereas a large enterprise is a company that exceeds one or more of the following criteria:
- annual average number of employees: 50;
- annual turnover, excluding value added tax: 9,000,000 euros; and
- balance sheet total: 4,500,000 euros.
The new conditions only apply to agreements entered into, renewed or modified on or after 29 April 2020.
What?
If no payment term has been agreed between the parties, the law imposes a statutory payment term of 30 calendar days.
In an agreement, parties can only agree to a contractual payment term of maximum 60 calendar days.
Furthermore, the control and verification term, i.e. the time allowed to check the conformity of the goods or services with the contract, and to protest, will be limited to a maximum of 30 calendar days.
Any clause that is in violation with these rules will be considered unwritten.
Action?
Large enterprises will need to revisit their general purchase conditions and template purchase agreements by 29 April 2020.
This exercise can be combined with the implementation of the new rules on unfair contractual terms in B2B contracts. More information on these rules can be found here.
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