Ban on long payment terms

Published on 2nd Aug 2017

As of 1 July 2017, the act against unreasonably long payment terms (Wet tegengaan onredelijk lange betaaltermijnen) came into effect. The act is a more strict interpretation of Directive 2011/7/EU and has been implemented in order to improve the solvability position of small and medium-sized enterprises. Payment terms of more than 60 days will be banned.

An earlier interpretation of the Directive already led to the introduction of the prohibition of a payment term of more than 60 days. However, parties could apply for an exception to this rule if they explicitly agreed on a longer payment term. Any such agreement was only allowed if the payment term was not unreasonably unfair towards the supplier, taking into account (a) whether the purchaser has any objective reasons to deviate from the 60-day deadline, (b) the nature of the agreed performance, and (c) good commercial practice.

The new act now prohibits large companies acting as purchasers to impose payment terms of more than 60 days on any small and medium-sized enterprises (SME), which are companies that comply with at least two of the following criteria:

  • a balance total of less than EUR 20 million;
  • a net turnover of less than EUR 40 million; and/or
  • less than 250 employees.

Any agreement entered into by a large company and an SME as of 1 July 2017 with a payment term of more than 60 days will be null and void. Such a payment term will automatically be converted to a payment term of 30 days, after which statutory interest (currently 8%) shall be automatically payable. Parties cannot deviate from this rules anymore or waive the right to statutory interest.

Any existing agreements need to comply with the act as of 1 July 2018.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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