Companies are still experiencing great difficulties due to their professional customers’ payment behaviour. More and more Belgian companies are paying their suppliers after the agreed payment period. A recent study conducted over the year 2018 showed a downward trend in payment behaviour, both between companies themselves and between companies and public authorities. The study revealed that less than 70% of all invoices are paid within the agreed payment term, and that more than one in ten invoices are paid more than 90 days late, while some of these invoices are even left unpaid.
In addition, it has been observed that bigger companies tend to take advantage of their position to impose longer payment periods on their contracting party. The current regime laid out in the Act of 2 August 2002 on combating late payment in commercial transactions (the “Act of 2002”) does not sufficiently improve the payment behaviour between companies. The new Act therefore aims to strengthen the rules and remedy any loopholes that companies can use to circumvent their payment obligations.
The current rules applying to payment terms
The Act of 2002 in its first version provided that parties were free to contractually set the payment term between them. The payment term could even exceed 60 calendar days as long as that this was not manifestly abusive towards a party. If the parties do not set a payment term, then the law provides that a term of 30 days will apply.
In May 2019, the Act of 2002 was amended and stated that the parties could not agree on a payment term exceeding 60 days if the creditor is an SME and the debtor is not an SME. This protection towards SMEs sought to avoid smaller companies having to accept very long payment terms imposed by their stronger contracting party, which could cause them to suffer from liquidity problems. Such liquidity problems have a ‘snowball’ effect because these companies’ lack of liquidity is reflected in their own payment behaviour towards third parties.
Moreover, where a period is provided for checking the invoice (a so-called verification or acceptance term), this term may not exceed 30 days. In practice, this means that when an SME delivers goods or services to a large company, the contractually agreed payment period can never exceed 90 days (a maximum of 30 days for the acceptance period and a maximum of 60 days for the payment).
The recent study referred to above however showed that a payment period of 90 days is still too long for many companies, especially SMEs.
Therefore, the Act of 2002 was again amended this year, regarding both the payment term and the verification/acceptance term. The new Act further provides for two other clarifications regarding the calculation of the payment term and the applicability of interest for late payment.
Maximum payment term of 60 days
First, the new Act provides that in the context of commercial transactions between companies, these companies may not agree on a payment term exceeding 60 calendar days, irrespective of the concerned companies’ size. Any term longer than 60 days will be considered null and void: in such a case, it would be as if no payment term has been agreed upon and the legal term of 30 days will then apply.
By enshrining a clear deadline in law, it will no longer be possible for companies to exert pressure to contractually set a very long payment period. This maximum period of 60 days is similar to the current period applying to public debtors.
Upon obtaining the High Council of the Self-employed and SMEs’ opinion, the King will have the power to authorise longer payment terms at the sectoral level when it is justified.
Acceptance or verification term must be included in the payment term
Second, the new Act provides that an acceptance or verification procedure for the goods or services must form an integral part of the payment period. An acceptance/verification term allows the customer to check the goods’ conformity with the contract terms. The customer may indeed want to check the invoice to ensure that what is stated on that invoice corresponds to what was delivered or that the delivery took place correctly. Up to now, the parties could agree that the effective payment term would only start after the completion of such an acceptance or verification procedure, which allowed for the payment of the invoice to be delayed beyond the maximum of 60 days.
To close the loopholes in the Act of 2002’s current version and to avoid that an acceptance or verification procedure is used by some companies to extend the maximum legal payment term, the new Act provides that the acceptance or verification procedure must be fully included in the payment term.
The new Act provides for two additional specifications.
To avoid circumventing the maximum legal payment period, the parties will be prohibited from contractually agreeing on the date of receipt of the invoice. The payment period only starts to run from the date of receipt of the invoice by the debtor and could therefore be artificially extended by contractually fixing the date of the invoice (and thus the date on which the payment term starts). This provision is added by analogy with the rules currently applying to commercial transactions between companies and public authorities.
The Act further adds that the debtor must provide the creditor with all the information necessary to enable him/her to issue the invoice within the time limits referred to in Article 4 of Royal Decree No 1 of 29 December 1992. This provision should, for example, make it possible to put an end to the practice of certain debtors’ who do not communicate the number of the order form that the creditor needs to issue the invoice.
Finally, sometimes companies pressurise their creditors not to charge interest or a lump sum when the amount due is not paid on time. At present, the Act of 2 August 2002 only provides for the creditor’s right to ask for such interest or lump sum. The new Act clarifies that once the payment term is exceeded, the amount due can automatically be increased without notice of default with interest or a lump sum, in addition to the fixed compensation of 40 EUR for collection costs.
The new Act will enter into force 6 months after its publication in the State Gazette, which is on 1 February 2022.
From that date forward, parties will still be free to set a contractual payment term applying to commercial transactions between them, but that term will have to be limited to a maximum of 60 days, irrespective of the parties’ size. Any contractual clause providing for a longer term will automatically be deemed null and the legally provided payment term of 30 days will then apply. It is therefore strongly recommended to revise the payment terms and shorten any excessive term before 1 February 2022 to reduce it to the maximum term allowed.
The other modifications brought by the new Act aim to ensure the effectiveness of the payment term of 60 days by preventing a contractual party from exerting pressure to artificially delay the (start of) payment term. First, any acceptance or verification term provided for by contract or by the law to certify the goods or services’ conformity with the contract must form an integral part of the payment term. Second, parties will be prohibited from contractually setting the date of receipt of the invoice. The debtor must provide all information relevant to the creditor to issue its invoice in time. Finally, the new Act provides that if the creditor has fulfilled his/her contractual and legal obligations and has not received the amount due on the due date, then the unpaid amount will, as from the next day, automatically and without notice of default, be increased with interest, unless the debtor can show that he/she is not responsible for the delay.