15th March 2013
Speaking today to mark the transposition of the EU Late Payments Directives into Irish law, the Minister for Jobs, Enterprise and Innovation, Mr. Richard Bruton T.D. and the Minister for Small Business, Mr. John Perry, T.D. announced that the new revised Late Payment in Commercial Transactions legislation (Statutory Instrument No. 580 of 2012) will take effect from 16 March 2013. This will continue the Government’s drive to get credit flowing in the Irish economy by encouraging prompt payment for all business transactions.
This new legislation transposes EU Directive 2011/7/EU and repeals and modernises old rules.
Reduction in the number of late payments is seen by the Government and the EU as an important means to help SMEs to deal with the current difficult market conditions.
This Directive lays down the specific deadlines for the payment of invoices and establishes a right to compensation in the event of late payment in all commercial transactions.
Welcoming the revised legislation Minister Bruton said:
“Small and medium-sized businesses are at the core of the Government’s plan for jobs and growth. Employing over 650,000 people and contributing €10billion in taxes to the Exchequer every year, they are the backbone of the economy, and in recognition of their importance we have put in place a number of important measures including:
- Appointing John Perry TD as Minister for Small Business as a strong driver of Government policy in this area
- Establishing a Small Business Advisory Group, chaired by Minister Perry, to feed the voice of small business directly into Government policy
- Putting in place a prompt payments rule across all Government Departments and Agencies, strongly policed by Minister Perry and the Department of Jobs, Enterprise & Innovation
- Putting in place a 10-point plan for SMEs as part of Budget 2013 to assist cashflow and boost growth in this crucial sector.
“SMEs have been badly hit by the economic crisis. The measures we have put in place already have made a major difference to payment times by Government Departments and Agencies. The new rules which come into effect tomorrow will make a major difference to payments to SMEs by other companies. By modernising laws and making them consistent across Europe, the revised legislation will act as a deterrent to late payment and become a driver for payment on time. It will establish a clear expectation that payment will be made according to agreed terms and that creditors will not be penalised. It will also ensure that debtors will not benefit from negative actions. Minister Perry and I, together with our colleagues across Government, are determined to make further changes to support SMEs, help them grow and create the jobs we need.”
The main points are:-
Public authorities must pay for the goods and services that they procure within 30 days or, in very exceptional circumstances, within 60 days.
- Public authorities must pay for the goods and services that they procure within 30 days or, in very exceptional circumstances, within 60 days.
- Enterprises should pay their invoices within 60 days, unless they expressly agree otherwise and if it is not grossly unfair to the creditor.
- Enterprises are automatically entitled to claim interest for late payments and can also claim compensation for remaining reasonable recovery costs.
- The statutory interest rate for late payment is increased
- Enterprises can challenge grossly unfair terms and practices.
Also commenting on the introduction of the new legislation the Minister for Small Business, Mr. John Perry T.D. stated “The Late Payments legislation is a welcome mechanism that can help improve cash flow for businesses. It is particularly valuable for small firms. Its implementation by all parties will make a real difference to business in these troubled times”.
“The Irish Government is acutely aware of the difficulties being experienced by business particularly in the SME sector as a result of late payment” he continued. “In an effort to help ease cash flow difficulties for Irish small businesses, Ireland has also been operating, on a voluntary basis since June 2009:
- a 15 days prompt payment requirement for all central Government Departments and
- has recently introduced a similar arrangement beyond central Government Departments to our State Agency Sector. These new arrangements apply in respect of valid invoices received on or after 01 July 2011” the Minister stressed.
“Recent figures published for the 4th Quarter of 2012 show that 98% of Government payments, valued at €1.25bn, were paid to suppliers in a timely manner within 15 days” the Minister added.
The Ministers indicated that enacting this legislation is not the sole action planned by Government in this critical area in 2013. In addition to the implementation of the legislation and the 15 day prompt payment arrangement, further measures to address the issue are included in the Action Plan for Jobs 2013, which include a Prompt Payment Code of Conduct currently being developed by the Business Representative bodies with support from the Department of Jobs, Enterprise and Innovation and an information campaign which will be rolled out in the latter part of the year.
Ends
For further information please contact:
Press Office, Department of Jobs, Enterprise and Innovation: 01 631 2200, press.office@djei.ie
Notes for Editors:
The purpose of these Regulations is to give legal effect to Directive 2011/7/EC of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions. That Directive repeals, with effect from 16 March 2013, an earlier Directive from 2000 (Directive 2000/35/EC) on combating late payment in commercial transactions.
The Regulations repeal, with effect from 16 March 2013, the European Communities (Late Payment in Commercial Transactions) Regulations 2002 (S.I. No. 388 of 2002) which transposed Directive 2000/35/EC).
The Key provisions in the Regulations are as follows:
The Regulations will apply to commercial transactions in both the public and private sectors.
The Regulations provide that interest shall be payable in respect of a late payment. In addition, it will be an implied term of every contract that interest is payable if debts are not paid on time. A payment is regarded as late when 30 days have elapsed unless an alternative payment period is specified in an agreed contract. The interest rate chargeable for late payment is the European Central Bank main refinancing rate plus 8 percentage points unless otherwise agreed.
For business-to business payments, the general deadline is 30 days unless otherwise stated in the contract. It is possible, if both parties agree to extend payment terms up to 60 days. The period may be extended beyond 60 days only if “expressly agreed” by the parties in the contract and provided that it is not grossly unfair to the supplier.
The standard deadline for public authorities to business payments is 30 days. Payment can be extended up to 60 days only if it is “expressly agreed” and justified in light of the nature or feature of the contract.
The supplier is also entitled to compensation costs from defaulting purchasers. Suppliers are entitled to charge a minimum of €40 in relation to expenses incurred as a result of the late payment and may also be able to claim any reasonable recovery costs incurred.
Where a contract provides for a verification or acceptance period, the Regulations provide that interest does not run until verification or acceptance has taken place.
Where payment is made by instalments, the Regulations provide that the late payment of an instalment will attract interest and compensation but only in respect of that instalment and not the whole contract price.
Any clause in a contract which seeks to exclude interest for late payment or compensation is held to be grossly unfair and the Regulations provide that such a clause is either unenforceable or gives a rise to a claim to damages.
The Regulations provide that; compensation may be claimed for debt recovery costs, the use of terms that are grossly unfair may be unenforceable and such terms may be challenged in Court. Grossly unfair trading terms may also be challenged by organisations representing small and medium sized enterprises.
EU Directive 2011/7/EU on Combating Late Payment in Commercial Transactions are the EU’s tool to combat overdue payments. It is part of Europe’s Small Business Act (SBA) – a wide-ranging set of measures designed to make life easier for SMEs. The Directive provides a legal framework for pursuing debtors.
ec.europa.eu/growth/smes/support/late-payment/
Statutory Instrument No 580 of 2012, European Communities (Late Payment in Commercial Transactions) Regulations 2012 transposes the EU Directive into Irish law.
www.irishstatutebook.ie/2012/en/si/0580.html
Further details on Late Payments including the interest rate can be accessed on the Department of Jobs, Enterprise and Innovation website (currently being updated)
Late Payments
Actions on Prompt Payment included in the Action Plan for Jobs 2013 include
75. - Transpose EU late Payments directive into Irish Legislation
- Launch national late Payments information campaign
76. - Introduce a code of Conduct on prompt payments to improve cash flow between businesses.
Action Plan for Jobs 2013
ENDS
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