Do you work for a large company and do you occasionally enter into agreements with SMEs or self-employed individuals? Then this law, which takes effect on July 1, 2017, may have consequences for your purchasing policy. Below, we answer questions that may be relevant to your practice.

What does this new law entail?

This law stipulates that large companies that purchase goods or services from small businesses can agree on a payment term of up to 60 days. The new law only applies to relationships between large companies and SMEs or self-employed individuals. Large companies can still agree on longer terms among themselves.

Why is that necessary?

The House of Representatives observes that large companies regularly agree on long payment terms in practice. This has consequences for small businesses, which can experience liquidity problems and fail to pay their suppliers on time.

What is a large and a small company?

A large undertaking is defined as a large undertaking if two or more of the following conditions are met:

• The value of the assets according to the balance sheet amounts to more than EUR 17.5 million.
• Net sales for the financial year amount to more than 35 million.
• The number of employees is more than 250.

A small enterprise exists if two or more of the above conditions are not met.

What happens if a longer term is agreed upon?

In that case, the payment agreement is null and void. The statutory payment term of 30 days applies. If payment is not made within 30 days, the small business owner may claim statutory commercial interest (as of January 1, 2017: 8% per year) on the overdue term.

But what if the SME itself proposes a long payment term?

In that case, the responsibility lies with the large company to prevent this. The large company may be able to defend itself later, but case law will have to determine that.

We're a large company. We accidentally agreed on a payment term that was too long and didn't pay within 30 days. Is my supplier obligated to charge statutory commercial interest?

No, that's not necessary. The small business owner might not do this to maintain a good business relationship. However, they do retain the right to charge this interest for five years. Should any disputes arise later, they can rely on it. It's also possible that the small business owner goes bankrupt. In that case, the trustee can claim the interest.

How can I prevent my employees from agreeing to excessively long payment terms?

Have your purchasing terms and conditions reviewed regularly by a lawyer. This will prevent your employees from entering into illegal agreements.

Is a Quick Fix for Big Business?

For contracts concluded before the new law comes into effect, the old law will remain in effect for one year. This means there should be sufficient time to review the purchasing terms and conditions and all current contracts.

See this link for information about this law.