Proposal on for a Regulation repealing the current Late Payment Directive

Introduction

On 12.09.2023 the Commission adopted a new proposal for a Regulation of the European Parliament and of the Council on combating late payment in commercial transactions (“Late Payment Regulation”).

The new rules will repeal Directive 2011/7/EU (the Late Payment Directive).. In particular, the new Regulation tackles payment delays, an unfair practice that compromises the cash flow of SMEs and hampers the competitiveness and resilience of supply chains. The proposal introduces a stricter maximum payment limit of 30 days, eliminates ambiguities and addresses the legal gaps in the current Directive. Furthermore, the proposed text ensures an automatic payment of accrued interest and compensation fees and introduces new enforcement and redress measures to protect companies against bad payers. In this context, the proposal also aims to strengthen the synergies between public procurement and prompt payment objectives, by introducing new provisions to support timely payments to subcontractors in public works contracts.

Why are SMEs important?

Small and medium-sized enterprises (SMEs) are central to Europe’s economic and social fabric, drive Europe's green and digital transitions and support the EU’s long-term prosperity. The 24 million European SMEs represent 99% of all businesses in the EU and provide two third of private sector jobs in the EU. They are also deeply embedded in local communities, particularly in rural areas. They account for more than half of value added in the EU’s non-financial business sector, and are Europe’s breeding ground for innovation, diversity and equality.

What are “Late payments”?

“Late payments” are payments not made within the agreed or legal term. They affect companies in all sectors and all Member States and, to a disproportionate degree, severely affect SMEs. The root cause of late payments is asymmetries in bargaining power between a large client (debtor) and a smaller supplier (creditor). This often results in the supplier’s having to accept unfair payment terms and conditions.

Background

The proposal for a Regulation on late payments is part of the SME Relief Package, a series of initiatives to address the needs of SMEs in the current economic environment. The new measures will provide short-term relief, boost SMEs’ long-term competitiveness, and strengthen fairness in the business environment across the Single Market, including by tackling payment delays.

For more information:

Proposal for a Late Payment Regulation

Press release on the SME Relief Package: Championing Europe's SMEs (europa.eu)

Communication from the Commission on the SME Relief Package:

Factsheet on the Late Payment Regulation

Questions and Answers: Late Payment Regulation 

Question and Answers: Communication on SME Relief Package