The EU's Late Payments Regulation Proposal – Key Points And Problems

RegCORE Client Alert | Banking Union

QuickTake

On 12 September 2023, the European Commission (the Commission) published a proposal for a Regulation on combating late payment in commercial transactions (hereafter the Proposal or Proposed Regulation) Late payments are payments which are not made within the contractually agreed or statutory term and thereby have the potential to have a major adverse impact on small and medium enterprises (SMEs). By Commission estimates, the root cause to one in about four bankruptcies can be traced back to invoices which are not paid on time.

Although the currently applicable Late Payments Directive (the Directive) was adopted in an updated form on 15 February 2011 to protect European businesses, and especially SMEs, against late payments and to improve their competitiveness, still only 40% of the businesses in the EU are paid on time. The Proposal, which is part of the SME Relief Package, seeks to replace the Directive.