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Background on the Act to counter unreasonable payment terms of 2017

On 1 July 2017, the Act to amend Book 6 of the Dutch Civil Code in connection with combating unreasonably long payment terms entered into force. This was a private member’s bill regulating that large companies cannot agree on a payment term of more than 60 days in their commercial relationship with SMEs in situations where the large company acts as debtor and the SME acts as creditor (usually as supplier of goods or services). The Act includes a review clause.

Already during the parliamentary debate on the bill, various parties expressed concerns about possible unintended effects of this proposal. Because of the prominent position of the 60-day period in the proposal, it could have a ‘magnet effect’ that could cancel out the unfortunately still small improvements in payment behaviour that have been realised.

The main rule of paying invoices within 30 days is anchored in Section 6:119a(2) of the Dutch Civil Code in the form of regulations. Contrary to this rule, companies may agree on a longer period. Large corporations which have SMEs as creditors may agree on a payment period of up to 60 days (Section 6:119a (6) of the DCC). Practice has shown that often longer payment terms than 30 days are used, so that a payment term of 30 days is the exception rather than the rule. The statutory framework thus leaves more room than is effective to ensure that contractual payment terms of less than 30 days are agreed to a very large extent. The room for manoeuvre up to 60 days, which was in fact intended to meet occasional complex situations, seems to have contributed to the fact that the basic principle of 30 days has been lost from sight.

New act

The new act provides that large enterprises cannot agree on a payment term longer than 30 days with SMEs (including small independent businesses). This relates to the situation where the large enterprise acts as a customer and the SME as a supplier and creditor of the large enterprise. If these parties agree on a payment term longer than 30 days, the agreed payment term is void and a 30-day payment term applies by operation of law. Large’ companies are defined as companies with an annual turnover of more than €40 million and at least 250 employees.

If large companies pay a submitted invoice after more than 30 days, they will owe statutory commercial interest over the period exceeding 30 days. Based on the current article 3:307 paragraph 1 of the Civil Code, the obligation of a buyer to pay statutory interest is enforceable during five years after the claim has become due. In this way, suppliers (SMEs) who have a dependent relationship with a buyer (a large company) are enabled to claim statutory interest up to five years after the agreement has been terminated.

Entry into force and practical consequences

The bill was adopted by the Lower House of Parliament on 15 March 2022. The Upper House passed the bill on 29 March 2022. More information can be found at: https://www.eerstekamer.nl/wetsvoorstel/35769_verkorten_wettelijke

By Royal Decree of 3 May 2022, it has been determined that the new act will enter into force on 1 July 2022. Large companies will therefore have to adapt their organisation in the short term, for example by processing and approving invoices more quickly in order to be able to pay their suppliers within 30 days. In addition, large companies that have concluded long-term contracts with a small supplier before the proposed legislative amendment comes into effect, and that apply a payment term longer than 30 days, will have to amend their contracts. These contracts must be amended within one year of the bill’s entry into force.