Reducing payment backlogs – new regulations

From 2020, higher interest for the delay in B2B transactions and new penalties from UOKiK (OCCP) for bad debtors became effective.

On 1 January 2020, the regulations aimed at preventing payment backlogs became effective. In order to counteract unfair extension of payment deadlines, the legislator amended, among others, the Act of 8 March 2013 on Payment Deadlines in Commercial Transactions. From the new year it took the name of the Act on Counteracting Excessive Delays in Commercial Transactions. The amendment has also introduced new regulations to the Code of Civil Procedure and the Act on Combating Unfair Competition.

Learn more: Changes to issuing grounds to rulings and to appeal proceedings

Reducing payment backlogs – fundamental changes

• Higher interest for the delay in commercial transactions

As of 1 January, the interest rate is 11.5% p.a. instead of the current 9%, with the rate remaining linked to the NBP reference rate. Interestingly, lower interest (9.5%) is due from the medical institution.

• Shortening of maximum payment deadlines
  • Maximum 60-day payment deadline in transactions with large businesses

The new Act introduced privileges for micro, small and medium-sized enterprises in relation to a large business debtor:

• with more than 250 employees on average per year,
• with a turnover exceeding EUR 50 million per year or with a total balance sheet exceeding EUR 43 million per year.

From 2020, it is absolutely forbidden for a large business to determine, for transactions with micro, small or medium-sized enterprises, a payment deadline exceeding 60 days as of the date of the delivery of invoice. Therefore, it is now impossible, as it has been so far, to rely on the legitimacy of extending the deadline beyond 60 days due to the will of both parties and the absence of flagrant harm to the creditor. Moreover, from 1 January 2020, an entity which is a large business is obliged to declare in a commercial agreement that it is eligible for such a status.

When determining the status of an entrepreneur, not only the individual data of the enterprise should be taken into account, but also the data of related and partner businesses, including companies from the capital group. Thus, determining this status can cause a great number of problems in specific cases.

• The possibility of terminating the contract with a payment deadline exceeding 120 days

The changes have also affected contracts in which the creditor is not a large business. If the payment deadline indicated in such contracts exceeds 120 days as of the date of the delivery of invoice to the debtor, the creditor may terminate or withdraw from such a contract. This situation can be accepted if the payment deadline has been unilaterally imposed or is grossly unfair to the creditor. In case of a possible dispute, the burden of proof of the time limit fairness rests with the debtor. Therefore, there will be a presumption of unfairness of the payment deadline. The creditor has been granted a claim for establishing that the payment deadline was grossly unfair. It can be claimed within 3 years as of the date on which the payment was made or should have been made.

• Maximum 30-day payment deadline in transactions with a public entity
  Another absolute ban on extending payment deadlines has been introduced for transactions in which the debtor is a public entity. The payment deadline in such agreements cannot exceed 30 days as of the date of delivery of invoice. In the case of the medical institutions, it will amount to 60 days.
• Increase in the flat-rate recovery costs

The creditor’s claim for the costs of recovery (EUR 40), so far uniform, has been determined by the amount of the debt. The new rates are as follows:

• EUR 40 for the claims not exceeding PLN 5 000.
• EUR 70 for the receivables between PLN 5 000 and PLN 50 000.
• EUR 100 for the receivables above PLN 50 000.

Nevertheless, it is important that the Act limiting payment backlogs has introduced a mechanism aimed at preventing the abuse of the right to compensation in case of assignment of receivables to the third parties (e.g. debt collection companies).

• UOKiK (OCCP) penalties for the receivables exceeding PLN 2 million within the next 3 months

From 2020, the President of the Office of Competition and Consumer Protection (UOKiK) may impose a fine on an entrepreneur if the amount of late payments exceeds PLN 2 million within three consecutive months. This does not apply to the years 2020 and 2021, in which the limit amounts to PLN 5 million. The amount of the fine will depend mainly on the value of the unfulfilled pecuniary obligation and the expiration of the maturity date. The penalty will be calculated according to a special statutory algorithm. However, the repayment of all overdue amounts does not result in termination of the OCCP proceedings but will only reduce the amount of the fine.

• Mandatory reports on payment deadlines

Large businesses whose individual income exceeds EUR 50 million and tax capital groups are obliged under the new law to report to the Ministry of Economy on the payment deadlines applied in the previous calendar year.

• Excessive extension of payment deadlines as a breach of competition law

The Act limiting payment backlogs clearly indicates that the imposition of excessively long payment deadlines is a breach of competition law determined in the Act on Competition and Consumer Protection and in the Act on Counteracting Unfair Use of Contractual Advantage in Trade in Agricultural and Food Products. Thus, the use of unfair terms will constitute a tort, and the entrepreneur will be able to pursue claims under the Act on Combating Unfair Competition.

• Facilitation of protective proceedings

Amendments to the Code of Civil Procedure will affect protective proceedings. If a creditor claims payment of a receivable in respect of a commercial transaction not exceeding PLN 75,000 (i.e. in the cases pending before the district courts), for which the payment deadline is exceeded by at least 3 months, the creditor will be released from the obligation to show a legal interest in obtaining protection. It will be sufficient to invoke the circumstances indicated. This should make it significantly easier for creditors to obtain a decision on obtaining protection, although after last year’s changes in the amount of bailiff’s fees increasing the costs of protection performance, the use of this mechanism may still not be common.

Authors:

Michał Fatek
Trainee attorney at-law
TGC Corporate Lawyers

Grzegorz Witczak
Advocate
TGC Cororate Lawyers

Michalina Gdula
Junior Associate
TGC Corporate Lawyers

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