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Unpaid bills that push small firms into bankruptcy

Company cash-flows would be boosted by tens of billions of euros if their bills were paid within 30 days. Making sure this happens is the aim of an update to the directive on late payments in business transactions currently being scrutinised by the European Parliament.
Liquidity problems can bankrupt a business. This is especially true for small and medium-sized firms and the problem is even worse during a crisis, when credit is tighter than ever. A recast version of the current directive, in force since 2002, is intended to help companies get their money in more quickly. However, to discuss misgivings voiced about this draft law, Members of the EP Internal Market Committee held a public hearing with experts on 4 November.

Public authorities are bad payers, according to research. They take 65 days on average to pay a bill, compared to 55 days by the private sector. Yet they themselves are protected from the economic turbulence that batters companies by their access to finance and their budget planning. The draft EU law therefore differentiates between public and private actors in terms of payment deadlines and penalties. Barbara Weiler (S&D, DE), the MEP piloting the law through Parliament, is not convinced this is the right approach. Local authority and hospital representatives present at the hearing believed any such differentiation to be unjustified and counterproductive. And when it was argued that contractual freedom must be respected, one private sector representative was unconvinced, saying that the position of strength of large companies tended to limit the freedom of smaller firms during contract negotiations.

The draft directive states that public authorities should pay firms within 30 days of invoicing. This deadline might be acceptable provided vaguely worded derogations do not render it a fiction, stressed Heide Rühle (Greens/EFA, DE) and the private sector representative. An absolute maximum deadline could be a solution but must be no longer than 60 days, said a chamber of commerce representative. These limits were unwelcome to the local authorities, who said they needed more time to check invoices in accordance with procedures. Jürgen Creutzmann (ALDE, DE) thought this deadline perfectly reasonable, as did Cornelius de Jong (GUE, NL), who said if it was possible to meet such deadlines in the Netherlands it should be feasible elsewhere.

Datum: 05 November 2009
Bron: Press release Europian Parliament

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