From 2012, a disappointing year…

Since January 1, 2009 payment terms between professionals are regulated in France and may not exceed one of the two following periods: forty-five days end of the month or sixty days from the issuance of the invoice1.

However, four years later, the results expected are not there. Although French enterprises are well aware of the legal provisions related to payment terms, because of the financial and economic environment, their concrete application is delicate, even notwithstanding the fact that violation of the payment terms legislation is in certain cases criminally punishable2.

A 2012 survey conducted for the French Association of Credit Managers and Consultants (Association française des crédit managers et conseils -AFDCC) showed that 28% of the enterprises canvassed had to lengthen their own payment delays toward suppliers as compared to 2011 and that 56% declared that their clients’ delays had worsened in 2012.

In addition, the exceeding of payment terms does not always give rise to the indemnities which are foreseen by the law (notably lateness penalties) because although lateness penalties (at a rate which may not be less than three times the legal interest rate) must be indicated on the invoices, only one enterprise out of five systematically pursues such lateness penalties.3

Therefore, late penalties do not seem to constitute a truly efficient means of pressure.

Similarly, one may doubt the efficacy and dissuasive character of the recently adopted measure which consists, since January 1, 2013, of the requirement for any late payment debtor to pay a lump sum fee of €40 for collection costs (Article D.441-5 of the French Commercial Code).4

On the other hand, violation of payment terms may also result in a civil fine (sanction civile), a sanction which could seem to be more dissuasive5. But to our knowledge, the French Ministry of Economy has not yet initiated legal proceedings based on violations of payment terms.

… to 2013, a year of change?

The French National Observatory of Payment Terms (Observatoire National des Délais de Paiement, hereinafter “Observatory”) (organism created in 2006 in which both the Direction Générale du Trésor and the Direction Générale de la Concurrence participate) has, in its annual report for 2012, recommended for 2013 thirteen measures (some of which exist and some of which would be new) in order to reduce payment delays.

The Observatory notably suggests a banking support for companies in a difficult cash flow situation through a process of credit mediation (médiation du crédit) and inter-companies relationship mediation (médiation des relations interentreprises), replacement of civil and criminal penalties by administrative sanctions whose maximum amount per offense could be as high as € 75,000 for an individual and € 375,000 for a legal entity (such penalties are normally to be provided for in an upcoming bill on consumer law in 2013) or an incentive to invoice the late penalties.

Another measure which could be implemented would be for enterprises to grant a price « rebate » against a reduction of the payment delays.

But the most efficient measure may be increased control by the French administration. The French Minister of Economy, Pierre Moscovici, has indicated that “2,000 companies are likely to be audited in 2013 by the DGCCRF (+10% compared to 2012) with particular attention being paid to the large groups.”6

It remains to be seen whether these measures will result in the reduction of payment delays in France.