UK - BIS consultation paper "Duty to Report on Payment Practices and Policies"
The UK Department for Business Innovation & Skills (BIS) has published a consultation paper seeking views on the introduction of a proposed new law requiring UK companies to publicly report on their payment practices and policies. Late payment of invoices is a serious matter for many UK companies, particularly smaller businesses, as cash-flow problems have such a detrimental impact. The UK Government is considering if a new law requiring payment practices and standard payment terms to be made openly available to suppliers would help highlight which companies are good payers and enable suppliers to determine if they have been offered less favourable payment terms compared to other suppliers. The consultation paper, which can be found here, also includes draft regulations, which can be found here.
The consultation proposes that only companies which are UK large incorporated companies or LLPs (as defined in the Companies Act 2006), or public companies of any size, would be subject to the mandatory reporting requirements on, for example, how long they take to pay invoices, what proportion of invoices are paid late and their standard payment terms.
The reporting requirements would be quarterly to ensure they are up to date, and companies would be required to publish the information on their website to make it easily accessible. Directors of each such company would be responsible for ensuring the accuracy of the published reports, breaches of which would be punishable by criminal sanctions.
Although the UK currently has legislation to enable suppliers to charge interest on late payments, this is rarely used as suppliers do not like to impose such additional interest charges on their customers in case it impacts their ongoing business relationship. It will be interesting to see how companies responds to this new proposal to impose mandatory reporting in order to increase transparency of payment practices.
For more information, please contact Doris Myles or Samantha Kemter.