Trying to fight against late payments and helping make sure that companies are paid on time is a key initiative promoted by the European Commission already in with the adoption of the Late Payments directive. Since this first time, the EU has also been working on adapting the late payments directive and also on ensuring it was correctly implemented by the various Member States, for example through various workshops and round table work on Late Payments attended by FEBIS representatives over the past years.
With the current Covid 19 crisis situation, payments have been greatly affected by the lockdown situation and the economic turmoil that has impacted all countries globally. Almost all EU Member States are reporting increased late payments since mid-March 2020, and this definitely can have a dramatic effect on a number of companies already in financial distress by causing cascade liquidations.
The EU is supporting Member States in their national policies to help economic recovery and sustainability of the workforce. On the late payments issue, reactions have mainly been happening at national level, but the EU is also trying to make sure responses are coordinated.
Below is a link to an extensive report outlining the various policy measures taken by Member States in the fight against Covid 19 which outlines inter alia the measures taken to help small businesses and to mitigate late payments:
The most important point outlined in almost all countries in the late payment issue is to make sure that companies who are able to pay on time do it so it does not impede their suppliers and clients cash flow and trade credit. Here are some (non-exhaustive) examples:
- In France for example, the „Mediateur du credit “has seen a big rise in claims for late or non-payments and has been using the „name and fame“ policy to reward companies that are good payers.
- In Bulgaria, the consequences of late payment of obligations to private entities, including interest and penalties for late payment, as well as non- monetary consequences, such as early demand for payment, contract termination and seizure of property, are temporarily abolished.
- In Germany, measures are facilitating tax deferrals and reduction of tax prepayments as well as suspension of enforcement measures to improve the liquidity of companies that are directly hit by the effects of the coronavirus epidemic (estimated at around EUR 41.6 bn)
- In Ireland, the application of interest: the application of interest on late payments is suspended for January/February VAT and both February and March PAYE (Employers) liabilities.
- In Cyprus, there is a freeze of loan’s repayment (decree voted on 29.02.2020). For nine months, loans’ capital and interest payment are postponed, while interest is compounding in the meantime. [voted on 29/3]. Given the approval from the European Banking Authority any debt not served in the next nine months is not considered as NPL.