- Will the Office of Competition and Consumer Protection help fight payment backlogs? You may have doubts because the amendment to the regulations introduces relaxation of regulations and penalties.
- Small businesses have been given more time to adapt to short payment terms, and in some cases it may even be a whole year.
- The effect of easing the enforcement of anti-congestion regulations may be a further increase in the debt of Polish companies. This year it has already increased by over half a billion PLN.
- Entrepreneurs must rely on themselves to accelerate payments, but the ban on the assignment of receivables is often a problem, which limits the companies' possibilities.
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Trade and construction with the highest debts
As a result, the debt of Polish entrepreneurs is growing. In the database of the National Debt Register (KRD), it amounts to almost PLN 9.9 billion. Just a year ago it was PLN 9.3 billion. The worst situation concerns trade (PLN 2.37 billion), construction (PLN 1.55 billion) and TSL, i.e. transport, forwarding and logistics (PLN 1.37 billion). The economic information office – ERIF also reported an increase in company debts in the first quarter by over PLN 540 million year on year.
The weapon of small companies in the fight for the money owed to them were the regulations that authorized the Office of Competition and Consumer Protection (UOKiK) to combat payment backlogs. The amendment to the Act on counteracting excessive delays in commercial transactions and the Public Finance Act (Journal of Laws of 2022, item 2414) entered into force on December 8, 2022. By the end of 2023, the Office of Competition and Consumer Protection issued decisions against 34 entities, the highest fine was PLN 7.5 million. The total amount of fines is over PLN 24 million.
Penalties for congestion are few, but… they will be mitigated
Entrepreneur organizations indicated that fines imposed on several dozen entities, given the massive scale of payment delays in the Polish economy, were not enough. However, in March this year, the European Parliament's Internal Market and Consumer Protection Committee (IMCO) adopted a regulation on late payments. The public sector has 30 days (from receipt of the invoice by the debtor or from delivery of the product) to make the payment, as does the private sector, but the commission agreed to a 60-day deadline if the parties, in the interest of their contractual freedom, agree to it. The European Parliamentarians also included a payment period of up to 120 days for individual product categories which "due to the specific nature of the industry, require slightly longer payment and invoicing terms (i.e. 'seasonal goods' and 'slow-moving goods'). In trade, such a provision can both help and harm – depending on what the company does and whether the entrepreneur is the payer or the recipient of the transfer.
– Anti-congestion regulations require strict compliance and enforcement to be effective. The regulations currently being introduced are rather aimed at opening new "doors" to extend payments and avoid penalties for them. Unfortunately, large companies that postpone payments because they are borrowing money at the expense of small partners can be very creative in justifying payment shifts, says Jerzy Dąbrowski, member of the management board of the microfactoring company Finea.
Extinguishing the fire with gasoline
Expert Finea points to the amended regulation's granting of an additional year to adapt to the new payment period framework. In practice, this may weaken EU regulations aimed at combating payment backlogs. According to some experts, any possibility of extending payment deadlines should be ruled out.
– Such changes are intended to provide flexibility in preparing for new regulations for small businesses. However, this is "putting out the fire with gasoline", because small companies, just different ones, also suffer from congestion. And even very often the same ones. They don't get paid for their production, services and sales, so they delay payment to subcontractors. The effect of a fast-moving snowball is created – comments Jerzy Dąbrowski.
The introduction of mandatory interest on each exceeded invoice payment time and a lump-sum compensation of at least EUR 50, covering the costs of e.g. reminders, would be an opportunity to organize market conditions for running a business.
Provisions prohibiting the assignment of receivables are not applicable
The SME sector tries to independently counteract unfavorable phenomena in the circulation of money in the economy. Tools for this include debt collection activities and factoring services that accelerate invoice payments before the obligation becomes overdue. However, entrepreneurs often encounter another problem here. This is the prohibition of assignment of receivables.
Pursuant to Art. 509 of the Civil Code, the creditor may transfer the receivable to a third party (transfer) without the debtor's consent, unless this would be contrary to the Act, a contractual provision or the nature of the obligation. The assignment of receivables is not possible if the parties stipulated in the contract that the receivables arising therefrom cannot be transferred to another entity.
– Unfortunately, this case is abused by large companies in relations with small contractors. The drastic difference in the negotiating position means that large companies demand that such a ban be included in the contract, and small entities are unable to dissuade them. They agree, but such provisions drastically limit their ability to deal with deferred transfers. The market offers support in counteracting congestion, the price of such services has dropped over the past few years, but the provision prohibiting assignment makes it impossible to use them. Therefore, the issue of regulating the prohibition of assignment of receivables is being raised more and more often. It would involve limiting such practices, says Jerzy Dąbrowski.
