What are the penalties for non-compliance with payment deadlines?

Payment terms are the period of time stipulated in a contract between delivery of a good or service by the supplier and payment by the customer. They are governed by the French law on the modernization of the economy. Here are the rules and penalties applicable in the event of non-compliance with payment terms.

General rules governing payment terms for service providers

Since 2009, contractual payment terms between companies have been capped by law. These must not exceed 60 days from the invoice date, or 45 days end of month.Article L441-11 of the French Commercial Code specifies that specific payment terms may apply to certain products or services.

Despite these rules, late payments are commonplace, and can impact the profitability of creditor companies forced to obtain short-term financing from their banks. Failure to meet payment deadlines has consequences for cash flow, competitiveness and even the very existence of financially fragile businesses.

A fixed indemnity for collection costs

Companies that fail to meet the payment deadlines imposed by their suppliers are liable to penalties. In accordance with article D441-5 of the French Commercial Code, they must pay a flat-rate indemnity of 40 euros for collection costs.

In practical terms, this is intended to offset the administrative and internal costs associated with late payment.

Late penalties

In the event of late payment, late payment penalties are also due. In the absence of a contractual stipulation, the rate corresponds to the semi-annual key rate of the European Central Bank (ECB) in force on January 1 or July 1, plus 10 points. However, the contract may specify a lower rate.

These penalties run from the day following the payment date shown on the invoice or, failing this, from the 31st day following the date on which the services were performed.

Tighter controls by the DGCCRF

Since the entry into force of the August 6, 2015 law for growth, activity and equal economic opportunity, DGCCRF agents have been able to carry out checks and sanction companies that fail to comply with the maximum payment terms set by the Consumer Code. They are liable to an administrative fine of up to 75,000 euros for an individual and 2 million euros for a legal entity. The fine is doubled if the breach is repeated within 2 years of the date of notification of the first sanction decision.

The law of May 22, 2019 on business growth and transformation (PACTE) reinforced these sanctions by requiring the companies concerned to publish their sanction at their own expense in the local press. A daily penalty was created to ensure the effectiveness of these publication measures.