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Act against unreasonably long payment terms entered into force on 1 July 2017

On 1 July 2017, the Act against unreasonably long payment terms entered into force (the “Act”). The Act aims to prevent large companies from enforcing unreasonably long payment terms and to establish that a maximum payment term of sixty days will apply when large companies enter into a trade agreement with independent entrepreneurs or small or midsized companies.

A company qualifies as midsized or small, if on two consecutive balance dates, without interruption, it fulfills at least two of the following three criteria:

  1. the value of the assets is, according to the balance sheet and the accompanying notes, based on the acquisition- and manufacturing price, not more than € 20,000,000;
  2. the net turnover of the financial year does not exceed € 40,000,000;
  3. the average number of employees during the financial year is less than 250.

A “large company” is a company that on two consecutive balance dates, without interruption, does not meet at least two of these three criteria.

If after 1 July 2017 a payment term of more than 60 days is agreed, the payment term will be void and will, by operation of law, be replaced by a payment term of 30 days. If a large company does not pay within 30 days, the midsize or small company may impose statutory interest for the overdue term.

With respect to existing agreements, a transition period of one year applies. During this period, payment terms of more than 60 days need to be amended in accordance with the new legislation.

The Act is incorporated in article 6:119a sub 6 of the Dutch Civil Code and is based on Directive 2011/7/EU from the European Union.

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