Law against Late Payment

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The Law against Late Payment, which came into force on 7 July 2010, is creating a new scenario involving some major challenges and opportunities for companies in all sectors. Under the new legislation, companies have 60 days in which to settle their trade debts, and this period cannot be extended by agreement between the parties. These periods are reduced to 30 days for certain produce (fresh and perishable food produce) and sectors (the public sector) and are far shorter than those to which we are accustomed in Spain.

This Law envisages a transitional period for the fulfilment of its objectives which ends on 1 January 2013.

The wording of the Law has raised certain questions as to whether or not contracts formalized prior to its entry into force remain valid, and as to the continued applicability of certain periods in the case of retail trade. The Law also requires the disclosure of information on the level of compliance with its provisions in the Notes to the annual accounts.

The impact and risks deriving from the new Law will differ to a great extent depending on your working capital structure. Whatever your activity, however, the best approach will be one which enables you to comply with the Law and at the same time minimize its impact and optimize your company’s working capital and cash flow.