Failure to report on late payment of debt – it’s criminal!
Regulations to impose criminal sanctions on directors of large companies (the definition of which is considered below) that fail to report the late payment of their companies’ debts have now been laid in Parliament.
The Regulations provide that as of 6 April 2017 large UK companies and LLPs will be required to publish half-yearly reports on their payment practices and in particular the average time taken to pay supplier invoices. These reports will be made freely available to the public via a Government website.
A company or LLP will be subject to the Regulations if, on their last two balance sheet dates, they exceed two or more of the following thresholds:
- £36 million annual turnover;
- £18 million balance sheet total; and
- 250 employees.
Directors who fail to comply with the Regulations will commit an offence which is punishable on summary conviction by a fine. The Department for Business, Energy & Industrial Strategy also anticipates that the Regulations will bring a market wide change to the payment practices of large companies and reduce the estimated £26.3 billion that is owed to the UK’s small-to-medium sized businesses.
However, previous Government proposals and legislation have failed to have a significant impact on the mind-set that large businesses can pay their debts when it suits them.
On 31 January 2017 the Government published guidance to assist large companies and LLPs prepare for the Regulations. However, if you have any outstanding concerns in relation to the Regulations, or debt recovery generally, then please do not hesitate to contact us.
This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. For advice, get in touch with your usual Greenwoods GRM contact or scroll down to complete our enquiry form.