European Union: Trade Relationships After The Macron Law

The Law for Growth, Activity and Equality of Opportunities, enacted on 6 August 2015, modified the provisions of Article L. 441-6 of the French Commercial Code regarding payment terms and provides for a lighter and more flexible framework for relationships between suppliers and wholesalers.

A contractual deadline limited to 60 days in principle

Under the old Article L. 441-6, paragraph 9, of the Commercial Code, payment terms agreed between professionals were capped at 45 days end of month or 60 days from the date of issue of the invoice. The Macron law amended Article L. 441-6 which now provides that the payment term agreed between the parties cannot exceed 60 days from the date of issue of the invoice, as provided for by Directive 2011/7/EU.

The specific deadline of 45 days after the date of issue of the invoice for summary invoices, i.e. for invoices issued monthly for several separate deliveries of goods or services provided to the same person during a calendar month, is maintained.

The possibility for parties to agree on a 45-day end of month term under certain conditions

The new paragraph 9 of Article L. 441-6 of the Commercial Code provides that the parties may agree on payment term of 45 days end of month from the date of issue of the invoice provided that such period is expressly provided for in the contract and that it is not grossly unfair to the creditor.

It is no longer allowed to stipulate a 45-day payment period from the end of the month during which the invoice was issued, as was permitted by Article L. 441-6 in its previous version.

The use of this second cap can be risky for the parties, as the expression "grossly unfair" is not defined in the Directive, nor in the Commercial Code. This expression will be interpreted by the judge in each case.

Derogatory payment deadlines in sectors with strong seasonality

For the supply of goods and services related to sectors with marked seasonal variations, Article L. 441-6, paragraph 14, perpetuates derogatory interbranch agreements and allows the parties to set a payment deadline which cannot exceed the maximum deadline which applied in 2013 according to an agreement concluded on the basis of Article 121 III of Law n°2012-387 of 22 March 2012, provided that such deadline is expressly provided for in the contract and that it is not grossly unfair to the creditor. The sectors concerned are sport goods, toy, leather, watchmaking and jewellery, and agricultural equipment sectors.

Thus, for example, in the agricultural equipment sector, for agricultural machinery, parties may stipulate a maximum payment period of 110 days end of month. For sport goods, the deadlines of Article L. 441-6 are extended by 30 days, which leads to a maximum of 90 days from the date of issue of the invoice, or 75 days end of month from the date of issue of the invoice.

What does not change regarding payment deadlines

The rules provided for in Article L. 111-3-1 of the Construction and Housing Code with respect to installments payable during the implementation of private contracts and sub-contracts governed by Law N°75-1334 are not affected by the Macron Law. Indeed, the deadline agreed to pay these monthly payments should not exceed the period provided in Article L. 441-6, paragraph 9, of the Commercial Code. The relevant deadline being the one provided for summary invoices, it remains unchanged at 45 days from the issue date of the invoice. Also, the delay for intervention by the project manager or of another person whose intervention conditions the payment of installments, is included within this period.

The law maintains paragraph 8 of Article L. 441-6 of the Commercial Code which, according to the Directive, provides that when the parties have not contractually defined any payment deadline, the time limit is set at 30 calendar days after the date of receipt of the goods or services.

Non-compliance with provisions on payment terms remains punishable by an administrative fine of up to € 75,000 for natural persons and € 375,000 for legal persons.

Relations between suppliers and wholesalers: new regulation

The Macron Law excludes relations between suppliers and wholesalers from the framework of Article L. 441-7 of the Commercial Code and subjects them to a less restrictive formalism provided for in the new Article L. 441-7-1 of the Commercial Code .

According to this article, a wholesaler is defined as "any natural or legal person who, for professional purposes, buys products from one or more suppliers and sells them, primarily to other traders, wholesalers and retailers, to transformers or other professionals who are purchasing for the needs of their business". Central purchasing bodies and wholesaler referencing agencies are also treated as wholesalers.

However, "companies or groups of natural or legal persons operating, directly or indirectly, one or more retail stores or working in the retail sector as a central purchasing or referencing for retail trade" are not wholesalers.

The new Article L. 441-7-1 maintains the obligation to establish a written agreement specifying the obligations the parties have undertaken in order to set the price at the end of the negociations, and to specify the particular conditions of sale, commercial cooperation obligations and other obligations intended to promote the business relationship.

This agreement must be drawn up within the same timeframe as set forth by Article L. 441-7 i.e. before March 1st or within two months after the starting point of the period of commercialisation of products or services subject to special commercial cycles. However, the general conditions of sale do not have to be notified before December 1st or two months before the start of the commercialisation period and the parties are not required to include in the agreement the supplier's price list or modalities for its consultation.

Unlike for the single distribution agreement under the article L.441-7, the dates of entry into force of the prices agreed after the annual trade negotiation and of the cooperation obligations under the single agreement do not necessarily have to coincide. Similarly, the prices agreed in the agreement do not need to be applied on March 1st of the relevant year at the latest.

The new system introduces more flexibility in the relationship between supplier and wholesaler because it allows the parties to include in the agreement the "type of situation and the manner in which derogatory terms of sale are likely to be applied".

Non-compliance with the provisions of Article L. 441-7-1 of the Commercial Code is punishable by the same penalties as those provided for by Article L. 441-7 of administrative fines up to € 75,000 for natural persons and € 375,000 for legal persons.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.