New Zealand Law Society - Legislation may target late payments to small business

Legislation may target late payments to small business

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MBIE has released a discussion paper on the issues raised in Improving business-to-business payment practices.

Small  Business Minister Stuart Nash says he is considering stricter rules around payment practices between businesses.

“Late payments from large organisations to smaller suppliers can be crippling for these businesses,” Mr Nash said.

“I am prepared to legislate if necessary to set minimum standards for payment terms. I have released a discussion document which sets out options for further action. I want to hear feedback from those affected before taking next steps."

Submissions on the proposals are open until Tuesday, 14 April 2020.

The paper has a proposal to introduce legislation that specifies a maximum payment term. This would mean that payment terms may not be longer than a specified number of days.

"Legislation could either impose maximum payment terms without permitting any exceptions, or it could be the default position, with some opportunities to allow businesses to mutually agree to a longer term under certain limited circumstances (such as if the term is fair to both parties to the contract). This could mean that if a contract does not specify a particular term, or if there is no written contract, that the default term would be the one in legislation. This approach has been used overseas," it says.

The paper suggests a 20-day maximum payment term. It suggests this would apply to a contract for the supply of goods and services between entities that are in trade.